Exhibit 4.2
ULTIMA COMMUNICATION, INC.
1999 STOCK OPTION/STOCK ISSUANCE PLAN
ARTICLE I.
GENERAL PROVISIONS
1. PURPOSE
This 1999 Stock Option/Stock Issuance Plan ("Plan"), is intended to
promote the interests of ULTIMA COMMUNICATION, INC., a California corporation
(the "Corporation"), by providing individuals who render valuable services to
the Corporation (or any Parent or Subsidiary) with the opportunity to acquire
ownership interests in the Corporation so as to encourage them to continue to
render services to the Corporation (or any Parent or Subsidiary).
2. STRUCTURE OF THE PLAN; TERMINOLOGY
This Plan has two separate components: the Option Grant Program set
forth in Article II and the Stock Issuance Program set forth in Article III. For
the purposes of this Plan, any capitalized term shall have the meaning assigned
under Article IV, Section 13 hereof.
3. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by either the Board or a committee
of two (2) or more Board members appointed by the Board to which the Board has
delegated administrative functions under the Plan (the "Plan Administrator").
The Plan Administrator may create secondary committees consisting of officers or
directors of the Corporation to which it may delegate certain administrative
functions, provided that such secondary committees shall not have the authority
to make option grants to any officers or directors of the Corporation. Members
of any committee to which the Board has delegated any administrative functions
shall serve for such terms as the Board shall determine and subject to the
Board's right of removal. All delegations of authority to any committee shall be
and remain revocable by the Board.
B. The Plan Administrator shall have full power and authority to
implement, interpret and administer the Plan, to establish all such rules and
regulations as it deems appropriate, and to make such determinations under the
Plan and any outstanding option grants or share issuances as it deems necessary
or advisable. Decisions of the Plan Administrator shall be final and binding on
all parties who have an interest in the Plan or any outstanding option or share
issuance.
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4. SELECTION OF OPTIONEES AND PARTICIPANTS
A. The persons eligible to receive share issuances under the Stock
Issuance Program and/or option grants pursuant to the Option Grant Program are
limited to Employees; non-employee members of the Board of the Corporation (or
of any Parent or Subsidiary); and consultants and other independent contractors
who provide valuable services to the Corporation (or to any Parent or
Subsidiary).
B. The Plan Administrator shall have the absolute discretion and
authority to determine, subject to the provisions of this Plan, the terms of any
option grant or share issuance. In addition to any other matters over which the
Plan Administrator has discretion hereunder, the Plan Administrator shall
Determine which, if any, eligible individuals will be granted options in
accordance with Article II of the Plan and which will be issued shares in
accordance with Article III of the Plan. With respect to option grants made
under the Plan, the Plan Administrator will determine the number of shares to be
covered by each such grant, the status of the granted option as either an
Incentive Option or a Non-Statutory Option, the time or times at which each
granted option is to become exercisable, the vesting schedule (if any)
applicable to shares issued pursuant to the granted options, and the maximum
term for which the option may remain outstanding. With respect to share
issuances under the Stock Issuance Program, in addition to other matters over
which the Plan Administrator has discretion hereunder, the Plan Administrator
will determine the number of shares to be issued to each issuee, the vesting
schedule (if any) applicable to the issued shares, and the consideration to be
paid by the individual for such shares. Notwithstanding the above, the Plan
Administrator may not impose a vesting schedule upon any option grant or any
shares of Common Stock subject to the option which is more restrictive than
twenty percent (20%) per year vesting.
C. Common Stock issuable under the Plan, whether under the Option
Grant Program or the Stock Issuance Program, may be subject to such restrictions
on transfer, repurchase rights or other restrictions as may be imposed by the
Plan Administrator and set forth in the documents governing such option or
issuance.
5. STOCK SUBJECT TO THE PLAN
A. Authorized but unissued or reacquired Common Stock of the
Corporation will be issued under the Plan. The maximum number of shares of
Common Stock which may be issued over the term of the Plan shall not exceed
180,000 shares subject to adjustment from time to time in accordance with the
provisions of this Section 5 of Article 1.
B. Shares reserved for issuance under granted options but not in fact
issued pursuant to options granted under the Plan to the expiration or
termination of the option or the cancellation of
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any option will remain available for issuance under the Plan. Shares actually
issued under the Plan, whether pursuant to the exercise of an option under the
Option Grant Program or a stock issuance pursuant to the Stock Issuance Program,
which are subsequently repurchased by the Corporation will not become available
for future issuance.
C. In the event any change is made to the Common Stock issuable under
the Plan by reason of any stock dividend, stock split, combination of shares,
exchange of shares or other change affecting the outstanding Common Stock as a
class without receipt of consideration, then appropriate adjustments shall be
made to (i) the aggregate number and/or class of shares issuable under the Plan
and (ii) the aggregate number and/or class of shares and the option price per
share in effect under each outstanding option in order to prevent the dilution
or enlargement of benefits thereunder. The adjustments determined by the Plan
Administrator shall be final, binding and conclusive.
6. AMENDMENT OF THE PLAN AND AWARDS
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects whatsoever, provided that the
Board may, in its discretion, require shareholder approval as a condition to the
effectiveness of any such amendment. However, no amendment or modification of
the Plan shall adversely affect the rights and obligations of an optionee with
respect to options at the time outstanding under the Plan, nor adversely affect
the rights of any issuee with respect to Common Stock issued under the Plan
prior to such action unless such optionee or issuee consents to such amendment.
B. Options to purchase shares of Common Stock may be granted under the
Option Grant Program and shares of Common Stock may be issued under the Stock
Issuance Program, which are in excess of the number of shares then available for
issuance under the Plan, provided any excess shares actually issued under the
Option Grant Program or the Stock Issuance Program are held in escrow until
shareholder approval of an amendment sufficiently increasing the number of
shares of Common Stock available for issuance under the Plan is obtained. If
such approval is not obtained within twelve (12) months after the date the
initial excess issuances are made, then (I) any unexercised options representing
such excess shall terminate and cease to be exercisable and (II) the Corporation
shall promptly refund to the optionees and issuees the option or purchase price
paid for any excess shares issued under the Plan and held in escrow, together
with interest (at the applicable Short Term Federal Rate) for the period the
shares were held in escrow, and such shares shall thereupon be automatically
cancelled and cease to be outstanding.
7. EFFECTIVE DATE AND TERM OF PLAN
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A. The Plan became effective when adopted by the Board and has been
approved by the Shareholders of the Corporation.
B. The Plan shall terminate upon the earlier of (i) June 1, 2009, or
(ii) the date on which all shares available for issuance under the Plan have
been issued pursuant to the exercise of options granted under Article II or the
issuance of shares under Article III. The termination of the Plan shall have no
effect on any outstanding options under or shares issued and outstanding under
the Plan, and such securities shall thereafter continue to have force and effect
in accordance with the provisions of the agreements evidencing such options and
issuances.
8. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon any person any right to continue
in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any Parent or Subsidiary)
or of the optionee or the issuee, which rights are hereby expressly reserved by
each, to terminate Service of the optionee or issuee at any time for any reason
whatsoever, with or without cause or to engage in any Corporate Transaction.
ARTICLE II.
OPTION GRANT PROGRAM
1. TERMS AND CONDITIONS OF OPTIONS.
Options granted pursuant to the Plan shall be authorized by action of
the Plan Administrator and may, at the Plan Administrator's discretion, be
either Incentive Options or Non-Statutory Options except that individuals who
are not Employees may only be granted Non-Statutory Options. Each granted option
shall be evidenced by one or more instruments in the form approved by the Plan
Administrator; provided, however, that each such instrument shall comply with
the terms and conditions of Sections 1 and 3 of this Article II and each
instrument evidencing an Incentive Option shall, in addition, comply with the
provisions of Section 2 of this Article II.
A. Option Price.
(I) The option price per share shall be fixed by the Plan
Administrator. In no event, however, shall the option price per share be less
than eighty-five percent (85%) of the Fair Market Value of a share of Common
Stock on the date of the option grant, and provided that the option price per
share for any 10% Shareholder shall not be less than 100% of the fair market
value of the stock on the date of grant.
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(II) The option price per share shall be immediately due upon
exercise of the option and shall, subject to the provisions of Article IV,
Section 1 and the agreement evidencing such grant, be payable in cash or check
drawn to the Corporation's order. Notwithstanding the above, should the
Corporation's outstanding Common Stock be registered under Section 12(g) of the
1934 Act, at the time the option is exercised, then the option price may also be
paid as follows:
- in shares of Common Stock held by the optionee for the requisite
period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value;
or
- through a special sale and remittance procedure pursuant to which
the optionee provides irrevocable written instructions (1) to a
designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, an amount sufficient
to cover the aggregate option price payable for the purchased
shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Corporation by
reason of such purchase and (11) to the Corporation to deliver
the certificates for the purchased shares directly to such
brokerage firm in order to effect the sale transaction.
Except to the extent such sale and remittance procedure is utilized, payment of
the option price must occur at the time the option is exercised.
B. Term and Exercise of Options. Each option granted under the Plan
shall be exercisable at such time or times, during such period, and for such
number of shares as shall be determined by the Plan Administrator and set forth
in the stock option agreement evidencing such option. However, no option granted
under the Plan shall have a term in excess of ten (10) years from the grant
date.
C. No Assignment. During the lifetime of the Optionee, Incentive Stock
Options shall be exercisable only by the Optionee and shall not be assignable or
transferable other than by will or by the laws of descent and distribution
following the Optionee's death. Non-Statutory Options may be assigned only with
the advance written consent of the Plan Administrator, which may be withheld in
the exercise of its sole discretion.
D. Termination of Service. The following provisions shall govern the
exercise period applicable to any options held by the optionee at the time of
cessation of Service or death:
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(I) Should the optionee cease to remain in Service for any reason
other than death or Permanent Disability, then the period during which each
outstanding option held by such optionee is to remain exercisable shall be
limited to the one (1)-month period following the date of such cessation of
Service.
(II) Should such Service terminate by reason of Permanent
Disability or should the optionee die while holding one or more outstanding
options, then the period during which each such option is to remain exercisable
shall be limited to the twelve (12)-month period following the date of the
optionee's cessation of Service or death. During the limited exercise period
following the optionee's death, the option may be exercised by the personal
representative of the optionee's estate or by the person or persons to whom the
option is transferred pursuant to the optionee's will or in accordance with the
laws of descent and distribution.
(III) The Plan Administrator shall have full power and authority
to extend (either at the time the option is granted or at any time while the
option remains outstanding) the period of time for which the option is to remain
exercisable following the optionee's cessation of Service, from the limited
period otherwise applicable under subsection 1D of this Article II, to such
greater period of time as the Plan Administrator may deem appropriate under the
circumstances.
(IV) Notwithstanding the above no option shall be exercisable
after the specified expiration date of the option term.
(V) Each such option shall, during the applicable limited
exercise period, be exercisable only with respect to the shares for which the
option was exercisable on the date of the optionee's cessation of Service.
E. Shareholder Rights. An optionee shall not have rights as a
shareholder with respect to any shares subject to an option until such optionee
shall have exercised the option and paid the option price.
F. Unvested Shares. The Plan Administrator shall have the discretion
to grant options which are exercisable for unvested shares of Common Stock under
the Plan. Should the Optionee cease Service while holding such unvested shares,
the Corporation shall have the right to repurchase, at the exercise price paid
per share, all or (at the discretion of the Corporation and with the consent of
the Optionee) any of those unvested shares. The terms upon which such repurchase
right shall be exercisable (including the period and procedure for exercise and
the appropriate vesting schedule for the purchased shares) shall be established
by the Plan Administrator and set forth in the document evidencing such
repurchase right.
2. INCENTIVE OPTIONS
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All provisions of the Plan shall be applicable to Incentive Options
granted hereunder and, in addition, the terms and conditions specified in this
Section 2 shall be applicable to Incentive Options granted under the Plan.
Options which are specifically designated as Non-Statutory Options when issued
under the Plan shall not be subject to such terms and conditions set forth
herein.
A. Option Price.
(I) The option price per share of the Common Stock subject to an
Incentive Option shall in no event be less than one hundred percent (100%) of
the Fair Market Value of a share of Common Stock on the grant date.
(II) If the individual to whom the option is granted is a 10%
Shareholder, then the option price per share shall not be less than one hundred
ten percent (110%) of the Fair Market Value of the Common Stock on the date of
the option grant.
B. Dollar Limitation. The aggregate Fair Market Value (determined as
of the date or dates of grant) of Common Stock which first becomes exercisable
during any one calendar year under Incentive Options granted to any Employee
under any option plan of the Corporation (or any parent or subsidiary
corporation) shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds options which become exercisable in
the same calendar year, the foregoing limitation on such options shall be
applied on the basis of the order in which such options are granted. Any options
in excess of such limitation shall automatically be treated as Non-statutory
Options.
C. Term of Option for 10% Shareholders. No option granted to a 10%
Shareholder shall have a term in excess of five (5) years from the grant date.
3. CANCELLATION AND NEW GRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected optionees, the
cancellation of any or all outstanding options under the Plan and the grant in
substitution therefor of new options under the Plan covering the same or a
different numbers of shares of Common Stock but having an option price per share
established at the time of such cancellation and regrant in accordance with the
provisions of this Plan.
4. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent
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thereof) in connection with such Corporate Transaction. In addition, all
outstanding repurchase rights under the Plan shall terminate automatically in
the event of any Corporate Transaction, except to the extent the repurchase
rights are assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction.
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in the consummation of such Corporate Transaction,
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same.
C. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
ARTICLE III.
STOCK ISSUANCE PROGRAM
1. STOCK ISSUANCES
Shares of Common Stock shall be issuable under the Stock Issuance
Program through direct and immediate issuances without any intervening stock
option grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement ("Issuance Agreement") in a form acceptable to the Plan Administrator,
which form shall be in compliance with the provisions of the Plan.
2. ISSUE PRICE
The purchase price per share shall be fixed by the Plan Administrator,
but in no event shall it be less than eighty-five percent (85%) of the Fair
Market Value of a share of Common Stock at the time of issuance, and provided
that the issue price per share for any 10% Shareholder shall not be less than
100% of the fair market value of the stock on the date of grant.
3. PAYMENT OF ISSUE PRICE
Except as provided in Article IV, Section 1, shares shall be issued
only in exchange for cash, a check payable to the Corporation, for services
previously rendered to the Corporation (or
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any Parent or Subsidiary) or such other lawful consideration as may be
acceptable to the Plan Administrator.
ARTICLE IV
MISCELLANEOUS
1. LOANS
A. The Plan Administrator may assist any optionee or issuee (other
than a nonemployee director) in the exercise of one or more options granted to
such optionee under the Option Grant Program or the purchase of one or more
shares to be issued to such issuee under the Stock Issuance Program, including
the satisfaction of any Federal and State income and employment tax obligations
arising therefrom, by (i) authorizing the extension of a loan from the
Corporation to such optionee or issuee, or (ii) permitting the optionee or
issuee to pay the option price or purchase price for the purchased Common Stock
in installments over a period of years.
B. The terms of any loan or installment method of payment (including
the interest rate and terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Loans or installment payments may be
authorized with or without security or collateral. However, any loan made to a
consultant or other non-employee advisor must be secured by property other than
the purchased shares of Common Stock. In all events the maximum credit available
to each optionee or issuee may not exceed the sum of (i) the aggregate option
price or purchase price payable for the purchased shares plus (ii) any Federal
and State income and employment tax liability incurred by the optionee or issuee
in connection with such exercise or purchase.
C. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under the financial assistance program shall be
subject to forgiveness by the Corporation in whole or in part upon such terms
and conditions as the Board in its discretion deems appropriate.
2. VESTING OF SHARES AND REPURCHASE RIGHTS
A. The Plan Administrator, in its absolute discretion, may issue fully
and immediately vested shares of Common Stock, or the Plan Administrator may
impose such vesting requirements as it deems appropriate with the Corporation
retaining a right to repurchase any unvested shares. The terms of the vesting
schedule and of the Corporation's repurchase rights shall be as determined by
the Plan Administrator and set forth in the agreement governing such issuance.
Notwithstanding the above, the Plan Administrator may not impose a vesting
schedule upon any option grant or any shares of Common Stock subject to the
option which is more restrictive than twenty percent (20%) per year vesting.
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B. Any new, additional or different shares of stock or other property
(including money paid other than as a regular cash dividend) which the holder of
unvested Common Stock may have the right to receive by reason of a stock
dividend, stock split, reclassification or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration shall be issued subject to (i) the same vesting and repurchase
limitations applicable to the unvested Common Stock with respect to which it was
paid or arose, and (ii) such escrow arrangements as the Plan Administrator shall
deem appropriate.
C. No person to whom shares of Common Stock have been issued pursuant
to the Plan may transfer any such shares which have not vested. Notwithstanding
the above, the issuee shall have the right to make a gift of unvested shares
acquired under the Plan to his/her spouse, parents or issue or to a trust
established for such spouse, parents or issue, provided the transferee of such
shares delivers to the Corporation a written agreement to be bound by all the
provisions of the Plan and the Issuance or Stock Purchase Agreement executed by
the issuee at the time of his/her acquisition of the gifted shares.
3. MARKET STAND-OFF AGREEMENTS
The Plan Administrator may require each person to whom any shares are
issued under this Plan to enter into an agreement which restricts or prohibits
the sale of any stock of the Corporation by such person for a reasonable period
of time following a public offering of any shares of stock by the Corporation.
4. RIGHT OF FIRST REFUSAL
Until such time as the Corporation's outstanding shares of Common
Stock are first registered under Section 12(g) of the 1934 Act, the Plan
Administrator may subject any shares issued pursuant to the Plan to a right of
first refusal with respect to any proposed disposition of such shares other than
a transfer permitted by Section 2.C of this Article IV. Such right of first
refusal shall be exercisable by the Corporation (or its assignees) in accordance
with the terms and conditions specified in the instrument governing the issuance
of such shares
5. SECURITIES LAWS; LEGENDS
A. No shares of Common Stock or other assets shall be issued or
delivered under this Plan unless and until the Corporation shall have determined
that there has been full and adequate compliance with all applicable
requirements of the Federal and state securities laws and all other applicable
legal and regulatory requirements.
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B. Shares issued under the Plan shall bear such legends as the Plan
Administrator deems necessary or appropriate, including such restrictive legends
as the Plan Administrator shall require to reflect the terms of any agreement
between the issuee and the Corporation.
6. SHAREHOLDER RIGHTS
Subject to the rights of the Corporation set forth herein or in any
other agreement entered into between the Corporation and an issuee of shares
under the Plan, each person to whom shares of Common Stock have been issued
under the Plan shall have all the rights of a shareholder with respect to those
shares whether or not his/her interest in such shares is vested. Accordingly,
the issuee shall have the right to vote such shares and to receive any cash
dividends or other distributions paid or made with respect to such shares.
7. ACCELERATION
The Plan Administrator may, in its discretion, provide for the
automatic acceleration upon a Change of Control and Corporate Transaction of the
time at which any option will become exercisable or for the lapse of any
repurchase right tied to vesting by including a provision to such effect in the
documents evidencing the rights of the optionee or issuee.
8. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the issuance of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
9. OTHER PLANS, GRANTS OR ISSUANCES
Nothing in this Plan shall be construed to limit the ability of the
Corporation to adopt other plans or to make grants or issuances to its employees
or consultants outside of any Plan.
10. WITHHOLDING
The Corporation's obligation to deliver shares upon the exercise of
any options granted under Article II or the purchase of any shares issued under
Article III shall be subject to the satisfaction of all applicable Federal,
State and local income and employment tax withholding requirements.
11. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under the
Option Grant Program, the issuance of any shares under the Stock issuance
Program, and the issuance of Common Stock
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upon the exercise of the option grants made hereunder shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the options granted under it, and
the Common Stock issued pursuant to it.
12. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income statement
at least annually to each individual holding an outstanding option under the
Plan, unless such individual is a key Employee whose duties in connection with
the Corporation (or any Parent or Subsidiary) assure such individual access to
equivalent information.
13. DEFINITIONS
The following definitions shall be in effect under this Plan:
A. Board shall mean the Board of Directors of the Corporation.
B. Common Stock shall mean the common stock of the Corporation.
C. Corporate Transaction shall mean either of the following
stockholder approved transactions to which the Corporation is a party:
(i) any transaction or series of related transactions (including,
without limitation, any reorganization, merger or consolidation) in which more
than fifty percent (50%) of the Corporation's outstanding voting stock is
transferred to a person or persons different from those who held the stock
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of the
Corporation.
C. Employee shall mean an individual who is in the employ of the
Corporation or any Parent or Subsidiary, subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.
E. Fair Market Value per share of Common Stock on any relevant date
under the Plan shall be the value determined in accordance with the following
provisions:
(i) If the Common Stock is not at the time listed or admitted to
trading on any Stock Exchange but is traded on
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the NASDAQ National Market System, the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers through the NASDAQ
National Market System or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market Value
shall be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed or admitted to trading
on any Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of transactions
on such exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value shall be the closing selling
price on the last preceding date for which such quotation exists.
(iii) If the Common Stock is at the time neither listed nor admitted
to trading on any Stock Exchange nor traded on the NASDAQ National Market
System, then such Fair Market Value shall be determined by the Plan
Administrator after taking into account such factors as the Plan Administrator
shall deem appropriate.
F. Incentive Option shall mean a stock option which satisfies the
requirements of Internal Revenue Code Section 422.
G. Non-Statutory Option shall mean a stock option not intended to meet
the requirements of Code Section 422.
H. Parent shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
I. Permanent Disability shall have the meaning assigned to such term
in Code Section 22(e)(3).
J. Service shall mean the provision of services to the Corporation or
any Parent or Subsidiary by an individual in the capacity of an Employee, a
non-employee member of the Board or a consultant or independent contractor.
K. Subsidiary shall mean each corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each such corporation (other than the last corporation) in the unbroken chain
owns, at the time of the
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determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
L. 10% Stockholder shall mean the owner of stock (as determined under
Code Section 424(d)) possessing ten percent (10%) or more of the total combined
voting power of all classes of stock of the Corporation.
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Ultima Communication, Inc.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following stock option grant (the
"Option") pursuant to the 1999 Stock Option/Stock Issuance Plan (the "Plan") to
purchase shares of the Common Stock of Ultima Communication, Inc. (the
"Corporation"):
Optionee:
Grant Date:
Grant Number: Option Price: $X per share
Vesting Commencement Date:
Number of Option Shares:
Expiration Date:
Type of Option: ___Incentive Stock Option
___Non-Statutory Stock Option
Vesting Schedule
Date Shares
The Option Shares shall vest in accordance with the following vesting
schedule:
(i) No Option Shares shall vest unless and until the Optionee has
completed twelve (12) months of Service (as defined in the Plan) measured from
the Vesting Commencement Date.
(ii) Upon the completion of the twelve (12) month service period
specified in subparagraph (i) above, 25% of the Option Shares shall become
vested.
(iii) The Remaining Option Shares shall vest in a series of successive
equal monthly installments over each of the next thirty-six (36) months of
Service completed by the Optionee after the initial twelve (12) month service
period specified in subparagraph (i) above.
Optionee understands that the Option is granted pursuant to the
Corporation's Plan. By signing below, optionee agrees to be bound by the terms
and conditions of the Plan and the terms and conditions of the Option as set
forth in the Stock Option Agreement attached hereto as Exhibit A. Optionee
understands that any Option
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Shares purchased under the Option will be subject to the terms and conditions
set forth in the Stock Purchase Agreement attached hereto as Exhibit B.
Optionee hereby acknowledges receipt of a copy of the Plan in the form
attached hereto as Exhibit C.
REPURCHASE RIGHTS. THE OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO REPURCHASE RIGHTS
AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS ASSIGNS UPON
ANY PROPOSED SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR OTHER DISPOSITION OF THE
CORPORATION'S SHARES. THE TERMS AND CONDITIONS OF SUCH RIGHTS ARE SPECIFIED IN
THE STOCK PURCHASE AGREEMENT.
No Employment or Service Contract. Nothing in this Agreement or in the
Plan shall confer upon the Optionee any right to continue in the Service of the
Corporation for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation or the Optionee, which rights
are hereby expressly reserved by each, to terminate Optionee's Setice at any
time for any reason whatsoever, with or without cause.
------------------, ------
Date
Ultima Communication, Inc.
By:
---------------------------
Title: President
------------------, ------
Date
Optionee
-----------------------------
Address:
-----------------------------
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EXHIBIT A
STOCK OPTION AGREEMENT
<PAGE>
Ultima Communication, Inc.
STOCK OPTION AGREEMENT
RECITALS
A. The Board of Directors of the Corporation has adopted the Ultima
Communication, Inc. 1999 Stock Option/Stock Issuance Plan (the "Plan") for the
purpose of attracting and retaining the services of persons who contribute to
the growth and financial success of the Corporation.
B. Optionee is a person who the Plan Administrator believes has and
will contribute to the growth and financial success of the Corporation and this
Agreement is executed pursuant to and is intended to carry out the purposes of
the Plan.
AGREEMENT
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. Subject to and upon the terms and conditions set
forth in this Agreement, the Corporation hereby grants to Optionee, as of the
grant date (the "Grant Date") specified in the accompanying Notice of Grant of
Stock Option (the "Grant Notice"), a stock option to purchase up to that number
of shares of the Corporation's Common Stock (the "Option Shares") as is
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term at the option price per share (the "Option
Price") specified in the Grant Notice.
2. Option Term. This option shall have a maximum term of ten (10)years
measured from the Grant Date and shall expire at the close of business on the
expiration date (the "Expiration Date") specified in the Grant Notice, unless
sooner terminated in accordance with Paragraph 5, 6 or 17.
3. Limited Transferability. Except as may otherwise be approved by the
Plan Administrator, this option shall be neither transferable nor assignable by
Optionee other than by will or by the laws of descent and distribution following
Optionee's death and may be exercised during Optionee's lifetime, only by
Optionee.
4. Dates of Exercise. This option may not be exercised in whole or in
part at any time prior to the time the Plan is approved by the Corporation's
shareholders in accordance with Paragraph 17. Provided such shareholder approval
is obtained, this option shall thereupon become exercisable for the Option
Shares in one or more installments as is specified in the Grant Notice. As the
option becomes exercisable in one or more installments, the installments shall
accumulate and the option shall remain exercisable
<PAGE>
for such installments until the Expiration Date or the sooner termination of the
option term under Paragraph 5 or Paragraph 6 of this Agreement.
5. Accelerated Termination of Option Term. The option term specified
in Paragraph 2 shall terminate (and this option shall cease to be exercisable)
prior to the Expiration Date should any of the following provisions become
applicable:
(i) Except as otherwise provided in subparagraph (ii) or (iii)
below, should Optionee cease to remain in Service while this option is
outstanding, then the period for exercising this option shall be reduced to a
three (3)-month period commencing with the date of such cessation of Service,
but in no event shall this option be exercisable at any time after the
Expiration Date. Upon the expiration of such three (3)-month period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to be
outstanding.
(ii) Should Optionee die while this option is outstanding, then
the personal representative of the Optionee's estate or the person or persons to
whom the option is transferred pursuant to the Optionee's will or in accordance
with the law of descent and distribution shall have the right to exercise this
option. Such right shall lapse and this option shall cease to be exercisable
upon the earlier of (A) the expiration of the twelve (12) month period measured
from the date of Optionee's death or (B) the Expiration Date. Upon the
expiration of such twelve (12) month period or (if earlier) upon the Expiration
Date, this option shall terminate and cease to be outstanding.
(iii) Should Optionee become permanently disabled and cease by
reason thereof to remain in Service while this option is outstanding, then the
Optionee shall have a period of twelve (12) months (commencing with the date of
such cessation of Service) during which to exercise this option, but in no event
shall this option be exercisable at any time after the Expiration Date. Optionee
shall be deemed to be permanently disabled if Optionee is unable to engage in
any substantial activity gainful for the Corporation or the parent or subsidiary
corporation retaining his/her services by reason of any medically determinable
physical or mental impairment, which can be expected to result in death or which
has lasted or can be expected to last for a continuous period of not less than
twelve (12) months. Upon the expiration of such limited period of exercisability
or (if earlier) upon the Expiration Date, this option shall terminate and cease
to be outstanding.
(iv) During the limited period of exercisability applicable under
subparagraph (i), (ii) or (iii) above, this option may be exercised for any or
all of the Option Shares for which this option is, at the time of the Optionee's
cessation of Service,
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<PAGE>
exercisable in accordance with the exercise schedule specified in the Grant
Notice and the provisions of Paragraph 6 of this Agreement.
(v) For purposes of this Paragraph 5 and for all other purposes
under this Agreement:
A. The Optionee shall be deemed to remain in Service for so long as
the Optionee continues to render periodic services to the Corporation or any
parent or subsidiary corporation, whether as an Employee, a nonemployee member
of the board of directors, or an independent contractor or consultant.
B. The Optionee shall be deemed to be an Employee of the Corporation
and to continue in the Corporation's employ for so long as the Optionee remains
in the employ of the Corporation or one or more of its parent or subsidiary
corporations, subject to the control and direction of the employer entity as to
both the work to be performed and the manner and method of performance.
C. A corporation shall be considered to be a subsidiary corporation of
the Corporation if it is a member of an unbroken chain of corporations beginning
with the Corporation, provided each such corporation in the chain (other than
the last corporation) owns, at the time of determination, stock possessing 50%
or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.
D. A corporation shall be considered to be a parent corporation of the
Corporation if it is a member of an unbroken chain ending with the Corporation,
provided each such corporation in the chain (other than the Corporation) owns,
at the time of determination, stock possessing 50% or more of the total combined
voting power of all classes of stock in one of the other corporations in such
chain.
6. Special Termination of Option.
A. This Option, to the extent not previously exercised, shall
terminate and cease to be exercisable upon the consummation of one or more of
the following shareholder-approved transactions (a "Corporate Transaction")
unless this Option is expressly assumed by the successor corporation or parent
thereof:
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets, or
(iii) any transaction (other than an issuance of shares by the
Corporation for cash) in or by means of which one or
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<PAGE>
more persons acting in concert acquire, in the aggregate, more than 50% of the
outstanding shares of the stock of the Corporation.
B. This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. Adjustment in Option Shares.
A. In the event any change is made to the Corporation's outstanding
Common Stock by reason of any stock split, stock dividend, combination of
shares, exchange of shares, or other change affecting the outstanding Common
Stock as a class without receipt of consideration, then appropriate adjustments
shall be made to (i) the total number of Option Shares subject to this option,
(ii) the number of Option Shares for which this option is to be exercisable from
and after each installment date specified in the Grant Notice and (iii) the
Option Price payable per share in order to reflect such change and thereby
preclude a dilution or enlargement of benefits hereunder.
B. If this option is to be assumed in connection with a Corporate
Transaction described in Paragraph 6 or is otherwise to remain outstanding, then
this option shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply and pertain to the number and class of securities which
would have been issuable to the Optionee in the consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Option Price
payable per share, provided the aggregate Option Price payable hereunder shall
remain the same.
8. Privilege of Stock Ownership. The holder of this option shall not
have any of the rights of a shareholder with respect to the Option Shares until
such individual shall have exercised the option and paid the Option Price.
9. Manner of Exercising Option.
A. In order to exercise this option with respect to all or any part of
the Option Shares for which this option is at the time exercisable, Optionee (or
in the case of exercise after Optionee's death, the Optionee's executor,
administrator, heir or legatee, as the case may be) must take the following
actions:
(i) Execute and deliver to the Secretary of the Corporation a
stock purchase agreement (the "Purchase Agreement") in substantially the form of
Exhibit B to the Grant Notice.
(ii) Pay the aggregate Option Price for the purchased shares in
one or more forms approved under the Plan.
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<PAGE>
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option, if other than Optionee, have the
right to exercise this option.
B. Should the Corporation's outstanding Common Stock be registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"1934 Act") at the time the option is exercised, then the Option Price may also
be paid as follows:
(i) in shares of Common Stock held by the Optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at fair market value on the Exercise
Date; or
(ii) through a special sale and remittance procedure pursuant to
which the Optionee is to provide irrevocable written instructions (a) to a
designated brokerage firm to effect the immediate sale of the purchased shares
and remit to the Corporation, out of the sale proceeds available on the
settlement date, sufficient funds to cover the aggregate Option Price payable
for the purchased shares plus all applicable Federal and State income and
employment taxes required to be withheld by the Corporation by reason of such
purchase and (b) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to effect the sale
transaction.
C. For purposes of this Agreement, the Exercise Date shall be the date
on which the executed Purchase Agreement shall have been delivered to the
Corporation, and the fair market value of a share of Common Stock on any
relevant date shall be determined in accordance with subparagraphs (i) through
(iii) below:
(i) If the Common Stock is not at the time listed or admitted to
trading on any stock exchange but is traded on the NASDAQ National Market
System, the fair market value shall be the closing selling price of one share of
Common Stock on the date in question, as such price is reported by the National
Association of Securities Dealers through its NASDAQ system or any successor
system. If there is no closing selling price for the Common Stock on the date in
question, then the closing selling price on the last preceding date for which
such quotation exists shall be determinative of fair market value.
(ii) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the fair market value shall be the closing
selling price per share of Common Stock on the date in question on the stock
exchange determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common Stock on
such exchange on the date in question, then the fair market value shall be
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<PAGE>
the closing selling price on the exchange on the last preceding date for which
such quotation exists.
(iii) If the Common Stock at the time is neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-counter
market, or if the Plan Administrator determines that the value determined
pursuant to subparagraphs (i) and (ii) above does not accurately reflect the
fair market value of the Common Stock, then such fair market value shall be
determined by the Plan Administrator after taking into account such factors as
the Plan Administrator shall deem appropriate.
D. As soon after the Exercise Date as practical, the Corporation shall
mail or deliver to Optionee or to the other person or persons exercising this
option a certificate or certificates representing the shares so purchased and
paid for, with the appropriate legends affixed thereto.
E. In no event may this option be exercised for any fractional shares.
10. Compliance with Laws and Regulations.
A. The exercise of this option and the issuance of Option Shares upon
such exercise shall be subject to compliance by the Corporation and the Optionee
with all applicable requirements of law relating thereto and with all applicable
regulations of any stock exchange on which shares of the Corporation's Common
Stock may be listed at the time of such exercise and issuance.
B. In connection with the exercise of this option, Optionee shall
execute and deliver to the Corporation such representations in writing as may be
requested by the Corporation in order for it to comply with the applicable
requirements of Federal and State securities laws.
11. Successors and Assigns. Except to the extent otherwise provided in
Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Corporation.
12. Liability of Corporation.
A. If the Option Shares covered by this Agreement exceed, as of the
Grant Date, the number of shares of Common Stock which may without shareholder
approval be issued under the Plan, then this option shall be void with respect
to such excess shares, unless shareholder approval of an amendment sufficiently
increasing the number of shares of Common Stock issuable under the Plan is
obtained in accordance with the provisions of Article IV, Section 3, of the
Plan.
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<PAGE>
B. The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary to
the lawful issuance and sale of any Common Stock pursuant to this option shall
relieve the Corporation of any liability with respect to the nonissuance or sale
of the Common Stock as to which such approval shall not have been obtained. The
Corporation, however, shall use its best efforts to obtain all such approvals.
13. Notices. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation in care of the Corporate Secretary at its principal corporate
offices. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice. All notices shall be deemed to have been
given or delivered upon personal delivery or upon deposit in the U. S. mail,
postage prepaid and properly addressed to the party to be notified.
14. The Loans. Plan Administrator may, in its absolute discretion and
without any obligation to do so, assist the Optionee in the exercise of this
option by (i) authorizing the extension of a loan to the Optionee from the
Corporation or (ii) permitting the Optionee to pay the option price for the
purchased Common Stock in installments over a period of years. The terms of any
such loan or installment method of payment (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.
15. Construction. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
16. Governing Law. The interpretation, performance, and enforcement of
this Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
17. Additional Terms Applicable to an Incentive Stock Option. In the
event this option is designated an incentive stock option in the Grant Notice,
the following terms and conditions shall also apply to the grant:
A. This option shall cease to qualify for favorable tax treatment as
an incentive stock option under the Federal tax laws if (and to the extent) this
option is exercised for one or more Option Shares: (i) more than three (3)
months after the date the Optionee
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<PAGE>
ceases to be an Employee for any reason other than death or permanent disability
(as defined in Paragraph 5) or (ii) more than one (1) year after the date the
Optionee ceases to be an Employee by reason of permanent disability.
B. Should this option be designated as immediately exercisable in the
Grant Notice, then this option shall not become exercisable in the calendar year
in which granted if (and to the extent) the aggregate fair market value
(determined at the Grant Date) of the Corporation's Common Stock for which this
option would otherwise first become exercisable in such calendar year would,
when added to the aggregate fair market value (determined as of the respective
date or dates of grant) of the Corporation's Common Stock for which this option
or one or more other incentive stock options granted to the Optionee prior to
the Grant Date (whether under the Plan or any other option plan of the
Corporation or its parent or subsidiary corporations) first become exercisable
during the same calendar year, exceed one Hundred Thousand Dollars ($100,000) in
the aggregate. To the extent the exercisability of this option is deferred by
reason of the foregoing limitation, the deferred portion will first become
exercisable in the first calendar year or years thereafter in which the One
Hundred Thousand Dollar ($100,000) limitation of this Paragraph 18.B would not
be contravened.
C. Should this option be designated as exercisable in installments in
the Grant Notice, then no installment under this option (whether annual or
monthly) shall qualify for favorable tax treatment as an incentive stock option
under the Federal tax laws if (and to the extent) the aggregate fair market
value (determined at the Grant Date) of the Corporation's Common Stock for which
such installment first becomes exercisable hereunder will, when added to the
aggregate fair market value (determined as of the respective date or dates of
grant) of the Corporation's Common Stock for which one or more other incentive
stock options granted to the Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any parent or subsidiary
corporation) first become exercisable during the same calendar year, exceed One
Hundred Thousand Dollars ($100,000) in the aggregate.
D. This option may not be transferred or assigned except by will or by
the laws of descent, and shall be exercisable during the lifetime of the person
to whom the Incentive Stock Option is granted only by such person.
18. Withholding. Optionee hereby agrees to make appropriate
arrangements with the Corporation or parent or subsidiary corporation employing
Optionee for the satisfaction of all Federal, State or local income tax
withholding requirements and Federal social security employee tax requirements
applicable to the exercise of this option.
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IMMEDIATELY EXERCISABLE
REPURCHASE RIGHT
RIGHT OF FIRST REFUSAL
Ultima Communication, Inc.
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this _____ day of _____________, ______, by and
among Ultima Communication, Inc. (the "Corporation"), ___________________, the
holder of a stock option (the "Optionee") under the Corporation's 1999 Stock
Option/Stock Issuance Plan and _______________, the Optionee's spouse.
I. EXERCISE OF OPTION
1.1 Exercise. Optionee hereby purchases shares ("Purchased Shares") of
the Corporation's common stock ("Common Stock") pursuant to that certain option
("Option") granted Optionee on _______________, __________ ("Grant Date") to
purchase up to ___ shares of the Common Stock ("Total Purchasable Shares") under
the Corporation's 1999 Stock Option/Stock Issuance Plan (the "Plan") at an
option price of $___________ per share ("Option Price").
1.2 Payment. Concurrently with the delivery of this Agreement to the
Corporate Secretary of the Corporation, Optionee shall pay the Option Price for
the Purchased Shares in accordance with the provisions of the agreement between
the Corporation and Optionee evidencing the Option (the "Option Agreement") and
shall deliver whatever additional documents may be required by the Option
Agreement as a condition for exercise, together with a duly- executed blank
Assignment Separate from Certificate (in the form attached hereto as Exhibit I)
with respect to the Purchased Shares.
1.3 Delivery of Certificates. The certificates representing the
Purchased Shares hereunder shall be held in escrow by the Corporate Secretary of
the Corporation in accordance with the provisions of Article VII.
1.4 Shareholder Rights. Until such time as the Corporation actually
exercises its repurchase right, rights of first refusal or special purchase
right under this Agreement, Optionee (or any successor in interest) shall have
all the rights of a shareholder (including voting and dividend rights) with
respect to the Purchased Shares, including the Purchased Shares held in escrow
under Article VII, subject, however, to the transfer restrictions of Article IV.
<PAGE>
II. SECURITIES LAW COMPLIANCE
2.1 Exemption from Registration. The Purchased Shares have not been
registered under the Securities Act of 1933, as amended (the "1933 Act"), and
are accordingly being issued to Optionee in reliance upon the exemption from
such registration provided by Rule 701 of the Securities and Exchange Commission
for stock issuances under compensatory benefit plans such as the Plan. Optionee
hereby acknowledges previous receipt of a copy of the documentation for such
Plan in the form of Exhibit C to the Notice of Grant of Stock Option (the "Grant
Notice") accompanying the Option Agreement.
2.2 Restricted Securities.
A. Optionee hereby confirms that Optionee has been informed that the
Purchased Shares are restricted securities under the 1933 Act and may not be
resold or transferred unless the Purchased Shares are first registered under the
Federal securities laws or unless an exemption from such registration is
available. Accordingly, Optionee hereby acknowledges that Optionee is prepared
to hold the Purchased Shares for an indefinite period and that Optionee is aware
that Rule 144 of the Securities and Exchange Commission issued under the 1933
Act is not presently available to exempt the sale of the Purchased Shares from
the registration requirements of the 1933 Act.
B. Upon the expiration of the ninety (90)-day period immediately
following the date on which the Corporation first becomes subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Purchased Shares, to the extent vested under Article V, may
be sold (without registration) pursuant to the applicable requirements of Rule
144. If Optionee is at the time of such sale an affiliate of the Corporation for
purposes of Rule 144 or was such an affiliate during the preceding three (3)
months, then the sale must comply with all the requirements of Rule 144
(including the volume limitation on the number of shares sold, the
broker/market-maker sale requirement and the requisite notice to the Securities
and Exchange Commission); however, the two (2)-year holding period requirement
of the Rule will not be applicable. If Optionee is not at the time of the sale
an affiliate of the Corporation nor was such an affiliate during the preceding
three (3) months, then none of the requirements of Rule 144 (other than the
broker/market-maker sale requirement for Purchased Shares held for less than
three (3) years following payment in cash of the Option Price therefor) will be
applicable to the sale.
C. Should the Corporation not become subject to the reporting
requirements of the Exchange Act, then Optionee may, provided he/she is not at
the time an affiliate of the Corporation (nor was such an affiliate during the
preceding three (3) months), sell the Purchased Shares (without registration)
pursuant to paragraph (k) of Rule 144 after the Purchased Shares have been held
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for a period of three (3) years following the payment in cash of the Option
Price for such shares.
2.3 Disposition of Shares. Optionee hereby agrees that Optionee shall
make no disposition of the Purchased Shares (other than a permitted transfer
under paragraph 4.1) unless and until there is compliance with all of the
following requirements:
(a) Optionee shall have notified the Corporation of the proposed
disposition and provided a written summary of the terms and conditions of
the proposed disposition.
(b) Optionee shall have complied with all requirements of this
Agreement applicable to the disposition of the Purchased Shares.
(c) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that (i)
the proposed disposition does not require registration of the Purchased
Shares under the 1933 Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the 1933 Act or of any
exemption from registration available under the 1933 Act (including Rule
144) has been taken.
(d) Optionee shall have provided the Corporation with written
assurances, in form and substance satisfactory to the Corporation, that the
proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Purchased Shares pursuant to the provisions
of the Commissioner Rules identified in paragraph 2.5.
The Corporation shall not be required (i) to transfer on its books any
Purchased Shares which have been sold or transferred in violation of the
provisions of this Article II nor (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting or dividend rights to, any transferee to
whom the Purchased Shares have been transferred in contravention of this
Agreement.
2.4 Restrictive Legends. In order to reflect the restrictions on
disposition of the Purchased Shares, the stock certificates for the Purchased
Shares will be endorsed with restrictive legends, including one or more of the
following legends:
(i) "The shares represented by this certificate have not been
registered under the Securities Act of 1933. The shares may not be sold or
offered for sale in the absence of (a) an effective registration statement for
the shares under such Act, (b) a 'no action' letter of the Securities and
Exchange Commission with respect to such sale or offer, or (c) satisfactory
assurances to the Corporation that registration under such Act is not required
with respect to such sale or offer."
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(ii) "The shares represented by this certificate are unvested and
accordingly may not be sold, assigned, transferred, encumbered, or in any manner
disposed of except in conformity with the terms of a written agreement dated
______________, _____ between the Corporation and the registered holder of the
shares (or the predecessor in interest to the shares). Such agreement grants
certain repurchase rights and rights of first refusal to the Corporation (or its
assignees) upon the sale, assignment, transfer, encumbrance or other disposition
of the Corporation's shares or upon termination of service with the Corporation.
The Corporation will upon written request furnish a copy of such agreement to
the holder hereof without charge."
III. SPECIAL TAX ELECTION
3.1 Section 83(b) Election Applicable to the Exercise of a
Non-Statutory Stock Option. If the Purchased Shares are acquired hereunder
pursuant to the exercise of a non-statutory stock option, as specified in the
Grant Notice, then the Optionee understands that under Section 83 of the
Internal Revenue Code of 1986, as amended (the "Code"), the excess of the fair
market value of the Purchased Shares on the date any forfeiture restrictions
applicable to such shares lapse over the Option Price paid for such shares will
be reportable as ordinary income on such lapse date. For this purpose, the term
"forfeiture restrictions" includes the right of the Corporation to repurchase
the Purchased Shares pursuant to the Repurchase Right provided under Article V
of this Agreement. Optionee understands that he/she may elect under Section
83(b) of the Code to be taxed at the time the Purchased Shares are acquired
hereunder, rather than when and as such Purchased Shares cease to be subject to
such forfeiture restrictions. Such election must be filed with the Internal
Revenue Service within thirty (30) days after the date of this Agreement. Even
if the fair market value of the Purchased Shares at the date of this Agreement
equals the Option Price paid (and thus no tax is payable), the election must be
made to avoid adverse tax consequences in the future. THE FORM FOR MAKING THIS
ELECTION IS ATTACHED AS EXHIBIT H HERETO. Optionee UNDERSTANDS THAT FAILURE TO
MAKE THIS FILING WITHIN THE THIRTY (30)-DAY PERIOD WILL RESULT IN THE
RECOGNITION OF ORDINARY INCOME BY THE Optionee AS THE FORFEITURE RESTRICTIONS
LAPSE.
3.2 Conditional Section 83(b) Election Applicable to the Exercise of
an Incentive Stock Option. If the Purchased Shares are acquired hereunder
pursuant to the exercise of an incentive stock option under the Federal tax
laws, as specified in the Grant Notice, then the following tax principles shall
be applicable to the Purchased Shares:
A. For regular tax purposes, no taxable income will be recognized
at the time the Option is exercised.
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B. The excess of (i) the fair market value of the Purchased
Shares on the date the Option is exercised or (if later) on the date any
forfeiture restrictions applicable to the Purchased Shares lapse over (ii)
the Option Price paid for the Purchased Shares will be includable in the
Optionee's taxable income for alternative minimum tax purposes.
C. If the Optionee makes a disqualifying disposition of the
Purchased Shares, then the Optionee will recognize ordinary income in the
year of such disposition equal in amount to the excess of (i) the fair
market value of the Purchased Shares on the date the Option is exercised or
(if later) on the date any forfeiture restrictions applicable to the
Purchased Shares lapse over (ii) the Option Price paid for the Purchased
Shares. Any additional gain recognized upon the disqualifying disposition
will be either short-term or long-term capital gain depending upon the
period for which the Purchased Shares are held prior to the disposition.
D. For purposes of the foregoing, the term "forfeiture
restrictions" will include the right of the Corporation to repurchase the
Purchased Shares pursuant to the Repurchase Right provided under Article V
of this Agreement. The term "disqualifying disposition" means any sale or
other disposition(1) of the Purchased Shares within two (2) years after the
Grant Date or within one (1) year after the execution date of this
Agreement.
E. In the absence of final Treasury Regulations relating to
incentive stock options, it is not certain whether the Optionee may, in
connection with the exercise of the Option for any Purchased Shares at the
time subject to forfeiture restrictions, file a protective election under
Section 83(b) of the Code which would limit (1) the Optionee's alternative
minimum taxable income upon exercise and (11) the Optionee's ordinary
income upon a disqualifying disposition, to the excess of (i) the fair
market value of the Purchased Shares on the date the Option is exercised
over (ii) the Option Price paid for the Purchased Shares. THE APPROPRIATE
FORM FOR MAKING SUCH A PROTECTIVE ELECTION IS ATTACHED AS EXHIBIT II TO
THIS AGREEMENT AND MUST BE FILED WITH THE INTERNAL REVENUE SERVICE WITHIN
THIRTY (30) DAYS AFTER THE DATE OF THIS AGREEMENT. HOWEVER SUCH ELECTION IF
PROPERLY FILED WILL ONLY BE ALLOWED TO THE EXTENT
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(1) Generally, a disposition of shares purchased under an incentive stock
option includes any transfer of legal title, including a transfer by sale,
exchange or gift, but does not include a transfer to the Optionee's spouse, a
transfer into joint ownership with right of survivorship if Optionee remains one
of the joint owners, a pledge, a transfer by bequest or inheritance or certain
tax free exchanges permitted under the Code.
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THE FINAL TREASURY REGULATIONS PERMIT SUCH A PROTECTIVE ELECTION.
3.3 OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY,
AND NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER SECTION 83(b), EVEN
IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING
ON HIS/HER BEHALF. This filing should be made by registered or certified mail,
return receipt requested, and Optionee must retain two (2) copies of the
completed form for filing with his or her State and Federal tax returns for the
current tax year and an additional copy for his or her records.
IV. TRANSFER RESTRICTIONS
4.1 Restriction on Transfer. Optionee shall not transfer, assign,
encumber or otherwise dispose of any of the Purchased Shares which are subject
to the Corporation's Repurchase Right under Article V. In addition, Purchased
Shares which are released from the Repurchase Right shall not be transferred,
assigned, encumbered or otherwise made the subject of disposition in
contravention of the Corporation's First Refusal Right under Article VI. Such
restrictions on transfer, however, shall not be applicable to (i) a gratuitous
transfer of the Purchased Shares made to the Optionee's spouse or issue,
including adopted children, or to a trust for the exclusive benefit of the
Optionee or the Optionee's spouse or issue, provided and only if the Optionee
obtains the Corporation's prior written consent to such transfer, (ii) a
transfer of title to the Purchased Shares effected pursuant to the Optionee's
will or the laws of intestate succession or (iii) a transfer to the Corporation
in pledge as security for any purchase-money indebtedness incurred by the
Optionee in connection with the acquisition of the Purchased Shares.
4.2 Transferee Obligations. Each person (other than the Corporation)
to whom the Purchased Shares are transferred by means of one of the permitted
transfers specified in paragraph 4.1 must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Corporation that such
person is bound by the provisions of this Agreement and that the transferred
shares are subject to (i) both the Corporation's Repurchase Right and the
Corporation's First Refusal Right granted hereunder and (ii) the market
stand-off provisions of paragraph 4.4, to the same extent such shares would be
so subject if retained by the Optionee.
4.3 Definition of Owner. For purposes of Articles IV, V, VI and VII of
this Agreement, the term "Owner" shall include the Optionee and all subsequent
holders of the Purchased Shares who derive their chain of ownership through a
permitted transfer from the Optionee in accordance with paragraph 4.1.
4.4 Market Stand-Off Provisions.
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A. In connection with any underwritten public offering by the
Corporation of its equity securities pursuant to an effective registration
statement filed under the 1933 Act, including the Corporation's initial public
offering, Owner shall not sell, make any short sale of, loan, hypothecate,
pledge, grant any option for the purchase of, or otherwise dispose or transfer
for value or otherwise agree to engage in any of the foregoing transactions with
respect to, any Purchased Shares without the prior written consent of the
Corporation or its underwriters. Such limitations shall be in effect for such
period of time from and after the effective date of such registration statement
as may be requested by the Corporation or such underwriters; provided, however,
that in no event shall such period exceed one hundred-eighty (180) days. The
limitations of this paragraph 4.4 shall remain in effect for the two-year period
immediately following the effective date of the Corporation's initial public
offering and shall thereafter terminate and cease to have any force or effect.
B. Owner shall be subject to the market stand-off provisions of this
paragraph 4.4 provided and only if the officers and directors of the Corporation
are also subject to similar arrangements.
C. In the event of any stock dividend, stock split, recapitalization
or other change affecting the Corporation's outstanding Common Stock effected as
a class without receipt of consideration, then any new, substituted or
additional securities distributed with respect to the Purchased Shares shall be
immediately subject to the provisions of this paragraph 4.4, to the same extent
the Purchased Shares are at such time covered by such provisions.
D. In order to enforce the limitations of this paragraph 4.4, the
Corporation may impose stop-transfer instructions with respect to the Purchased
Shares until the end of the applicable stand-off period.
V. REPURCHASE RIGHT
5.1 Grant. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date the Optionee ceases for any reason to remain in Service or
(if later) during the sixty (60)-day period following the execution date of,
this Agreement, to repurchase at the Option Price all or (at the discretion of
the Corporation and with the consent of the Optionee) any portion of the
Purchased Shares in which the Optionee has not acquired a vested interest in
accordance with the vesting provisions of paragraph 5.3 (such shares to be
hereinafter called the "Unvested Shares"). For purposes of this Agreement, the
Optionee shall be deemed to remain in Service for so long as the Optionee
continues to render periodic services to the Corporation or any parent or
subsidiary corporation, whether as an
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employee, a non-employee member of the board of directors, or an independent
contractor or consultant.
5.2 Exercise of the Repurchase Right. The Repurchase Right shall be
exercisable by written notice delivered to the Owner of the Unvested Shares
prior to the expiration of the applicable sixty (60)-day period specified in
paragraph 5.1. The notice shall indicate the number of Unvested Shares to be
repurchased and the date on which the repurchase is to be effected, such date to
be not more than thirty (30) days after the date of notice. To the extent one or
more certificates representing Unvested Shares may have been previously
delivered out of escrow to the Owner, then Owner shall, prior to the close of
business on the date specified for the repurchase, deliver to the Secretary of
the Corporation the certificates representing the Unvested Shares to be
repurchased, each certificate to be properly endorsed for transfer. The
Corporation shall, concurrently with the receipt of such stock certificates
(either from escrow in accordance with paragraph 7.3 or from Owner as herein
provided), pay to Owner in cash or cash equivalents (including the cancellation
of any purchase-money indebtedness), an amount equal to the Option Price
previously paid for the Unvested Shares which are to be repurchased.
5.3 Termination of the Repurchase Right. The Repurchase Right shall
terminate with respect to any Unvested Shares for which it is not timely
exercised under paragraph 5.2. In addition, the Repurchase Right shall
terminate, and cease to be exercisable, with respect to any and all Purchased
Shares in which the Optionee vests in accordance with the vesting schedule
specified in the Grant Notice. All Purchased Shares as to which the Repurchase
Right lapses shall, however, continue to be subject to (i) the First Refusal
Right of the Corporation and its assignees under Article VI, (ii) the market
stand-off provisions of paragraph 4.4 and (iii) the Special Purchase Right under
Article VIII.
5.4 Aggregate Vesting Limitation. If the Option is exercised in more
than one increment so that the Optionee is a party to one or more other Stock
Purchase Agreements ("Prior Purchase Agreements") which are executed prior to
the date of this Agreement, then the total number of Purchased Shares as to
which the Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which the Optionee would otherwise at the time
be vested, in accordance with the vesting provisions of paragraph 5.3, had all
the Purchased Shares been acquired exclusively under this Agreement.
5.5 Fractional Shares. No fractional shares shall be repurchased by
the Corporation. Accordingly, should the Repurchase Right extend to a fractional
share (in accordance with the vesting provisions of paragraph 5.3) at the time
the Optionee ceases Service, then such fractional share shall be added to any
fractional share in
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which the Optionee is at such time vested in order to make one whole vested
share no longer subject to the Repurchase Right.
5.6 Additional Shares or Substituted Securities. In the event of any
stock dividend, stock split, recapitalization or other change affecting the
Corporation's outstanding Common Stock as a class effected without receipt of
consideration, then any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which is
by reason of any such transaction distributed with respect to the Purchased
Shares shall be immediately subject to the Repurchase Right, but only to the
extent the Purchased Shares are at the time covered by such right. Appropriate
adjustments to reflect the distribution of such securities or property shall be
made to the number of Purchased Shares and Total Purchasable Shares hereunder
and to the price per share to be paid upon the exercise of the Repurchase Right
in order to reflect the effect of any such transaction upon the Corporation's
capital structure; provided, however, that the aggregate purchase price shall
remain the same.
VI. RIGHT OF FIRST REFUSAL
6.1 Grant. The Corporation is hereby granted rights of first refusal
(the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which the Optionee has vested in accordance
with the vesting provisions of Article V. For purposes of this Article VI, the
term "transfer" shall include any sale, assignment, pledge, encumbrance or other
disposition for value of the Purchased Shares intended to be made by the Owner,
but shall not include any of the permitted transfers under paragraph 4.1.
6.2 Notice of Intended Disposition. In the event the Owner desires to
accept a bona tide third-party offer for the transfer of any or all of the
Purchased Shares (the shares subject to such offer to be hereinafter called the
"Target Shares"), Owner shall promptly (i) deliver to the Corporate Secretary of
the Corporation written notice (the "Disposition Notice") of the terms and
conditions of the offer, including the purchase price and the identity of the
third-party offeror, and (ii) provide satisfactory proof that the disposition of
the Target Shares to such third-party offeror would not be in contravention of
the provisions set forth in Articles II and IV of this Agreement.
6.3 Exercise of Right. The Corporation shall, for a period of
forty-five (45) days following receipt of the Disposition Notice, have the right
to repurchase any or all of the Target Shares specified in the Disposition
Notice upon the same terms and conditions specified therein or upon terms and
conditions which do not materially vary from those specified therein. Such right
shall be exercisable by delivery of written notice (the "Exercise Notice") to
Owner prior to the expiration of the forty-five (45)-day exercise
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period. If such right is exercised with respect to all the Target Shares
specified in the Disposition Notice, then the Corporation (or its assignees)
shall effect the repurchase of the Target Shares, including payment of the
purchase price, not more than ten (10) business days after delivery of the
Exercise Notice; and at such time Owner shall deliver to the Corporation the
certificates representing the Target Shares to be repurchased, each certificate
to be properly endorsed for transfer. To the extent any of the Target Shares are
at the time held in escrow under Article VII, the certificates for such shares
shall automatically be released from escrow and delivered to the Corporation for
purchase. Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation (or its assignees) shall have the right to pay the purchase price in
the form of cash equal in amount to the value of such property. If the Owner and
the Corporation (or its assignees) cannot agree on such cash value within ten
(10) days after the Corporation's receipt of the Disposition Notice, the
valuation shall be made by an appraiser of recognized standing selected by the
Owner and the Corporation (or its assignees) or, if they cannot agree on an
appraiser within twenty (20) days after the Corporation's receipt of the
Disposition Notice, each shall select an appraiser of recognized standing and
the two appraisers shall designate a third appraiser of recognized standing,
whose appraisal shall be determinative of such value. The cost of such appraisal
shall be shared equally by the Owner and the Corporation. The closing shall then
be held on the later of (i) the tenth business day following delivery of the
Exercise Notice or (ii) the tenth business day after such cash valuation shall
have been made.
6.4 Non-Exercise of Right. In the event the Exercise Notice is not
given to Owner within forty-five (45) days following the date of the
Corporation's receipt of the Disposition Notice, Owner shall have a period of
thirty (30) days thereafter in which to sell or otherwise dispose of the Target
Shares to the third-party offeror identified in the Disposition Notice upon
terms and conditions (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice; provided,
however, that any such sale or disposition must not be effected in contravention
of the provisions of Article II of this Agreement. To the extent any of the
Target Shares are at the time held in escrow under Article VII, the certificates
for such shares shall automatically be released from escrow and surrendered to
the Owner. The third-party offeror shall acquire the Target Shares free and
clear of the Corporation's Repurchase Right under Article V and the
Corporation's First Refusal Right hereunder, but the acquired shares shall
remain subject to (i) the securities law restrictions of paragraph 2.2(a) and
(ii) the market stand-off provisions of paragraph 4.4. In the event Owner does
not effect such sale or disposition of the Target Shares within the specified
thirty (30)-day period, the Corporation's First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses in accordance with paragraph 6.7.
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6.5 Partial Exercise of Right. In the event the Corporation (or its
assignees) makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within thirty (30) days after the date of the Disposition Notice, to
effect the sale of the Target Shares pursuant to one of the following
alternatives:
(i) sale or other disposition of all the Target Shares to the
third party offeror identified in the Disposition Notice, but in full
compliance with the requirements of paragraph 6.4, as if the Corporation
did not exercise the First Refusal Right hereunder; or
(ii) sale to the Corporation (or its assignees) of the portion of
the Target Shares which the Corporation (or its assignees) has elected to
purchase, such sale to be effected in substantial conformity with the
provisions of paragraph 6.3.
Failure of Owner to deliver timely notification to the Corporation
under this paragraph 6.5 shall be deemed to be an election by Owner to sell the
Target Shares pursuant to alternative (i) above.
6.6 Recapitalization/Merger.
(a) In the event of any stock dividend, stock split, recapitalization
or other transaction affecting the Corporation's outstanding Common Stock as a
class effected without receipt of consideration, then any new, substituted or
additional securities or other property which is by reason of such transaction
distributed with respect to the Purchased Shares shall be immediately subject to
the Corporation's First Refusal Right hereunder, but only to the extent the
Purchased Shares are at the time covered by such right.
(b) In the event of any of the following transactions:
(i) a merger or consolidation in which the Corporation is not the
surviving entity,
(ii) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(iii) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to person or persons other than those who
held such securities immediately prior to the merger, or
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(iv) any transaction effected primarily to change the State in
which the Corporation is incorporated, or to create a holding company
structure,
the Corporation's First Refusal Right shall remain in full force and effect and
shall apply to the new capital stock or other property received in exchange for
the Purchased Shares in consummation of the transaction but only to the extent
the Purchased Shares are at the time covered by such right.
6.7 Lapse. First Refusal Right under this Article VI shall lapse and
cease to have effect upon the earliest to occur of (i) the first date on which
shares of the Corporation's Common Stock are held of record by more than five
hundred (500) persons, (ii) a determination is made by the Corporation's Board
of Directors that a public market exists for the outstanding shares of the
Corporation's Common Stock, or (iii) a firm commitment underwritten public
offering pursuant to an effective registration statement under the 1933 Act,
covering the offer and sale of the Corporation's Common Stock in the aggregate
amount of at least $5,000,000. However, the market stand-off provisions of
paragraph 4.4 shall continue to remain in full force and effect following the
lapse of the First Refusal Right hereunder.
VII. ESCROW
7.1 Deposit. The issuance, the certificates for any Unvested Shares
purchased hereunder shall be deposited in escrow with the Corporate Secretary of
the Corporation to be held in accordance with the provisions of this Article
VII. Each deposited certificate shall be accompanied by a duly-executed
Assignment Separate from Certificate in the form of Exhibit I. The deposited
certificates, together with any other assets or securities from time to time
deposited with the Corporate Secretary pursuant to the requirements of this
Agreement, shall remain in escrow until such time or times as the certificates
(or other assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with paragraph 7.3. Upon delivery of the certificates
(or other assets and securities) to the Corporate Secretary of the Corporation,
the Owner shall be issued an instrument of deposit acknowledging the number of
Unvested Shares (or other assets and securities) delivered in escrow.
7.2 Recapitalization. All regular cash dividends on the Unvested
Shares (or other securities at the time held in escrow) shall be paid directly
to the Owner and shall not be held in escrow. However, in the event of any stock
dividend, stock split, recapitalization or other change affecting the
Corporation's outstanding Common Stock as a class effected without receipt of
consideration or in the event of a Corporate Transaction, any new, substituted
or additional securities or other property which is by reason of such
transaction distributed with respect to the Unvested
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Shares shall be immediately delivered to the Corporate Secretary to be held in
escrow under this Article VII, but only to the extent the Unvested Shares are at
the time subject to the escrow requirements of paragraph 7.1.
7.3 Release/Surrender. The Unvested Shares, together with any other
assets or securities held in escrow hereunder, shall be subject to the following
terms and conditions relating to their release from escrow or their surrender to
the Corporation for repurchase and cancellation:
(i) Should the Corporation (or its assignees) elect to exercise
the Repurchase Right under Article V with respect to any Unvested Shares,
then the escrowed certificates for such Unvested Shares (together with any
other assets or securities issued with respect thereto) shall be delivered
to the Corporation concurrently with the payment to the Owner, in cash or
cash equivalent (including the cancellation of any purchase-money
indebtedness), of an amount equal to the aggregate Option Price for such
Unvested Shares, and the Owner shall cease to have any further rights or
claims with respect to such Unvested Shares (or other assets or securities
attributable to such Unvested Shares).
(ii) Should the Corporation (or its assignees) elect to exercise
its First Refusal Right under Article VI with respect to any vested Target
Shares held at the time in escrow hereunder, then the escrowed certificates
for such Target Shares (together with any other assets or securities
attributable thereto) shall, concurrently with the payment of the paragraph
6.3 purchase price for such Target Shares to the Owner, be surrendered to
the Corporation, and the Owner shall cease to have any further rights or
claims with respect to such Target Shares (or other assets or securities).
(iii) Should the Corporation (or its assignees) elect not to
exercise its First Refusal Right under Article VI with respect to any
Target Shares held at the time in escrow hereunder, then the escrowed
certificates for such Target Shares (together with any other assets or
securities attributable thereto) shall be surrendered to the Owner for
disposition in accordance with provisions of paragraph 6.4.
(iv) As the interest of the Optionee in the Unvested Shares (or
any other assets or securities attributable thereto) vests in accordance
with the provisions of Article V, the certificates for such vested shares
(as well as all other vested assets and securities) shall be released from
escrow and delivered to the Owner in accordance with the following
schedule:
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a. The initial release of vested shares (or other vested
assets and securities) from escrow shall be effected within thirty
(30) days following the expiration of the initial twelve (12)-month
period measured from the Grant Date.
b. Subsequent releases of vested shares (or other vested
assets and securities) from escrow shall be effected at semi-annual
intervals thereafter, with the first such semi-annual release to occur
eighteen (18) months after the Grant Date.
c. Upon the Optionee's cessation of Service, any escrowed
Purchased Shares (or other assets or securities) in which the Optionee
is at the time vested shall be promptly released from escrow.
d. Upon any earlier termination of the Corporation's
Repurchase Right in accordance with the applicable provisions of
Article V, any Purchased Shares (or other assets or securities) at the
time held in escrow hereunder shall promptly be released to the Owner
as fully-vested shares or other property.
(v) All Purchased Shares (or other assets or securities) released
from escrow in accordance with the provisions of subparagraph (iv) above
shall nevertheless remain subject to (1) the Corporation's First Refusal
Right under Article VI until such right lapses pursuant to paragraph 6.7,
(11) the market stand-off provisions of paragraph 4.4 until such provisions
terminate in accordance therewith and (111) the Special Purchase Right
under Article VIII.
VIII. MARITAL DISSOLUTION OR LEGAL SEPARATION
8.1 Grant. In connection with the dissolution of the Optionee's
marriage or the legal separation of the Optionee and the Optionee's spouse, the
Corporation shall have the right (the "Special Purchase Right"), exercisable at
any time during the thirty (30)-day period following the Corporation's receipt
of the required Dissolution Notice under paragraph 8.2, to purchase from the
Optionee's spouse, in accordance with the provisions of paragraph 8.3, all or
any portion of the Purchased Shares which would otherwise be awarded to such
spouse in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.2 Notice of Decree or Agreement. The Optionee shall promptly provide
the Secretary of the Corporation with written notice (the "Dissolution Notice")
of (i) the entry of any judicial decree or order resolving the property rights
of the Optionee and the Optionee's spouse in connection with their marital
dissolution or legal separation or (ii) the execution of any contract
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or agreement relating to the distribution or division of such property rights.
The Dissolution Notice shall be accompanied by a copy of the actual decree of
dissolution or settlement agreement between the Optionee and the Optionee's
spouse which provides for the award to the spouse of one or more Purchased
Shares in settlement of any community property or other marital property rights
such spouse may have in such shares.
8.3 Exercise of Special Purchase Right. The Special Purchase Right
shall be exercisable by delivery of written notice (the "Purchase Notice") to
the Optionee and the Optionee's spouse within thirty (30) days after the
Corporation's receipt of the Dissolution Notice. The Purchase Notice shall
indicate the number of shares to be purchased by the Corporation, the date such
purchase is to be effected (such date to be not less than five (5) business
days, nor more than ten (10) business days, after the date of the Purchase
Notice), and the fair market value to be paid for such Purchased Shares. The
Optionee (or the Optionee's spouse, to the extent such spouse has physical
possession of the Purchased Shares) shall, prior to the close of business on the
date specified for the purchase, deliver to the Corporate Secretary of the
Corporation the certificates representing the shares to be purchased, each
certificate to be properly endorsed for transfer. To the extent any of the
shares to be purchased by the Corporation are at the time held in escrow under
Article VII, the certificates for such shares shall be promptly delivered out of
escrow to the Corporation. The Corporation shall, concurrently with the receipt
of the stock certificates, pay to the Optionee's spouse (in cash or cash
equivalents) an amount equal to the fair market value specified for such shares
in the Purchase Notice.
If the Optionee's spouse does not agree with the fair market value
specified for the shares in the Purchase Notice, then the spouse shall promptly
notify the Corporation in writing of such disagreement and the fair market value
of such shares shall thereupon be determined by an appraiser of recognized
standing selected by the Corporation and the spouse. If they cannot agree on an
appraiser within twenty (20) days after the date of the Purchase Notice, each
shall select an appraiser of recognized standing, and the two appraisers shall
designate a third appraiser of recognized standing whose appraisal shall be
determinative of such value. The cost of the appraisal shall be shared equally
by the Corporation and the Optionee's spouse. The closing shall then be held on
the fifth business day following the completion of such appraisal; provided,
however, that if the appraised value is more than fifteen percent (15%) greater
than the fair market value specified for the shares in the Purchase Notice, the
Corporation shall have the right, exercisable prior to the expiration of such
five (5)-business-day period, to rescind the exercise of the Special Purchase
Right and thereby revoke its election to purchase the shares awarded to the
spouse.
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8.4 Lapse. Special Purchase Right under this Article VIII shall lapse
and cease to have effect upon the earlier to occur of (i) the first date on
which the First Refusal Right under Article VI lapses or (ii) the expiration of
the thirty (30)-day exercise period specified in paragraph 8.3, to the extent
the Special Purchase Right is not timely exercised in accordance with such
paragraph.
IX. GENERAL PROVISIONS
9.1 Assignment. The Corporation may assign its Repurchase Right under
Article V, its First Refusal Right under Article VI and/or its Special Purchase
Right under Article VIII to any person or entity selected by the Corporation's
Board of Directors, including (without limitation) one or more shareholders of
the Corporation.
If the assignee of the Repurchase Right is other than a one hundred
percent (100%) owned subsidiary corporation of the Corporation or the parent
corporation owning one hundred percent (100%) of the Corporation, then such
assignee must make a cash payment to the Corporation, upon the assignment of the
Repurchase Right, in an amount equal to the excess (if any) of (i) the fair
market value of the Unvested Shares at the time subject to the assigned
Repurchase Right over (ii) the aggregate repurchase price payable for the
Unvested Shares thereunder.
9.2 Definitions. For purposes of this Agreement, the following
provisions shall be applicable in determining the parent and subsidiary
corporations of the Corporation:
(i) Any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation shall be considered to be
a parent corporation of the Corporation, provided each such corporation in
the unbroken chain (other than the Corporation) owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
(ii) Each corporation (other than the Corporation) in an unbroken
chain of corporations beginning with the Corporation shall be considered to
be a subsidiary of the Corporation, provided each such corporation (other
than the last corporation) in the unbroken chain owns, at the time of the
determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
9.3 No Employment or Service Contract. Nothing in this Agreement or in
the Plan shall confer upon the Optionee any right to continue in the Service of
the Corporation (or any parent or subsidiary corporation of the Corporation
employing or retaining
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Optionee) for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation (or any parent or subsidiary
corporation of the Corporation employing or retaining Optionee) or the Optionee,
which rights are hereby expressly reserved by each, to terminate the Optionee's
Service at any time for any reason whatsoever, with or without cause.
9.4 Notices. Any notice required in connection with (i) the Repurchase
Right, the Special Purchase Right or the First Refusal Right or (ii) the
disposition of any Purchased Shares covered thereby shall be given in writing
and shall be deemed effective upon personal delivery or upon deposit in the
United States mail, registered or certified, postage prepaid and addressed to
the party entitled to such notice at the address indicated below such party's
signature line on this Agreement or at such other address as such party may
designate by ten (10) days advance written notice under this paragraph 9.4 to
all other parties to this Agreement.
9.5 No Waiver. The failure of the Corporation (or its assignees) in
any instance to exercise the Repurchase Right granted under Article V, or the
failure of the Corporation (or its assignees) in any instance to exercise the
First Refusal Right granted under Article VI, or the failure of the Corporation
(or its assignees) in any instance to exercise the Special Purchase Right
granted under Article VIII shall not constitute a waiver of any other repurchase
rights and/or rights of first refusal that may subsequently arise under the
provisions of this Agreement or any other agreement between the Corporation and
the Optionee or the Optionee's spouse. No waiver of any breach or condition of
this Agreement shall be deemed to be a waiver of any other or subsequent breach
or condition, whether of like or different nature.
9.6 Cancellation of Shares. If the Corporation (or its assignees)
shall make available, at the time and place and in the amount and form provided
in this Agreement, the consideration for the Purchased Shares to be repurchased
in accordance with the provisions of this Agreement, then from and after such
time, the person from whom such shares are to be repurchased shall no longer
have any rights as a holder of such shares (other than the right to receive
payment of such consideration in accordance with this Agreement), and such
shares shall be deemed purchased in accordance with the applicable provisions
hereof and the Corporation (or its assignees) shall be deemed the owner and
holder of such shares, whether or not the certificates therefor have been
delivered as required by this Agreement.
X. MISCELLANEOUS PROVISIONS
10.1 Optionee Undertaking. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
in its judgment deem necessary or advisable in order to carry out or effect one
or more of the obligations or
17
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restrictions imposed on either the Optionee or the Purchased Shares pursuant to
the express provisions of this Agreement.
10.2 Agreement is Entire Contract. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the express terms and provisions
of the Plan.
10.3 Governing Law. This Agreement shall be governed by, and construed
in accordance with the laws of the State of California, as such laws are applied
to contracts entered into and performed in such State without resort to that
State's conflict-of-laws rules.
10.4 Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
10.5 Successors and Assigns. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and the Optionee and the Optionee's legal representatives, heirs,
legatees, distributees, assigns and transferees by operation of law, whether or
not any such person shall have become a party to this Agreement and have agreed
in writing to join herein and be bound by the terms and conditions hereof.
10.6 Power of Attorney. Optionee's spouse hereby appoints Optionee his
or her true and lawful attorney in fact, for him or her and in his or her name,
place and stead, and for his or her use and benefit, to agree to any amendment
or modification of this Agreement and to execute such further instruments and
take such further actions as may reasonably be necessary to carry out the intent
of this Agreement. Optionee's spouse further gives and grants unto Optionee as
his or her attorney in fact full power and authority to do and perform every act
necessary and proper to be done in the exercise of any of the foregoing powers
as fully as he or she might or could do if personally present, with full power
of substitution and revocation, hereby ratifying and confirming all that
Optionee shall lawfully do and cause to be done by virtue of this power of
attorney.
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IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first indicated above.
Ultima Communication, Inc.
By: _______________________________
Title: ____________________________
Address: _________________________________
_________________________________
Address: _________________________________
Optionee(2)
_________________________________
_________________________________
The undersigned spouse of Optionee has read and hereby approves the
foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting the Optionee the right to acquire the Purchased Shares in accordance
with the terms of such Agreement, the undersigned hereby agrees to be
irrevocably bound by all the terms and provisions of such Agreement, including
(specifically) the right of the Corporation (or its assignees) to purchase any
and all interest or right the undersigned may otherwise have in such shares
pursuant to community property laws or other marital property rights.
_________________________________
Optionee's Spouse
Address: _________________________________
_________________________________
--------------------
(2) I have executed the Section 83(b) election that was attached hereto as
an Exhibit. As set forth in Article III, I understand that I, and not the
Corporation, will be responsible for completing the form and filing the election
with the appropriate office of the Federal and State tax authorities and that if
such filing is not completed within thirty (30) days after the date of this
Agreement, I will not be entitled to the tax benefits provided by Section 83(b).
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EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ________________ hereby sell(s), assign(s) and
transfer(s) unto Ultima Communication, Inc. (the "Corporation") ________________
(_____) shares of the Common Stock of the Corporation standing in his name on
the books of the Corporation represented by Certificate No. __________ and do
hereby irrevocably constitute and appoint ______________ as Attorney to transfer
the said stock on the books of the Corporation with full power of substitution
in the premises.
Dated: ________________________
Signature
_____________________________
Instruction: Please do not fill in any blanks other than the signature line. The
purpose of this assignment is to enable the Corporation to exercise its
Repurchase Right set forth in the Agreement without requiring additional
signatures on the part of the Optionee.
<PAGE>
REPURCHASE RIGHTS
-----------------
EXHIBIT II
SECTION 83(b) TAX ELECTION
This statement is being made under Section 83(b) of the Internal Revenue Code,
pursuant to Treas. Reg. Section 1.83-2.
1. The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No. :
2. The property with respect to which the election is being made is ________
shares of the common stock of Ultima Communication, Inc.
3. The property was issued on _____________, _________.
4. The taxable year in which the election is being made is the calendar year
________.
5. The property is subject to a repurchase right pursuant to which the issuer
has the right to acquire the property at the original purchase price if for
any reason taxpayer's employment with the issuer is terminated. The issuers
repurchase right lapses in a series of annual and monthly installments over
a four year period ending on __________, _________.
6. The fair market value at the time of transfer (determined without regard to
any restriction other than a restriction which by its terms will never
lapse) is $_________ per share.
7. The amount paid for such property is $________ per share.
8. A copy of this statement was furnished to Ultima Communication, Inc. for
whom taxpayer rendered the services underlying the transfer of property.
9. This statement is executed as of:
-------------------------------- -----------------------------
Spouse (if any) Taxpayer
This form must be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
<PAGE>
SPECIAL PROTECTIVE ELECTION PURSUANT TO SECTION 83(b) OF THE
INTERNAL REVENUE CODE WITH RESPECT TO PROPERTY ACQUIRED UPON
EXERCISE OF AN INCENTIVE STOCK OPTION
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Code. Accordingly, it is the intent of the
Taxpayer to utilize this election to achieve the following tax results:
1. The purpose of this election is to have the alternative minimum
taxable income attributable to the purchased shares measured by the amount by
which the fair market value of such shares at the time of their transfer to the
Taxpayer exceeds the purchase price paid for the shares. In the absence of this
election, such alternative minimum taxable income would be measured by the
spread between the fair market value of the purchased shares and the purchase
price which exists on the various lapse dates in effect for the forfeiture
restrictions applicable to such shares. The election is to be effective to the
full extent permitted under the Internal Revenue Code.
2. Section 421(a)(1) of the Code expressly excludes from income any
excess of the fair market value of the purchased shares over the amount paid for
such shares. Accordingly, this election is also intended to be effective in the
event there is a "disqualifying disposition" of the shares, within the meaning
of Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.
This form should be filed with the Internal Revenue Service Center with which
taxpayer files his/her Federal income tax returns. The filing must be made
within 30 days after the execution date of the Stock Purchase Agreement.
Note: Page 2 should be attached only if you are exercising an incentive
stock option.
