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EXHIBIT 99.1
Clarent Corporation
1999 Amended and Restated Equity Incentive Plan
Adopted April 8, 1999
Approved By Stockholders June 22, 1999
Amended by Stockholder Approval on February 15, 2000
Amended by the Board of Directors April 7, 2000
Approved by Stockholders June 7, 2000
Termination Date: April 7, 2009
This Clarent Corporation 1999 Amended and Restated Equity Incentive Plan
amends and restates, in its entirety, the Clarent Corporation 1996 Stock
Option Plan adopted October 11, 1996, and amended on May 29, 1997, May 29,
1998 and October 22, 1998.
1. Purposes.
(a) Eligible Stock Award Recipients. The persons eligible to receive Stock
Awards are the Employees, Directors and Consultants of the Company and
its Affiliates.
(b) Available Stock Awards. The purpose of the Plan is to provide a means
by which selected Employees, Directors and Consultants may be given an
opportunity to benefit from increases in value of the Common Stock
through the granting of: (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) stock bonuses, (iv) rights to acquire restricted
stock and (v) Stock Appreciation Rights.
(c) General Purpose. The Company, by means of the Plan, seeks to retain the
services of persons who are now Employees, Directors or Consultants, to
secure and retain the services of new Employees, Directors and
Consultants and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation of
the Company, whether now or hereafter existing, as those terms are
defined in Sections 424(e) and (f), respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance with
subsection 3(c).
(e) "Common Stock" means the common stock of the Company.
(f) "Company" means Clarent Corporation, a California corporation.
(g) "Concurrent Stock Appreciation Right" or "Concurrent Right" means a
right granted pursuant to subsection 8(b)(ii) of the Plan.
(h) "Consultant" means any person, including an advisor, (1) engaged by the
Company or an Affiliate to render consulting or advisory services and
who is compensated for such services or (2) who is a member of the
Board of Directors of an Affiliate. However, the term "Consultant"
shall not include either Directors of the Company who are not
compensated by the Company for their services as Directors or Directors
of the Company who are merely paid a director's fee by the Company for
their services as Directors.
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(i) "Continuous Service" means that the Participant's service with the
Company or an Affiliate, whether as an Employee, Director or
Consultant, is not interrupted or terminated. The Participant's
Continuous Service shall not be deemed to have terminated merely
because of a change in the capacity in which the Participant renders
service to the Company or an Affiliate as an Employee, Consultant or
Director or a change in the entity for which the Participant renders
such service, provided that there is no interruption or termination of
the Participant's Continuous Service. For example, a change in status
from an Employee of the Company to a Consultant of an Affiliate or a
Director of the Company will not constitute an interruption of
Continuous Service. The Board or the chief executive officer of the
Company, in that party's sole discretion, may determine whether
Continuous Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military
leave or any other personal leave.
(j) "Covered Employee" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total
compensation is required to be reported to stockholders under the
Exchange Act, as determined for purposes of Section 162(m) of the Code.
(k) "Director" means a member of the Board.
(l) "Disability" means (i) before the Listing Date, the inability of a
person, in the opinion of a qualified physician acceptable to the
Company, to perform the major duties of that person's position with the
Company or an Affiliate of the Company because of the sickness or
injury of the person and (ii) after the Listing Date, the permanent and
total disability of a person within the meaning of Section 22(e)(3) of
the Code.
(m) "Employee" means any person employed by the Company or an Affiliate.
Neither service as a Director nor payment of a director's fee by the
Company or an Affiliate shall be sufficient to constitute "employment"
by the Company or an Affiliate.
(n) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(o) "Fair Market Value" means, as of any date, the value of the Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
traded on the NASDAQ National Market System or the NASDAQ SmallCap
Market, the Fair Market Value of a share of Common Stock shall be
the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or market (or the
exchange or market with the greatest volume of trading in the
Common Stock) on the last market trading day prior to the time of
determination (which may be the same calendar day), as reported in
The Wall Street Journal or such other source as the Board deems
reliable.
(ii) In the absence of such markets for the Common Stock, the Fair
Market Value shall be determined in good faith by the Board.
(iii) Prior to the Listing Date, the value of the Common Stock shall be
determined in a manner consistent with Section 260.140.50 of Title
10 of the California Code of Regulations.
(p) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code
and the regulations promulgated thereunder.
(q) "Independent Stock Appreciation Right" or "Independent Right" means a
right granted pursuant to subsection 8(b)(iii) of the Plan.
(r) "Listing Date" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on
any securities exchange or designated (or approved for designation)
upon notice of issuance as a national market security on an interdealer
quotation system if
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such securities exchange or interdealer quotation system has been
certified in accordance with the provisions of Section 25100(o) of the
California Corporate Securities Law of 1968.
(s) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or a
subsidiary, does not receive compensation (directly or indirectly) from
the Company or its parent or a subsidiary for services rendered as a
consultant or in any capacity other than as a Director (except for an
amount as to which disclosure would not be required under Item 404(a)
of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a)
of Regulation S-K and is not engaged in a business relationship as to
which disclosure would be required under Item 404(b) of Regulation S-K;
or (ii) is otherwise considered a "non-employee director" for purposes
of Rule 16b-3.
(t) "Nonstatutory Stock Option" means an Option not intended to qualify as
an Incentive Stock Option.
(u) "Officer" means (i) before the Listing Date, any person designated by
the Company as an officer and (ii) on and after the Listing Date, a
person who is an officer of the Company within the meaning of Section
16 of the Exchange Act and the rules and regulations promulgated
thereunder.
(v) "Option" means an Incentive Stock Option or a Nonstatutory Stock Option
granted pursuant to the Plan.
(w) "Option Agreement" means a written agreement between the Company and an
Optionholder evidencing the terms and conditions of an individual
Option grant. Each Option Agreement shall be subject to the terms and
conditions of the Plan.
(x) "Optionholder" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding
Option.
(y) "Outside Director" means a Director of the Company who either (i) is
not a current employee of the Company or an "affiliated corporation"
(within the meaning of Treasury Regulations promulgated under Section
162(m) of the Code), is not a former employee of the Company or an
"affiliated corporation" receiving compensation for prior services
(other than benefits under a tax qualified pension plan), was not an
officer of the Company or an "affiliated corporation" at any time and
is not currently receiving direct or indirect remuneration from the
Company or an "affiliated corporation" for services in any capacity
other than as a Director or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.
(z) "Participant" means a person to whom a Stock Award is granted pursuant
to the Plan or, if applicable, such other person who holds an
outstanding Stock Award.
(aa) "Plan" means this Clarent Corporation 1999 Equity Incentive Plan.
(bb) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange Act or
any successor to Rule 16b-3, as in effect from time to time.
(cc) "Securities Act" means the Securities Act of 1933, as amended.
(dd) "Stock Appreciation Right" means any of the various types of rights
which may be granted under Section 8 of the Plan.
(ee) "Stock Award" means any right granted under the Plan, including an
Option, a stock bonus, any right to acquire restricted stock and any
Stock Appreciation Right.
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(ff) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be
subject to the terms and conditions of the Plan.
(gg) "Tandem Stock Appreciation Right" or "Tandem Right" means a right
granted pursuant to subsection 8(b)(1) of the Plan.
(hh) "Ten Percent Stockholder" means a person who owns (or is deemed to own
pursuant to Section 424(d) of the Code) stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock
of the Company or of any of its Affiliates.
3. Administration.
(a) Administration by Board. The Board will administer the Plan unless and
until the Board delegates administration to a Committee, as provided in
subsection 3(c).
(b) Powers of Board. The Board shall have the power, subject to, and within
the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons eligible under
the Plan shall be granted Stock Awards; when and how each Stock
Award shall be granted; what type or combination of types of Stock
Award shall be granted; the provisions of each Stock Award granted
(which need not be identical), including the time or times when a
person shall be permitted to receive stock pursuant to a Stock
Award; and the number of shares with respect to which a Stock Award
shall be granted to each such person.
(ii) To construe and interpret the Plan and Stock Awards granted under
it, and to establish, amend and revoke rules and regulations for
its administration. The Board, in the exercise of this power, may
correct any defect, omission or inconsistency in the Plan or in
any Stock Award Agreement, in a manner and to the extent it shall
deem necessary or expedient to make the Plan fully effective.
(iii) To amend the Plan or a Stock Award as provided in Section 13.
(iv) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests
of the Company which are not in conflict with the provisions of
the Plan.
(c) Delegation to Committee.
(i) General. The Board may delegate administration of the Plan to a
Committee or Committees of one or more members of the Board, and
the term "Committee" shall apply to any person or persons to whom
such authority has been delegated. If administration is delegated
to a Committee, the Committee shall have, in connection with the
administration of the Plan, the powers theretofore possessed by the
Board, including the power to delegate to a subcommittee any of the
administrative powers the Committee is authorized to exercise (and
references in this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such resolutions,
not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee
at any time and revest in the Board the administration of the Plan.
(ii) Committee Composition when Common Stock is Publicly Traded. At
such time as the Common Stock is publicly traded, in the
discretion of the Board, a Committee may consist solely of two or
more Outside Directors, in accordance with Section 162(m) of the
Code, and/or solely of two or more Non-Employee Directors, in
accordance with Rule 16b-3. Within the scope of such
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authority, the Board or the Committee may (i) delegate to a committee
of one or more members of the Board who are not Outside Directors,
the authority to grant Stock Awards to eligible persons who are
either (a) not then Covered Employees and are not expected to be
Covered Employees at the time of recognition of income resulting from
such Stock Award or (b) not persons with respect to whom the Company
wishes to comply with Section 162(m) of the Code and/or (ii) delegate
to a committee of one or more members of the Board who are not Non-
Employee Directors the authority to grant Stock Awards to eligible
persons who are not then subject to Section 16 of the Exchange Act.
4. Shares Subject to the Plan.
(a) Share Reserve. Subject to the provisions of Section 12 relating to
adjustments upon changes in stock, the stock that may be issued
pursuant to Stock Awards shall not exceed in the aggregate Sixteen
Million Seven Hundred Ninety Two Thousand Four Hundred Sixty Five
(16,792,465) shares of Common Stock, such number to be increased each
year on, respectively, January 31, 2001, January 31, 2002, January 31,
2003, and January 31, 2004, by that number of shares equal to two and
one-half percent (2.5%) of the Company's outstanding shares, measured
as of such date. Notwithstanding the foregoing (and subject to the
provisions of Section 12), the stock that may be issued pursuant to
Incentive Stock Options shall not exceed in the aggregate Sixteen
Million Seven Hundred Ninety Two Thousand Four Hundred Sixty Five
(16,792,465) shares of Common Stock, and the stock that may be issued
pursuant to stock bonuses or restricted stock agreements shall not
exceed thirty percent (30%) of the Share Reserve.
(b) Reversion of Shares to the Share Reserve. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without
having been exercised in full (or vested in the case of restricted
stock), the stock not acquired under such Stock Award shall revert to
and again become available for issuance under the Plan. If any Common
Stock acquired pursuant to the exercise of an Option shall for any
reason be repurchased by the Company under an unvested share repurchase
option provided under the Plan, the stock repurchased by the Company
under such repurchase option shall revert to and again become available
for issuance, pursuant to Stock Awards other than Incentive Stock
Options, under the Plan. Shares subject to Stock Appreciation Rights
exercised in accordance with Section 8 of the Plan shall not be
available for subsequent issuance under the Plan.
(c) Source of Shares. The stock subject to the Plan may be unissued shares
or reacquired shares, bought on the market or otherwise.
(d) Share Reserve Limitation. Prior to the Listing Date, at no time shall
the total number of shares issuable upon exercise of all outstanding
Options and the total number of shares provided for under any stock
bonus or similar plan of the Company exceed the applicable percentage
as calculated in accordance with the conditions and exclusions of
Section 260.140.45 of Title 10 of the California Code of Regulations,
based on the shares of the Company which are outstanding at the time
the calculation is made.
5. Eligibility.
(a) Eligibility for Specific Stock Awards. Incentive Stock Options and
Stock Appreciation Rights appurtenant thereto may be granted only to
Employees. Stock Awards other than Incentive Stock Options and Stock
Appreciation Rights thereto may be granted to Employees, Directors and
Consultants.
(b) Ten Percent Stockholders. No Ten Percent Stockholder shall be eligible
for the grant of an Incentive Stock Option unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair
Market Value of the Common Stock at the date of grant and the Option is
not exercisable after the expiration of five (5) years from the date of
grant.
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Prior to the Listing Date, no Ten Percent Stockholder shall be eligible
for the grant of a Nonstatutory Stock Option unless the exercise price
of such Option is at least one hundred ten percent (110%) of the Fair
Market Value of the Common Stock at the date of grant.
Prior to the Listing Date, no Ten Percent Stockholder shall be eligible
for a restricted stock award unless the purchase price of the
restricted stock is at least one hundred percent (100%) of the Fair
Market Value of the Common Stock at the date of grant.
(c) Section 162(m) Limitation. Subject to the provisions of Section 12
relating to adjustments upon changes in stock, no employee shall be
eligible to be granted Options and Stock Appreciation Rights covering
more than seven hundred twenty thousand (720,000) shares of the Common
Stock during any calendar year. This subsection 5(c) shall not apply
prior to the Listing Date and, following the Listing Date, this
subsection 5(c) shall not apply until (i) the earliest of: (1) the
first material modification of the Plan (including any increase in the
number of shares reserved for issuance under the Plan in accordance
with Section 4); (2) the issuance of all of the shares of Common Stock
reserved for issuance under the Plan; (3) the expiration of the Plan;
or (4) the first meeting of stockholders at which Directors of the
Company are to be elected that occurs after the close of the third
calendar year following the calendar year in which occurred the first
registration of an equity security under Section 12 of the Exchange
Act; or (ii) such other date required by Section 162(m) of the Code and
the rules and regulations promulgated thereunder.
(d) Consultants.
(i) Prior to the Listing Date, a Consultant shall not be eligible for
the grant of a Stock Award if, at the time of grant, either the
offer or the sale of the Company's securities to such Consultant is
not exempt under Rule 701 of the Securities Act ("Rule 701")
because of the nature of the services that the Consultant is
providing to the Company, or because the Consultant is not a
natural person, or as otherwise provided by Rule 701, unless the
Company determines that such grant need not comply with the
requirements of Rule 701 and will satisfy another exemption under
the Securities Act as well as comply with the securities laws of
all other relevant jurisdictions.
(ii) From and after the Listing Date, a Consultant shall not be
eligible for the grant of a Stock Award if, at the time of grant,
a Form S-8 Registration Statement under the Securities Act ("Form
S-8") is not available to register either the offer or the sale of
the Company's securities to such Consultant because of the nature
of the services that the Consultant is providing to the Company,
or because the Consultant is not a natural person, or as otherwise
provided by the rules governing the use of Form S-8, unless the
Company determines both (i) that such grant (A) shall be
registered in another manner under the Securities Act (e.g., on a
Form S-3 Registration Statement) or (B) does not require
registration under the Securities Act in order to comply with the
requirements of the Securities Act, if applicable, and (ii) that
such grant complies with the securities laws of all other relevant
jurisdictions.
(iii) As of April 7, 1999 Rule 701 and Form S-8 generally are available
to consultants and advisors only if (i) they are natural persons;
(ii) they provide bona fide services to the issuer, its parents,
its majority-owned subsidiaries or majority-owned subsidiaries of
the issuer's parent; and (iii) the services are not in connection
with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or
maintain a market for the issuer's securities.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be
separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and a separate certificate or certificates will be
issued for shares purchased on exercise of each type of Option. The
provisions of separate Options need not be identical, but each Option
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shall include (through incorporation of provisions hereof by reference in
the Option or otherwise) the substance of each of the following provisions:
(a) Term. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be exercisable
after the expiration of ten (10) years from the date it was granted.
(b) Exercise Price of an Incentive Stock Option. Subject to the provisions
of subsection 5(b) regarding Ten Percent Stockholders, the exercise
price of each Incentive Stock Option shall be not less than one hundred
percent (100%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the
foregoing, an Incentive Stock Option may be granted with an exercise
price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the
Code.
(c) Exercise Price of a Nonstatutory Stock Option. Subject to the
provisions of subsection 5(b) regarding Ten Percent Stockholders, the
exercise price of each Nonstatutory Stock Option granted prior to the
Listing Date shall be not less than one hundred percent (100%) of the
Fair Market Value of the stock subject to the Option on the date the
Option is granted. The exercise price of each Nonstatutory Stock Option
granted on or after the Listing Date shall be not less than one hundred
percent (100%) of the Fair Market Value of the stock subject to the
Option on the date the Option is granted. Notwithstanding the
foregoing, a Nonstatutory Stock Option may be granted with an exercise
price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another
option in a manner satisfying the provisions of Section 424(a) of the
Code.
(d) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes
and regulations, either (i) in cash at the time the Option is exercised
or (ii) at the discretion of the Board at the time of the grant of the
Option (or subsequently in the case of a Nonstatutory Stock Option) by
delivery to the Company of other Common Stock, according to a deferred
payment or other arrangement (which may include, without limiting the
generality of the foregoing, the use of other Common Stock) with the
Participant or in any other form of legal consideration that may be
acceptable to the Board; provided, however, that at any time that the
Company is incorporated in Delaware, payment of the Common Stock's "par
value," as defined in the Delaware General Corporation Law, shall not
be made by deferred payment.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate
of interest necessary to avoid the treatment as interest, under any
applicable provisions of the Code, of any amounts other than amounts
stated to be interest under the deferred payment arrangement.
(e) Transferability of an Incentive Stock Option. An Incentive Stock Option
shall not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the
Optionholder only by the Optionholder. Notwithstanding the foregoing
provisions of this subsection 6(e), the Optionholder may, by delivering
written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the
Optionholder, shall thereafter be entitled to exercise the Option.
(f) Transferability of a Nonstatutory Stock Option. Except to the extent
permitted by law, a Nonstatutory Stock Option granted prior to the
Listing Date shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the lifetime
of the Optionholder only by the Optionholder. A Nonstatutory Stock
Option granted on or after the Listing Date shall be transferable to
the extent provided in the Option Agreement. If the Nonstatutory Stock
Option does not provide for transferability, then the Nonstatutory
Stock Option shall not be transferable except by will or by the laws of
descent and distribution and shall be exercisable during the lifetime
of the Optionholder only
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by the Optionholder. Notwithstanding the foregoing provisions of this
subsection 6(f), the Optionholder may, by delivering written notice to
the Company, in a form satisfactory to the Company, designate a third
party who, in the event of the death of the Optionholder, shall
thereafter be entitled to exercise the Option.
(g) Vesting Generally. The total number of shares of Common Stock subject
to an Option may, but need not, vest and therefore become exercisable
in periodic installments which may, but need not, be equal. The Option
may be subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or other
criteria) as the Board may deem appropriate. The vesting provisions of
individual Options may vary. The provisions of this subsection 6(g) are
subject to any Option provisions governing the minimum number of shares
as to which an Option may be exercised.
(h) Minimum Vesting Prior to the Listing Date. Notwithstanding the
foregoing subsection 6(g), Options granted prior to the Listing Date
shall provide for vesting of the total number of shares at a rate of at
least twenty percent (20%) per year over five (5) years from the date
the Option was granted, subject to reasonable conditions such as
continued employment. However, in the case of such Options granted to
Officers, Directors or Consultants, the Option may become fully
exercisable, subject to reasonable conditions such as continued
employment, at any time or during any period established by the
Company; for example, the vesting provision of the Option may provide
for vesting of less than twenty percent (20%) per year of the total
number of shares subject to the Option.
(i) Termination of Continuous Service. In the event an Optionholder's
Continuous Service terminates (other than upon the Optionholder's death
or Disability), the Optionholder may exercise his or her Option (to the
extent that the Optionholder was entitled to exercise it as of the date
of termination) but only within such period of time ending on the
earlier of (i) the date three (3) months following the termination of
the Optionholder's Continuous Service (or such longer or shorter period
specified in the Option Agreement, which, for Options granted prior to
the Listing Date, shall not be less than thirty (30) days, unless such
termination is for cause) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after termination, the
Optionholder does not exercise his or her Option within the time
specified in the Option Agreement, the Option shall terminate.
(j) Extension of Termination Date. An Optionholder's Option Agreement may
also provide that if the exercise of the Option following the
termination of the Optionholder's Continuous Service (other than upon
the Optionholder's death or Disability) would be prohibited at any time
solely because the issuance of shares would violate the registration
requirements under the Securities Act, then the Option shall terminate
on the earlier of (i) the expiration of the term of the Option set
forth in subsection 6(a) or (ii) the expiration of a period of three
(3) months after the termination of the Optionholder's Continuous
Service during which the exercise of the Option would not be in
violation of such registration requirements.
(k) Disability of Optionholder. In the event an Optionholder's Continuous
Service terminates as a result of the Optionholder's Disability, the
Optionholder may exercise his or her Option (to the extent that the
Optionholder was entitled to exercise it as of the date of
termination), but only within such period of time ending on the earlier
of (i) the date twelve (12) months following such termination (or such
longer or shorter period specified in the Option Agreement, which, for
Options granted prior to the Listing Date, shall not be less than six
(6) months) or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, after termination, the Optionholder
does not exercise his or her Option within the time specified herein,
the Option shall terminate.
(l) Death of Optionholder. In the event (i) an Optionholder's Continuous
Service terminates as a result of the Optionholder's death or (ii) the
Optionholder dies within the period (if any) specified in the Option
Agreement after the termination of the Optionholder's Continuous
Service for a reason other
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than death, then the Option may be exercised (to the extent the
Optionholder was entitled to exercise the Option as of the date of
death) by the Optionholder's estate, by a person who acquired the right
to exercise the Option by bequest or inheritance or by a person
designated to exercise the option upon the Optionholder's death pursuant
to subsection 6(e) or 6(f), but only within the period ending on the
earlier of (1) the date eighteen (18) months following the date of death
(or such longer or shorter period specified in the Option Agreement,
which, for Options granted prior to the Listing Date, shall not be less
than six (6) months) or (2) the expiration of the term of such Option as
set forth in the Option Agreement. If, after death, the Option is not
exercised within the time specified herein, the Option shall terminate.
(m) Early Exercise. The Option may, but need not, include a provision
whereby the Optionholder may elect at any time before the
Optionholder's Continuous Service terminates to exercise the Option as
to any part or all of the shares subject to the Option prior to the
full vesting of the Option. Subject to the "Repurchase Limitation" in
subsection 11(h), any unvested shares so purchased may be subject to an
unvested share repurchase option in favor of the Company or to any
other restriction the Board determines to be appropriate.
(n) Right of Repurchase. Subject to the "Repurchase Limitation" in
subsection 11(h), the Option may, but need not, include a provision
whereby the Company may elect, prior to the Listing Date, to repurchase
all or any part of the vested shares acquired by the Optionholder
pursuant to the exercise of the Option.
(o) Right of First Refusal. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to
exercise a right of first refusal following receipt of notice from the
Optionholder of the intent to transfer all or any part of the shares
exercised pursuant to the Option. Except as expressly provided in this
subsection 6(o), such right of first refusal shall otherwise comply
with any applicable provisions of the Bylaws of the Company.
(p) Re-Load Options. Without in any way limiting the authority of the Board
to make or not to make grants of Options hereunder, the Board shall
have the authority (but not an obligation) to include as part of any
Option Agreement a provision entitling the Optionholder to a further
Option (a "Re-Load Option") in the event the Optionholder exercises the
Option evidenced by the Option Agreement, in whole or in part. Any such
Re-Load Option shall (i) provide for a number of shares equal to the
number of shares acquired upon exercise of such Option; (ii) have an
expiration date which is the same as the expiration date of the Option
the exercise of which gave rise to such Re-Load Option; and (iii) have
an exercise price which is equal to one hundred percent (100%) of the
Fair Market Value of the Common Stock subject to the Re-Load Option on
the date of exercise of the original Option. Notwithstanding the
foregoing, a Re-Load Option shall be subject to the same exercise price
and term provisions heretofore described for Options under the Plan,
including the provisions of Section 5(b) applicable to Ten Percent
Stockholders.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board may designate at the time of the
grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the
one hundred thousand dollars ($100,000) annual limitation on
exercisability of Incentive Stock Options described in subsection 11(d)
and in Section 422(d) of the Code. There shall be no Re-Load Options on
a Re-Load Option. Any such Re-Load Option shall be subject to the
availability of sufficient shares under subsection 4(a) and the "Section
162(m) Limitation" on the grants of Options under subsection 5(c) and
shall be subject to such other terms and conditions as the Board may
determine which are not inconsistent with the express provisions of the
Plan regarding the terms of Options.
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7. Provisions of Stock Awards other than Options.
(a) Stock Bonus Awards. Each stock bonus agreement shall be in such form
and shall contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus agreements may
change from time to time, and the terms and conditions of separate
stock bonus agreements need not be identical, but each stock bonus
agreement shall include (through incorporation of provisions hereof by
reference in the agreement or otherwise) the substance of each of the
following provisions:
(i) Consideration. A stock bonus shall be awarded in consideration for
past services actually rendered to the Company for its benefit.
(ii) Vesting. Subject to the "Repurchase Limitation" in subsection
11(h), shares of Common Stock awarded under the stock bonus
agreement may, but need not, be subject to a share repurchase
option in favor of the Company in accordance with a vesting
schedule to be determined by the Board.
(iii) Termination of Participant's Continuous Service. Subject to the
"Repurchase Limitation" in subsection 11(h), in the event a
Participant's Continuous Service terminates, the Company may
reacquire any or all of the shares of Common Stock held by the
Participant which have not vested as of the date of termination
under the terms of the stock bonus agreement.
(iv) Transferability. Shares of Common Stock granted pursuant to a
stock bonus agreement shall not be transferable prior to the time
they become vested.
(b) Restricted Stock Awards. Each restricted stock purchase agreement shall
be in such form and shall contain such terms and conditions as the
Board shall deem appropriate. The terms and conditions of the
restricted stock purchase agreements may change from time to time, and
the terms and conditions of separate restricted stock purchase
agreements need not be identical, but each restricted stock purchase
agreement shall include (through incorporation of provisions hereof by
reference in the agreement or otherwise) the substance of each of the
following provisions:
(i) Purchase Price. Subject to the provisions of subsection 5(b)
regarding Ten Percent Stockholders, the purchase price under each
restricted stock purchase agreement shall be such amount as the
Board shall determine and designate in such restricted stock
purchase agreement. For restricted stock awards made prior to the
Listing Date, the purchase price shall not be less than one hundred
percent (100%) of the stock's Fair Market Value on the date such
award is made or at the time the purchase is consummated. For
restricted stock awards made on or after the Listing Date, the
purchase price shall not be less than eighty-five percent (85%) of
the stock's Fair Market Value on the date such award is made or at
the time the purchase is consummated.
(ii) Consideration. The purchase price of stock acquired pursuant to
the restricted stock purchase agreement shall be paid either: (i)
in cash at the time of purchase; (ii) at the discretion of the
Board, according to a deferred payment or other arrangement with
the Participant; or (iii) in any other form of legal consideration
that may be acceptable to the Board in its discretion; provided,
however, that at any time that the Company is incorporated in
Delaware, payment of the Common Stock's "par value," as defined in
the Delaware General Corporation Law, shall not be made by
deferred payment.
(iii) Vesting. Subject to the "Repurchase Limitation" in subsection
11(h), shares of Common Stock acquired under the restricted stock
purchase agreement may, but need not, be subject to a share
repurchase option in favor of the Company in accordance with a
vesting schedule to be determined by the Board.
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(iv) Termination of Participant's Continuous Service. Subject to the
"Repurchase Limitation" in subsection 11(h), in the event a
Participant's Continuous Service terminates, the Company may
repurchase or otherwise reacquire any or all of the shares of
Common Stock held by the Participant which have not vested as of
the date of termination under the terms of the restricted stock
purchase agreement.
(v) Transferability. Except to the extent permitted by law, for a
restricted stock award made before the Listing Date, rights to
acquire shares under the restricted stock purchase agreement shall
not be transferable except by will or by the laws of descent and
distribution and shall be exercisable during the lifetime of the
Participant only by the Participant. For a restricted stock award
made on or after the Listing Date, rights to acquire shares under
the restricted stock purchase agreement shall be transferable by
the Participant only upon such terms and conditions as are set
forth in the restricted stock purchase agreement, as the Board
shall determine in its discretion, so long as stock awarded under
the restricted stock purchase agreement remains subject to the
terms of the restricted stock purchase agreement.
8. Stock Appreciation Rights.
(a) The Board or Committee shall have full power and authority, exercisable
in its sole discretion, to grant Stock Appreciation Rights under the
Plan to Employees or Directors of or Consultants to, the Company or its
Affiliates. To exercise any outstanding Stock Appreciation Right, the
holder must provide written notice of exercise to the Company in
compliance with the provisions of the Stock Award Agreement evidencing
such right. Except as provided in subsection 5(c), no limitation shall
exist on the aggregate amount of cash payments the Company may make
under the Plan in connection with the exercise of a Stock Appreciation
Right.
(b) Three types of Stock Appreciation Rights shall be authorized for
issuance under the Plan:
(i) Tandem Stock Appreciation Rights. Tandem Stock Appreciation Rights
will be granted appurtenant to an Option (other than an Incentive
Stock Option), and shall, except as specifically set forth in this
Section 8, be subject to the same terms and conditions applicable
to the particular Option grant to which it pertains. Tandem Stock
Appreciation Rights will require the holder to elect between the
exercise of the underlying Option for shares of stock and the
surrender, in whole or in part, of such Option for an appreciation
distribution. The appreciation distribution payable on the
exercised Tandem Right shall be in cash (or, if so provided, in an
equivalent number of shares of stock based on Fair Market Value on
the date of the Option surrender) in an amount up to the excess of
(A) the Fair Market Value (on the date of the Option surrender) of
the number of shares of stock covered by that portion of the
surrendered Option in which the Optionholder is vested over (B) the
aggregate exercise price payable for such vested shares.
(ii) Concurrent Stock Appreciation Rights. Concurrent Rights will be
granted appurtenant to an Option and may apply to all or any
portion of the shares of stock subject to the underlying Option
and shall, except as specifically set forth in this Section 8, be
subject to the same terms and conditions applicable to the
particular Option grant to which it pertains. A Concurrent Right
shall be exercised automatically at the same time the underlying
Option is exercised with respect to the particular shares of stock
to which the Concurrent Right pertains. The appreciation
distribution payable on an exercised Concurrent Right shall be in
cash (or, if so provided, in an equivalent number of shares of
stock based on Fair Market Value on the date of the exercise of
the Concurrent Right) in an amount equal to such portion as shall
be determined by the Board or the Committee at the time of the
grant of the excess of (A) the aggregate Fair Market Value (on the
date of the exercise of the Concurrent Right) of the vested shares
of stock purchased under the underlying Option which have
Concurrent Rights appurtenant to them over (B) the aggregate
exercise price paid for such shares.
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(iii) Independent Stock Appreciation Rights. Independent Rights will be
granted independently of any Option and shall, except as
specifically set forth in this Section 8, be subject to the same
terms and conditions applicable to Nonstatutory Stock Options as
set forth in Section 6. They shall be denominated in share
equivalents. The appreciation distribution payable on the
exercised Independent Right shall be not greater than an amount
equal to the excess of (A) the aggregate Fair Market Value (on
the date of the exercise of the Independent Right) of a number of
shares of Company stock equal to the number of share equivalents
in which the holder is vested under such Independent Right, and
with respect to which the holder is exercising the Independent
Right on such date, over (B) the aggregate Fair Market Value (on
the date of the grant of the Independent Right) of such number of
shares of Company stock. The appreciation distribution payable on
the exercised Independent Right shall be in cash or, if so
provided, in an equivalent number of shares of stock based on
Fair Market Value on the date of the exercise of the Independent
Right.
9. Covenants of the Company.
(a) Availability of Shares. During the terms of the Stock Awards, the
Company shall keep available at all times the number of shares of
Common Stock required to satisfy such Stock Awards.
(b) Securities Law Compliance. The Company shall seek to obtain from each
regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to grant Stock Awards and to issue and
sell shares of Common Stock upon exercise of the Stock Awards;
provided, however, that this undertaking shall not require the Company
to register under the Securities Act the Plan, any Stock Award or any
stock issued or issuable pursuant to any such Stock Award. If, after
reasonable efforts, the Company is unable to obtain from any such
regulatory commission or agency the authority which counsel for the
Company deems necessary for the lawful issuance and sale of stock under
the Plan, the Company shall be relieved from any liability for failure
to issue and sell stock upon exercise of such Stock Awards unless and
until such authority is obtained.
10. Use of Proceeds from Stock.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
11. Miscellaneous.
(a) Acceleration of Exercisability and Vesting. The Board shall have the
power to accelerate the time at which a Stock Award may first be
exercised and/or the time during which a Stock Award or any part
thereof will vest in accordance with the Plan, notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Stockholder Rights. No Participant shall be deemed to be the holder of,
or to have any of the rights of a holder with respect to, any shares
subject to an Option unless and until such Participant has satisfied
all requirements for exercise of the Option pursuant to its terms.
(c) No Employment or Other Service Rights. Nothing in the Plan or any
instrument executed or Stock Award granted pursuant thereto shall
confer upon any Participant or other holder of Stock Awards any right
to continue to serve the Company or an Affiliate in the capacity in
effect at the time the Stock Award was granted or shall affect the
right of the Company or an Affiliate to terminate (i) the employment of
an Employee with or without notice and with or without cause, for any
reason, (ii) the service of a Consultant pursuant to the terms of such
Consultant's agreement with the Company or an Affiliate or (iii) the
service of a Director pursuant to the Bylaws of the Company or an
Affiliate, and any applicable provisions of the corporate law of the
state in which the Company or the Affiliate is incorporated, as the
case may be.
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(d) Incentive Stock Option $100,000 Limitation. To the extent that the
aggregate Fair Market Value (determined at the time of grant) of stock
with respect to which Incentive Stock Options are exercisable for the
first time by any Optionholder during any calendar year (under all
plans of the Company and its Affiliates) exceeds one hundred thousand
dollars ($100,000), the Options or portions thereof which exceed such
limit (according to the order in which they were granted) shall be
treated as Nonstatutory Stock Options.
(e) Investment Assurances. The Company may require a Participant, as a
condition of exercising or acquiring stock under any Stock Award, (i)
to give written assurances satisfactory to the Company as to the
Participant's knowledge and experience in financial and business
matters and/or to employ a purchaser representative reasonably
satisfactory to the Company who is knowledgeable and experienced in
financial and business matters and that he or she is capable of
evaluating, alone or together with the purchaser representative, the
merits and risks of exercising the Stock Award; and (ii) to give
written assurances satisfactory to the Company stating that the
Participant is acquiring the stock subject to the Stock Award for the
Participant's own account and not with any present intention of selling
or otherwise distributing the stock. The foregoing requirements, and
any assurances given pursuant to such requirements, shall be
inoperative if (i) the issuance of the shares upon the exercise or
acquisition of stock under the Stock Award has been registered under a
then currently effective registration statement under the Securities
Act or (ii) as to any particular requirement, a determination is made
by counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company
may, upon advice of counsel to the Company, place legends on stock
certificates issued under the Plan as such counsel deems necessary or
appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the
stock.
(f) Withholding Obligations. To the extent provided by the terms of a Stock
Award Agreement, the Participant may satisfy any federal, state or
local tax withholding obligation relating to the exercise or
acquisition of stock under a Stock Award by any of the following means
(in addition to the Company's right to withhold from any compensation
paid to the Participant by the Company) or by a combination of such
means: (i) tendering a cash payment; (ii) authorizing the Company to
withhold shares from the shares of the Common Stock otherwise issuable
to the Participant as a result of the exercise or acquisition of stock
under the Stock Award; or (iii) delivering to the Company owned and
unencumbered shares of the Common Stock.
(g) Information Obligation. Prior to the Listing Date, to the extent
required by Section 260.140.46 of Title 10 of the California Code of
Regulations, the Company shall deliver financial statements to
Participants at least annually. This subsection 11(g) shall not apply
to key Employees whose duties in connection with the Company assure
them access to equivalent information.
(h) Repurchase Limitation. The terms of any repurchase option shall be
specified in the Stock Award and may be either at Fair Market Value at
the time of repurchase or at not less than the original purchase price.
To the extent required by Section 260.140.41 and Section 260.140.42 of
Title 10 of the California Code of Regulations, any repurchase option
contained in a Stock Award granted prior to the Listing Date to a
person who is not an Officer, Director or Consultant shall be upon the
terms described below:
(i) Fair Market Value. If the repurchase option gives the Company the
right to repurchase the shares upon termination of employment at
not less than the Fair Market Value of the shares to be purchased
on the date of termination of Continuous Service, then (i) the
right to repurchase shall be exercised for cash or cancellation of
purchase money indebtedness for all but not less than all of the
shares within ninety (90) days of termination of Continuous Service
(or in the case of shares issued upon exercise of Stock Awards
after such date of termination, within ninety (90) days after the
date of the exercise) or such longer period as may be agreed to by
the Company and the
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Participant (for example, for purposes of satisfying the requirements
of Section 1202(c)(3) of the Code regarding "qualified small business
stock") and (ii) the right terminates when the shares become publicly
traded.
(ii) Original Purchase Price. If the repurchase option gives the Company
the right to repurchase the shares upon termination of Continuous
Service at the original purchase price, then (i) the right to
repurchase at the original purchase price shall lapse at the rate
of at least twenty percent (20%) of the shares per year over five
(5) years from the date the Stock Award is granted (without respect
to the date the Stock Award was exercised or became exercisable)
and (ii) the right to repurchase shall be exercised for cash or
cancellation of purchase money indebtedness for all but not less
than all of the shares within ninety (90) days of termination of
Continuous Service (or in the case of shares issued upon exercise
of Options after such date of termination, within ninety (90) days
after the date of the exercise) or such longer period as may be
agreed to by the Company and the Participant (for example, for
purposes of satisfying the requirements of Section 1202(c)(3) of
the Code regarding "qualified small business stock").
12. Adjustments upon Changes in Stock.
(a) Capitalization Adjustments to Stock Subject to the Plan. If any change
is made in the stock subject to the Plan due to a change in corporate
capitalization and without the receipt of consideration by the Company
(through reincorporation, stock dividend, stock split, reverse stock
split, combination or reclassification of shares), the Plan will be
appropriately adjusted in the class(es) and maximum number of
securities subject to the Plan pursuant to subsection 4(a). Such
adjustments shall be made by the Board, the determination of which
shall be final, binding and conclusive.
(b) Capitalization and Transaction Adjustments to Outstanding Stock
Awards. If any change is made in the stock subject to any outstanding
Stock Award without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, separation, stock dividend, dividend in property other
than cash, stock split, reverse 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), such outstanding Stock Awards shall be
appropriately adjusted in the classes and number of securities and
price per share of stock subject to such outstanding Stock Awards. Such
adjustments shall be made by the Board, the determination of which
shall be final, binding and conclusive.
(c) Capitalization and Transaction Adjustments (Section 162(m)). If any
change is made in the stock subject to the Plan, or subject to any
Stock Award, without the receipt of consideration by the Company
(through merger, consolidation, reorganization, recapitalization,
reincorporation, separation, stock dividend, dividend in property other
than cash, stock split, reverse 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 Plan will be appropriately adjusted
in the maximum number of securities subject to award to any person
pursuant to subsection 5(c). (The conversion of any convertible
securities of the Company shall not be treated as a transaction
"without receipt of consideration" by the Company.) Such adjustments
shall be made by the Board, the determination of which shall be final,
binding and conclusive.
(d) Change in Control--Dissolution or Liquidation. In the event of a
dissolution or liquidation of the Company, then such Stock Awards shall
be terminated if not exercised (if applicable) prior to such event.
(e) Change in Control--Asset Sale, Merger, Consolidation or Reverse
Merger. In the event of (1) a sale of all or 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
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surviving corporation but the shares of Common Stock outstanding
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 or continue any Stock Awards outstanding under the Plan or shall
substitute similar stock awards (including an award to acquire the same
consideration paid to the stockholders in the transaction described in
this subsection 12(e) for those outstanding under the Plan. In the event
any surviving corporation or acquiring corporation refuses to assume or
continue such Stock Awards or to substitute similar stock awards for
those outstanding under the Plan, then with respect to Stock Awards held
by Participants whose Continuous Service has not terminated, the vesting
of such Stock Awards (and, if applicable, the time during which such
Stock Awards may be exercised) shall be accelerated in full prior to
such event, and the Stock Awards shall terminate if not exercised (if
applicable) at or prior to such event. With respect to any other Stock
Awards outstanding under the Plan, such Stock Awards shall terminate if
not exercised (if applicable) prior to such event.
(f) Change in Control--Securities Acquisition. After the Listing Date, in
the event of an acquisition by any person, entity or group within the
meaning of Section 13(d) or 14(d) of 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, then with respect to Stock Awards held by Participants whose
Continuous Service has not terminated, the vesting of such Stock Awards
(and, if applicable, the time during which such Stock Awards may be
exercised) shall be accelerated in full.
13. Amendment of the Plan and Stock Awards.
(a) Amendment of Plan. The Board at any time, and from time to time, may
amend the Plan. However, except as provided in Section 12 relating to
adjustments upon changes in stock, no amendment shall be effective
unless approved by the stockholders of the Company to the extent
stockholder approval is necessary to satisfy the requirements of
Section 422 of the Code, Rule 16b-3 or any NASDAQ or securities
exchange listing requirements.
(b) Stockholder Approval. The Board may, in its sole discretion, submit any
other amendment to the Plan for stockholder approval, including, but
not limited to, amendments to the Plan intended to satisfy the
requirements of Section 162(m) of the Code and the regulations
thereunder regarding the exclusion of performance-based compensation
from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) Contemplated Amendments. It is expressly contemplated that the Board
may amend the Plan in any respect the Board deems necessary or
advisable to provide eligible Employees with the maximum benefits
provided or to be provided under the provisions of the Code and the
regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under
it into compliance therewith.
(d) No Impairment of Rights. Rights under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the
Plan unless (i) the Company requests the consent of the Participant and
(ii) the Participant consents in writing.
(e) Amendment of Stock Awards. The Board at any time, and from time to
time, may amend the terms of any one or more Stock Awards; provided,
however, that the rights under any Stock Award shall not be impaired by
any such amendment unless (i) the Company requests the consent of the
Participant and (ii) the Participant consents in writing.
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14. Termination or Suspension of the Plan.
(a) Plan Term. The Board may suspend or terminate the Plan at any time.
Unless sooner terminated, the Plan shall terminate on the day before
the tenth (10th) anniversary of the date the Plan is adopted by the
Board or approved by the stockholders of the Company, whichever is
earlier. No Stock Awards may be granted under the Plan while the Plan
is suspended or after it is terminated. Notwithstanding the foregoing,
all Incentive Stock Options shall be granted, if at all, no later than
the last day preceding the tenth (10th) anniversary of the earlier of
(i) the date on which the latest increase in the maximum number of
shares issuable under the Plan was approved by the stockholders of the
Company or (ii) the date such amendment was adopted by the Board.
(b) No Impairment of Rights. Rights and obligations under any Stock Award
granted while the Plan is in effect shall not be impaired by suspension
or termination of the Plan, except with the written consent of the
Participant.
15. Effective Date of Plan.
The Plan shall become effective as of the date on which it is adopted by
the Board, but no Stock Award shall be exercised (or, in the case of a
stock bonus, shall be granted) unless and until the Plan has been approved
by the stockholders of the Company, which approval shall be within twelve
(12) months before or after the date the Plan is adopted by the Board.
16. Choice of Law.
All questions concerning the construction, validity and interpretation of
this Plan shall be governed by the law of the State of California, without
regard to such state's conflict of laws rules.
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