<PAGE>
As filed with the Securities and Exchange Commission on November 10, 1998
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------
DIGITAL RIVER, INC.
(Exact name of registrant as specified in its charter)
--------------------
DELAWARE 41-1901640
(State of Incorporation) (I.R.S. Employer Identification No.)
9625 WEST 76TH STREET, SUITE 150
EDEN PRAIRIE, MINNESOTA 55344
(612) 253-1234
(Address of principal executive offices)
1998 STOCK OPTION PLAN
NON-PLAN OPTION GRANTS
(Full title of the plan)
JOEL A. RONNING
CHIEF EXECUTIVE OFFICER
9625 WEST 76TH STREET, SUITE 150
EDEN PRAIRIE, MINNESOTA 55344
(612) 253-1234
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
--------------------
Copies to:
JEFFREY S. ZIMMAN, ESQ.
MICHAEL J. SULLIVAN, ESQ.
COOLEY GODWARD LLP
ONE MARITIME PLAZA, 20TH FLOOR
SAN FRANCISCO, CA 94111
(415) 693-2000
--------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF SECURITIES TO AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING
BE REGISTERED REGISTERED SHARE (1) PRICE (1) AMOUNT OF REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock Options and Common
Stock (par value $.01) 2,922,549 shares $4.3934 - $11.4375 $19,679,824 $5,471
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(h) under the Securities Act of
1933, as amended. The offering price per share and aggregate offering
price are based upon (a) the weighted average exercise price for shares
subject to outstanding options (i) granted pursuant to Digital River,
Inc.'s (the "Company") 1998 Stock Option Plan and (ii) granted outside
of the Company's 1998 Stock Option Plan and (b) the average of the high
and low prices of Registrant's Common Stock on November 5, 1998 as
reported on the Nasdaq National Market.
<PAGE>
The chart below details the calculations of the registration fee:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
OFFERING PRICE PER AGGREGATE OFFERING
SECURITIES NUMBER OF SHARES SHARE PRICE
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares issuable pursuant to
outstanding options under the 1998
Stock Option Plan 1,698,876 $4.3934 (1)(a) $7,463,842
- -------------------------------------------------------------------------------------------------------------
Shares issuable pursuant to the 1998
Stock Option Plan 617,791 $11.4375 (1)(b) $7,065,985
- -------------------------------------------------------------------------------------------------------------
Shares issuable pursuant to
outstanding options granted outside
of the 1998 Stock Option Plan 605,882 $8.50 (1)(a) $5,149,997
- -------------------------------------------------------------------------------------------------------------
Proposed Maximum Offering
Price $19,679,824
- -------------------------------------------------------------------------------------------------------------
Registration Fee $5,471
- -------------------------------------------------------------------------------------------------------------
</TABLE>
1.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Digital River, Inc. (the "Company")
with the Securities and Exchange Commission are incorporated by reference
into this Registration Statement:
(a) The Company's prospectus filed pursuant to Rule 424(b) under the
Securities Act of 1933, as amended (the "Securities Act"), on August 12, 1998
(No. 333-56787).
(b) The description of the Company's Common Stock which is contained in
the Registration Statement on Form 8-A filed July 20, 1998, under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), including
any amendment or report filed for the purpose of updating such description.
All reports and other documents subsequently filed by the Company
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference herein and to be a
part of this registration statement from the date of the filing of such
reports and documents.
INTERESTS OF NAMED EXPERTS AND COUNSEL
The legality of the Common Stock offered hereby will be passed upon for
the Company by Cooley Godward LLP, Palo Alto, California ("Cooley Godward").
As of the date of this prospectus, certain members of Cooley Godward own an
aggregate of approximately 1,500 shares of the Registrant's Common Stock.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Section 145 of the Delaware General Corporation Law the Company
has broad powers to indemnify its directors and officers against liabilities
they may incur in such capacities, including liabilities under the Securities
Act. The Company's By-laws require the Company to indemnify its directors and
executive officers, and permit the Company to indemnify its other officers,
employees and other agents, to the extent permitted by Delaware law. Under
the Company's By-laws, indemnified parties are entitled to indemnification
for negligence, gross negligence and otherwise to the fullest extent
permitted by law. The By-laws also require the Company to advance litigation
expenses in the case of stockholder derivative actions or other actions,
against an undertaking by the indemnified party to repay such advances if it
is ultimately determined that the indemnified party is not entitled to
indemnification.
The Company has entered into indemnity agreements with each of its
directors and executive officers. Such indemnity agreements contain
provisions which are in some respects broader than the specific
indemnification provisions contained in Delaware law. The Company also
maintains an insurance policy for its directors and executive officers
insuring against certain liabilities arising in their capacities as such.
2.
<PAGE>
EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
<S> <C>
4.1* Amended and Restated Certificate of Incorporation of the Company.
4.2* Amended and Restated Bylaws of the Company.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.3 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney is contained on the signature pages.
99.1* 1998 Stock Option Plan.
99.2 Form of Incentive Stock Option Agreement under the 1998 Stock Option Plan.
99.3 Form of Nonincentive Stock Option Agreement under the 1998 Stock Option Plan.
99.4 Form of Non-Statutory Stock Option Granted Outside of the 1998 Stock Option Plan.
</TABLE>
- -------------
* Documents incorporated by reference from the Company's Registration
Statement on Form S-1, as amended (333-56787), filed with the SEC on
June 12, 1998.
UNDERTAKINGS
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission pursuant
to Rule 424(b) if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the effective
registration statement, and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(i) and (a)(ii) do not apply if
the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the issuer
pursuant to section 13 or section 15(d) of the Exchange Act that are
incorporated by reference herein.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
3.
<PAGE>
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new registration statement relating to the securities offered herein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
3. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
4.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Eden Prairie, State of Minnesota, on November 9,
1998.
DIGITAL RIVER, INC.
By /s/ Joel A. Ronning
---------------------------------
Joel A. Ronning
Title: Chief Executive Officer and
Director
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Joel A. Ronning and Robert E. Strawman
and each or any one of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in connection therewith, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitutes or
substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Joel A. Ronning Chief Executive Officer and Director November 9, 1998
- -------------------------------------------- (Principal Executive Officer)
Joel A. Ronning
/s/ Robert E. Strawman Chief Financial Officer and Treasurer November 9, 1998
- -------------------------------------------- (Principal Financial Officer and
Robert E. Strawman Accounting Officer)
/s/ Perry W. Steiner Director November 9, 1998
- --------------------------------------------
Perry W. Steiner
</TABLE>
5.
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Thomas F. Madison Director November 9, 1998
- --------------------------------------------
Thomas F. Madison
Director November __, 1998
- --------------------------------------------
Charles E. Reese, Jr.
/s/ Christopher J. Sharples Director November 6, 1998
- --------------------------------------------
Christopher J. Sharples
/s/ J. Paul Thorin Director November 9, 1998
- --------------------------------------------
J. Paul Thorin
/s/ Timothy C. Choate Director November 5, 1998
- --------------------------------------------
Timothy C. Choate
</TABLE>
6.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
<S> <C>
4.1* Amended and Restated Certificate of Incorporation of the Company.
4.2* Amended and Restated Bylaws of the Company.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.3 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney is contained on the signature pages.
99.1* 1998 Stock Option Plan.
99.2 Form of Incentive Stock Option Agreement under the 1998 Stock Option Plan.
99.3 Form of Nonincentive Stock Option Agreement under the 1998 Stock Option Plan.
99.4 Form of Non-Statutory Stock Option Granted Outside of the 1998 Stock Option Plan.
</TABLE>
- -------------
* Documents incorporated by reference from the Company's Registration
Statement on Form S-1, as amended (333-56787), filed with the SEC on
June 12, 1998.
<PAGE>
November 9, 1998 Exhibit 5.1
Digital River, Inc.
9625 West 76th Street, Suite 150
Eden Prairie, Minnesota 55344
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Digital River, Inc. (the "Company") of a Registration
Statement on Form S-8 (the "Registration Statement") with the Securities and
Exchange Commission covering the offering of up to an aggregate of 2,922,549
shares of the Company's Common Stock, $.01 par value (the "Shares"), with
respect to (a) 2,316,667 of the Shares issuable pursuant to its 1998 Stock
Option Plan (the "Plan") and (b) 605,882 of the Shares issuable pursuant to
outstanding options granted outside of the Plan (the "Non-plan Option
Agreements").
In connection with this opinion, we have examined the Registration Statement
and related Prospectus, the Company's Amended and Restated Certificate of
Incorporation and By-laws, and such other documents, records, certificates,
memoranda and other instruments as we deem necessary as a basis for this
opinion. We have assumed the genuineness and authenticity of all documents
submitted to us as originals, the conformity to originals of all documents
submitted to us as copies thereof, and the due execution and delivery of all
documents, where due execution and delivery are a prerequisite to the
effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Plan, the
Non-plan Option Agreements, the Registration Statement and related
Prospectus, will be validly issued, fully paid, and nonassessable (except as
to shares issued pursuant to certain deferred payment arrangements, which
will be fully paid and nonassessable when such deferred payments are made in
full).
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
COOLEY GODWARD LLP
By: /s/ Michael J. Sullivan
-----------------------------------
Michael J. Sullivan
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement of our report dated March 6, 1998
(except with respect to the reverse stock split, as to which the date is July
14, 1998) included in Digital River, Inc.'s Form S-1/A as filed on August 11,
1998 (Registration No. 333-56787) and to all references to our Firm included
in this Registration Statement.
/s/ ARTHUR ANDERSEN LLP
-----------------------------------
ARTHUR ANDERSEN LLP
Minneapolis, Minnesota
November 10, 1998
<PAGE>
Exhibit 99.2
DIGITAL RIVER, INC.
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE 1998 STOCK OPTION PLAN
THIS AGREEMENT is made as of _________________, between DIGITAL RIVER,
INC., a Delaware corporation (the "Company"), and ____________________ (the
"Optionee").
THE PARTIES AGREE AS FOLLOWS:
1. OPTION GRANT. The Company hereby grants to the Optionee an option
(the "Option") to purchase the number of shares of the Company's voting
common stock (the "Shares"), for an exercise price per share (the "Option
Price") and based upon a Grant Date, all as set forth below:
Shares Under Option:
Option Price Per Share:
Grant Date:
Vesting Schedule (Cumulative):
The Option will be subject to all of the terms and conditions set forth
herein and in the Company's 1998 Stock Option Plan (the "Option Plan"), a
copy of which is attached hereto and incorporated herein by reference. The
Option granted hereunder will be an incentive stock option within the meaning
of Section 422 of the Internal Revenue Code of 1986, as amended.
2. STOCKHOLDER RIGHTS. No rights or privileges of a stockholder in the
Company are conferred by reason of the granting of the Option. Optionee will
not become a stockholder in the Company with respect to the Shares unless and
until the Option has been properly exercised and the Option Price fully paid
as to the portion of the Option exercised.
3. TERMINATION. Subject to earlier termination as provided in the
Option Plan, this Option will expire, unless previously exercised in full, on
the date ten (10) years from the Grant Date, or on the date five (5) years
from the grant date if the Optionee is a greater than 10% stockholder on the
Grant Date.
4. TERMS OF THE OPTION PLAN. The Optionee understands that the Option
Plan includes important terms and conditions that apply to this Option. Those
terms include (without limitation): important conditions to the right of the
Optionee to exercise the Option; important restrictions on the ability of the
Optionee to transfer the Option or to transfer Shares received upon exercise
of the Option; and early termination of the Option following the occurrence
of certain events, including the Optionee no longer being an employee,
director or consultant to or of the Company or its subsidiaries. The Optionee
acknowledges that he or she has read the Option Plan, agrees to be bound by
its terms, and makes each of the representations required to be made by the
Optionee under it.
5. DISQUALIFYING DISPOSITION. Disposal or transfer of the Shares by
the Optionee within two (2) years from the Grant Date of the Option or within
one (1) year after the exercise
<PAGE>
of the Option shall terminate the application of the provisions of Section
422 of the Internal Revenue Code of 1986, as amended, and the federal tax
advantages therefrom.
6. MISCELLANEOUS. This Agreement (together with the Option Plan) sets
forth the complete agreement of the parties concerning the subject matter
hereof; superseding all prior agreements, negotiations and understandings.
This Agreement will be governed by the laws of the State of Minnesota
irrespective of such state's choice of law provisions, and may be executed in
counterparts.
The parties hereby have entered into this Agreement as of the date set
forth above.
DIGITAL RIVER, INC.
By:
--------------------------------
Title: Secretary
"OPTIONEE"
-----------------------------------
Attachments: (1) 1998 Stock Option Plan
(2) Notice of Exercise and Investment Representation
2.
<PAGE>
Exhibit 99.3
DIGITAL RIVER, INC.
NONINCENTIVE STOCK OPTION AGREEMENT
UNDER THE 1998 STOCK OPTION PLAN
THIS AGREEMENT is made as of ___________________ between DIGITAL RIVER,
INC., a Delaware corporation (the "Company"), and ___________________________
(the "Optionee").
THE PARTIES AGREE AS FOLLOWS:
1. OPTION GRANT. The Company hereby grants to the Optionee an option
(the "Option") to purchase the number of shares of the Company's voting
common stock (the "Shares"), for an exercise price per share (the "Option
Price") and based upon a Grant Date, all as set forth below:
Shares Under Option:
Option Price Per Share:
Grant Date:
Vesting Schedule (Cumulative):
The Option will be subject to all of the terms and conditions set forth
herein and in the Company's 1998 Stock Option Plan (the "Option Plan"), a
copy of which is attached hereto and incorporated herein by reference. The
Option granted hereunder will be a nonincentive or nonqualified option for
tax purposes.
2. STOCKHOLDER RIGHTS. No rights or privileges of a stockholder in the
Company are conferred by reason of the granting of the Option. Optionee will
not become a stockholder in the Company with respect to the Shares unless and
until the Option has been properly exercised and the Option Price fully paid
as to the portion of the Option exercised.
3. TERMINATION. Subject to earlier termination as provided in the
Option Plan, this Option will expire, unless previously exercised in full, on
the date ten (10) years from the Grant Date.
4. TERMS OF THE OPTION PLAN. The Optionee understands that the Option
Plan includes important terms and conditions that apply to this Option. Those
terms include (without limitation): important conditions to the right of the
Optionee to exercise the option; important restrictions on the ability of the
Optionee to transfer the option or to transfer Shares received upon exercise
of the Option; and early termination of the option following the occurrence
of
1.
<PAGE>
certain events, including the Optionee no longer being an employee, director
or consultant to or of the Company or its subsidiaries. The Optionee
acknowledges that he or she has read the Option Plan, agrees to be bound by
its terms, and makes each of the representations required to be made by the
Optionee under it.
5. MISCELLANEOUS. This Agreement (together with the Option Plan) sets
forth the complete agreement of the parties concerning the subject matter
hereof, superseding all prior agreements, negotiations and understandings.
This Agreement will be governed by the laws of the State of Minnesota
irrespective of such state's choice of law provisions, and may be executed in
counterparts.
The parties hereby have entered into this Agreement as of the date set
forth above.
DIGITAL RIVER, INC.
By:
--------------------------------
Title: Secretary
"OPTIONEE"
-----------------------------------
Attachments: (1) 1998 Stock Option Plan
(2) Notice of Exercise and Investment Representation
2.
<PAGE>
Exhibit 99.4
DIGITAL RIVER, INC.
STOCK OPTION GRANT NOTICE
(OUTSIDE OF THE 1998 STOCK OPTION PLAN)
DIGITAL RIVER, INC. (the "Company") hereby grants to Optionee a nonstatutory
stock option to purchase the number of shares of the Company's voting common
stock (the "Shares") set forth below. This option is not intended to qualify
as an "incentive stock option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). This option is not
subject to, and is granted outside of the Company's 1998 Stock Option Plan.
This option is subject to all of the terms and conditions as set forth herein
and in Attachments I and II which are incorporated herein in their entirety.
<TABLE>
<S> <C>
OPTIONEE:
---------------
DATE OF GRANT:
---------------
SHARES SUBJECT TO OPTION:
---------------
EXERCISE PRICE PER SHARE:
---------------
VESTING COMMENCEMENT DATE:
---------------
EXPIRATION DATE:
---------------
</TABLE>
- --------------------------------------------------------------------------------
VESTING SCHEDULE
Options vest according to the following schedule:
This option may be fully vested in the event of a Change in Control as
provided in the Stock Option Agreement.
- --------------------------------------------------------------------------------
PAYMENT: Payment of the option exercise price may be made in cash, check
or any other method provided in the Stock Option Agreement.
ADDITIONAL TERMS/ACKNOWLEDGEMENTS: The undersigned Optionee acknowledges
receipt of, and understands and agrees to, this Grant Notice and the Stock
Option Agreement. Optionee further acknowledges that as of the Date of Grant,
this Grant Notice, and the Stock Option Agreement set forth the entire
understanding between Optionee and the Company regarding the acquisition of
Shares and supersedes all prior oral and written agreements on that subject
with the exception of (i) options previously granted and delivered to
Optionee under the Company's 1998 Stock Option Plan, and (ii) the following
agreements only:
OTHER AGREEMENTS:
----------------------------------------------
----------------------------------------------
DIGITAL RIVER, INC. OPTIONEE
By:
----------------------- ------------------------------
Signature
Title:
--------------------
Date:
---------------------
Attachment I: Stock Option Agreement
Attachment II: Notice of Exercise
<PAGE>
DIGITAL RIVER, INC.
STOCK OPTION AGREEMENT
Pursuant to the Grant Notice and this Stock Option Agreement, the
Company has granted you an option to purchase the number of shares of the
Company's voting common stock ("Shares") indicated in the Grant Notice at the
exercise price indicated in the Grant Notice.
This option is granted in connection with and in furtherance of the
Company's compensatory benefit plan for the Company's employees (including
officers), directors or consultants.
The details of this option are as follows:
1. VESTING. Subject to the limitations contained herein, this option
will vest as provided in the Grant Notice, provided that vesting will cease
upon the termination of your status as an employee of the Company.
2. METHOD OF PAYMENT. Payment of the exercise price by cash or check
is due in full upon exercise of all or any part of this option, provided that
you may elect, to the extent permitted by applicable law and the Grant
Notice, to make payment of the exercise price under the following
alternatives, (i) provided that at the time of exercise the Company's stock
is publicly traded and quoted regularly in the Wall Street Journal: payment
by delivery of already-owned Shares, held for the period required to avoid a
charge to the Company's reported earnings, and owned free and clear of any
liens, claims, encumbrances or security interests, which Shares shall be
valued at their fair market value on the date of exercise, or (ii) payment
pursuant to a program developed under Regulation T as promulgated by the
Federal Reserve Board which, prior to the issuance of Shares, results in
either the receipt of cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate exercise price to the Company
from the sales proceeds.
3. MINIMUM NUMBER OF SHARES. This option may not be exercised for less
than the lesser of one hundred (100) Shares or the number of Shares then
remaining subject to this option. This option may only be exercised for whole
Shares.
4. TERM. The term of this option commences on the Date of Grant and
expires upon the earliest of:
(i) the Expiration Date indicated in the Grant Notice;
(ii) the tenth (10th) anniversary of the Date of Grant;
(iii) six (6) months after your death, if you die while an
employee of the Company; or
(iv) thirty (30) days after the termination of your
employment with the Company due to your permanent and total disability
(within the meaning of Section 22(e)(3) of the Internal Revenue Code of
1986, as amended); or
(v) three (3) months after the termination of your
employment with the Company for any reason other than death, disability or
"for cause." In the event the you shall be
1.
<PAGE>
terminated "for cause" including but not limited to: (i) willful breach of
any agreement entered into with the Company; (ii) misappropriation of the
Company's property, fraud, embezzlement, breach of fiduciary duty, other acts
of dishonesty against the Company; or (iii) conviction of any felony or crime
involving moral turpitude, the option shall terminate as of the date of your
termination of continuous service.
5. EXERCISE.
(a) You may exercise the vested portion of this option during its
term by delivering a notice of exercise (in a form designated by the Company)
together with the exercise price to the Secretary of the Company, or to such
other person as the Company may designate, during regular business hours,
together with such additional documents as the Company may then require.
(b) By exercising this option you agree that:
(i) As a condition to any exercise of this option, the
Company may require you to enter into an arrangement providing for the
payment by you to the Company of any tax withholding obligation of the
Company arising by reason of (1) the exercise of this option; (2) the lapse
of any substantial risk of forfeiture to which the Shares are subject at the
time of exercise; or (3) the disposition of Shares acquired upon such
exercise.
(ii) Regardless of whether the offer and sale of Shares
subject to this option have been registered under the Securities Act of 1933,
as amended (the "1933 Act") or have been registered or qualified under the
securities laws of any state, the Company may impose restrictions upon the
sale, pledge or other transfer of such Shares (including the placement of
appropriate legends on stock certificates) if in the judgment of the Company
and its counsel such restrictions are necessary or desirable in order to
achieve compliance with the provisions of the 1933 Act, the securities laws
of any state or any other law.
6. TRANSFERABILITY. This option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your
lifetime only by you.
7. CAPITALIZATION ADJUSTMENTS. If any change is made in the Shares
subject to this option without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, stock dividend, dividend in property other than cash, stock
split, liquidating dividend, combination of shares, exchange of shares,
change in corporate structure or other transaction not involving the receipt
of consideration by the Company), the Option Agreement will be appropriately
adjusted in the class(es) and the outstanding options will be appropriately
adjusted in the class(es) and number of shares and price per share of stock
subject to such outstanding options. Such adjustments shall be made by the
Board of Directors of the Company, determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a transaction "without receipt of
consideration" by the Company.)
8. CHANGE IN CONTROL - ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (1) a sale of substantially all of the assets of the
Company, (2) a merger or consolidation in which the Company is not the
surviving corporation or (3) a reverse merger in which the Company is the
surviving corporation but the shares outstanding
2.
<PAGE>
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise, then
any surviving corporation or acquiring corporation shall assume any options
outstanding under the Option Agreement or shall substitute similar options
(including an award to acquire the same consideration paid to the
stockholders in the transaction described in this paragraph 8), for those
outstanding under the Option Agreement. In the event any surviving
corporation or acquiring corporation refuses to assume such options or to
substitute similar options for those outstanding under the Option Agreement
but subject to the restrictions in paragraph 10 below, then with respect to
your options in the event your continuous service as an employee of the
Company has not terminated, the vesting shall be accelerated in full, and the
options shall terminate if not exercised at or prior to such event. With
respect to any other options outstanding under the Option Agreement, such
options shall terminate if not exercised prior to such event.
9. CHANGE IN CONTROL-SECURITIES ACQUISITION. In the event of an
acquisition by any person, entity or group within the meaning of Section
13(d) or 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act"),
or any comparable successor provisions (excluding any employee benefit plan,
or related trust, sponsored or maintained by the Company or an Affiliate) of
the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power
entitled to vote in the election of directors (other than an acquisition
pursuant to paragraph 8 above), then with respect to your options in the
event your continuous service as an employee of the Company has not
terminated and subject to the restrictions in paragraph 10 below, the vesting
of such options shall be accelerated in full.
10. POOLING OF INTERESTS. If the Company and the other party to the
transaction constituting a Change in Control as described in paragraphs 8 and
9 agree that such transaction is to be treated as a "pooling of interests"
for financial reporting purposes, and if such transaction in fact is so
treated, then the accelerated vesting of options described in paragraphs 8
and 9 shall not occur to the extent that the Company's independent public
accountants and such other party's independent public accountants separately
determine in good faith that such acceleration would preclude the use of
"pooling of interests" accounting.
11. PURCHASE FOR INVESTMENT; RIGHTS OF HOLDER ON SUBSEQUENT
REGISTRATION. Unless the Shares to be issued upon exercise of an option
granted under the Option Agreement have been effectively registered under the
1933 Act, the Company shall be under no obligation to issue any Shares
covered by any option unless the person who exercises such option, whether
such exercise is in whole or in part, shall give a written representation and
undertaking to the Company which is satisfactory in form and scope to counsel
for the Company and upon which, in the opinion of such counsel, the Company
may reasonably rely, that he or she is acquiring the Shares issued to him or
her pursuant to such exercise of the option for his or her own account as an
investment and not with a view to, or for sale in connection with, the
distribution of any such Shares, and that he or she will make no transfer of
the same except in compliance with any rules and regulations in force at the
time of such transfer under the 1933 Act, or any other applicable law, and
that if Shares are issued without such registration a legend to this effect
may be endorsed on the securities so issued. In the event that the Company
shall, nevertheless, deem it necessary or desirable to register under the
1933 Act or other applicable statutes any Shares with respect to which an
option shall have been exercised, or to qualify any such Shares for exemption
from the 1933 Act or other applicable statutes, then the Company shall take
such action at its own expense and may require from each participant such
information
3.
<PAGE>
in writing for use in any registration statement, prospectus, preliminary
prospectus or offering circular as is reasonably necessary for such purpose
and may require reasonable indemnity to the Company and its officers and
directors from such holder against all losses, claims, damages and
liabilities arising from such use of the information so furnished and caused
by any untrue statement of any material fact required to be stated therein or
necessary to make the statement therein not misleading in light of the
circumstances under which they were made.
12. OPTION NOT AN EMPLOYMENT CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the
Company, or of the Company to continue your employment with the Company. In
addition, nothing in this option shall obligate the Company, its
stockholders, Board of Directors (the "Board"), officers or employees to
continue any relationship which you might have as an employee of the Company.
13. NOTICES. Any notices provided for in this option shall be given in
writing and shall be deemed effectively given upon receipt or, in the case of
notices delivered by the Company to you, five (5) days after deposit in the
United States mail, postage prepaid, addressed to you at the last address you
provided to the Company.
14. CHOICE OF LAW. This option shall be governed by, and construed in
accordance with the laws of the State of Minnesota, as such laws are applied
to contracts entered into and performed in such State.
15. GOVERNING AUTHORITY. This option is subject to all interpretations,
amendments, rules and regulations which may from time to time be promulgated
and adopted by the Company. This authority shall be exercised by the Board,
or by a committee of one or more members of the Board in the event that the
Board delegates its authority to a committee. The Board, in the exercise of
this authority, may correct any defect, omission or inconsistency in this
option in a manner and to the extent the Board shall deem necessary or
desirable to make this option fully effective. References to the Board also
include any committee appointed by the Board to administer and interpret this
option. Any interpretations, amendments, rules and regulations promulgated by
the Board shall be final and binding upon the Company and its successors in
interest as well as you and your heirs, assigns, and other successors in
interest.
Dated the ____ day of _________________, 1998.
Very truly yours,
DIGITAL RIVER, INC.
By:
-------------------------------------
Duly authorized on behalf
of the Board of Directors
4.
<PAGE>
NOTICE OF EXERCISE
Digital River, Inc.
5198 West 76th Street
Edina, MN 55439 Date of Exercise:
----------------------
Ladies and Gentlemen:
This constitutes notice under my nonstatutory stock option that I elect
to purchase the number of shares for the price set forth below.
<TABLE>
<S> <C>
Stock option dated:
--------------------
Number of shares as
to which option is
exercised:
--------------------
Certificate to be
issued in name of:
--------------------
Total exercise price: $
-------------------
Cash payment (or check) delivered
herewith: $
-------------------
Value of ______ shares of
Digital River, Inc. capital
stock delivered herewith(1): $
-------------------
</TABLE>
By this exercise, I agree to provide such additional documents as you
may reasonably require. I understand that my right to receive the shares
otherwise issuable to me upon the exercise of the option is contingent upon my
satisfaction of these requirements.
I hereby make the following statements with respect to the shares of
voting common stock (the "Shares"), which are being acquired by me for my own
account upon this exercise of the option as set forth above:
- --------
(1) Shares must meet the public trading requirements set forth in the option.
Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or security
interests. Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.
1.
<PAGE>
I acknowledge and agree that as a condition to this exercise of the
option, the Company may require me to enter an arrangement providing for the
payment by me to the Company of any tax withholding obligation of the Company
arising by reason of (1) the exercise of the option; (2) the lapse of any
substantial risk of forfeiture to which the Shares are subject at the time of
exercise; or (3) the disposition of Shares acquired upon such exercise.
I further acknowledge and agree that regardless of whether the offer and
sale of Shares subject to the option have been registered under the
Securities Act of 1933, as amended (the "1933 Act") or have been registered
or qualified under the securities laws of any state, the Company may impose
restrictions upon the sale, pledge or other transfer of the Shares (including
the placement of appropriate legends on stock certificates) if in the
judgment of the Company and its counsel such restrictions are necessary or
desirable in order to achieve compliance with the provisions of the 1933 Act,
the securities laws of any state or any other law.
Very truly yours,
------------------------------
2.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION SEQUENTIAL PAGE NUMBER
<S> <C> <C>
4.1* Amended and Restated Certificate of Incorporation of the Company.
4.2* Amended and Restated Bylaws of the Company.
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
23.3 Consent of Cooley Godward LLP. Reference is made to Exhibit 5.1.
24.1 Power of Attorney is contained on the signature pages.
99.1* 1998 Stock Option Plan.
99.2 Form of Incentive Stock Option Agreement under the 1998 Stock Option Plan.
99.3 Form of Nonincentive Stock Option Agreement under the 1998 Stock Option Plan.
99.4 Form of Non-Statutory Stock Option Granted Outside of the 1998 Stock Option Plan.
</TABLE>
- -------------
* Documents incorporated by reference from the Company's Registration Statement
on Form S-1, as amended (333-56787), filed with the SEC on June 12, 1998.
3.
