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EXHIBIT 99.3
DIGITAL ISLAND, INC.
STOCK OPTION ASSUMPTION AGREEMENT
SoftAware, Inc. 1999 Stock Option/Stock Issuance Plan
Optionee: ______________________
STOCK OPTION ASSUMPTION AGREEMENT effective as of the ___ day of
October, 2000.
WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase shares of the common stock of SoftAware Inc., a
California corporation ("SoftAware"), which were granted to Optionee under the
1999 Stock Option/Stock Issuance Plan (the "Plan").
WHEREAS, each of those options is evidenced by a Stock Option
Agreement (the "Option Agreement") issued to Optionee under the applicable Plan.
WHEREAS, SoftAware has been acquired by Digital Island, Inc., a
Delaware corporation ("Digital Island") through the merger of SoftAware with a
wholly-owned subsidiary of Digital Island (the "Merger") pursuant to the
Agreement and Plan of Reorganization, by and between Digital Island and
SoftAware, dated July 17, 2000 (the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require the
obligations of SoftAware under each outstanding option under the Plan to be
assumed by Digital Island at the consummation of the Merger and the holder of
each outstanding option to be issued an agreement evidencing the assumption of
such option.
WHEREAS, pursuant to the provisions of the Merger Agreement, the
exchange ratio (the "Exchange Ratio") in effect for the Merger is 0.3692 of a
share of Digital Island common stock ("Digital Island Stock") for each
outstanding share of SoftAware common stock ("SoftAware Stock").
WHEREAS, the purpose of this Agreement is to evidence the assumption
by Digital Island of the outstanding options held by Optionee at the time of the
consummation of the Merger (the "Effective Time") and to reflect certain
adjustments to those options which have become necessary in connection with
their assumption by Digital Island in the Merger.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of SoftAware Stock subject to the options
held by Optionee immediately prior to the Effective Time (the "SoftAware
Options") and the exercise price payable per share are set forth below. Digital
Island hereby assumes, as of the Effective Time, all the duties and obligations
of SoftAware under each of the SoftAware Options. In connection with such
assumption, the number of shares of Digital Island Stock purchasable under
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each SoftAware Option hereby assumed and the exercise price payable thereunder
have been adjusted to reflect the Exchange Ratio. Accordingly, the number of
shares of Digital Island Stock subject to each SoftAware Option hereby assumed
shall be as specified for that option below, and the adjusted exercise price
payable per share of Digital Island Stock under the assumed SoftAware Option
shall also be as indicated for that option below.
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SOFTAWARE STOCK OPTIONS DIGITAL ISLAND ASSUMED OPTIONS
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# of Shares of # of Shares
SoftAware Exercise Price of Digital Island Adjusted Exercise
Common Stock per Share Common Stock Price per Share
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$ $
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2. The intent of the foregoing adjustments to each assumed SoftAware
Option is to assure that the spread between the aggregate fair market value of
the shares of Digital Island Stock purchasable under each such option and the
aggregate exercise price as adjusted pursuant to this Agreement will not,
immediately after the consummation of the Merger, be greater than the spread
which existed, immediately prior to the Merger, between the then aggregate fair
market value of the SoftAware Stock subject to the SoftAware Option and the
aggregate exercise price in effect at such time under the Option Agreement. Such
adjustments are also intended to preserve, immediately after the Merger, on a
per share basis, the same ratio of exercise price per option share to fair
market value per share which existed under the SoftAware Option immediately
prior to the Merger.
3. Each SoftAware Option shall continue to have a maximum term of
ten (10) years from the date of grant, subject to earlier termination (as
provided in the applicable Option Agreement) following Optionee's cessation of
service or employment.
4. The following provisions shall govern each SoftAware Option
hereby assumed by Digital Island:
(a) Unless the context otherwise requires, all references
in each Option Agreement and the Plan (to the extent incorporated into
such Option Agreement) shall be adjusted as follows: (i) all
references to the "Company" shall mean Digital Island, (ii) all
references to "Stock," "Common Stock" or "Shares" shall mean shares of
Digital Island Stock, (iii) all references to the "Board" shall mean
the Board of Directors of Digital Island and (iv) all references to
the "Committee" shall mean the Compensation Committee of the Digital
Island Board of Directors.
(b) Except as modified by this Agreement, the grant date
and the expiration date of each assumed SoftAware Option and all other
provisions which govern either the exercise or the termination of the
assumed SoftAware Option shall remain the same as set forth in the
Option Agreement applicable to that option, and the provisions of the
applicable Plan and the Option Agreement shall accordingly govern and
control Optionee's rights under this Agreement to purchase Digital
Island Stock under the assumed SoftAware Option.
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(c) Each SoftAware Option assumed by Digital Island which
was originally designated as an Incentive Stock Option under the
federal tax laws shall retain such Incentive Stock Option status to
the maximum extent allowed by law.
(d) Each SoftAware Option hereby assumed by Digital Island
shall continue to vest and become exercisable in accordance with the
same installment vesting schedule in effect for that option under the
applicable Option Agreement immediately prior to the Effective Time;
except, that the number of shares subject to each such installment
shall be adjusted to reflect the Exchange Ratio.
(e) For purposes of applying any and all provisions of the
Option Agreement and the Plan relating to Optionee's status as an
employee or a consultant of SoftAware, Optionee shall be deemed to
continue in such status as an employee or a consultant for so long as
Optionee renders services as an employee or a consultant to Digital
Island or any present or future majority-owned Digital Island
subsidiary. Accordingly, the provisions of the Option Agreement
governing the termination of the assumed SoftAware Options upon
Optionee's cessation of service as an employee or a consultant of
SoftAware shall hereafter be applied on the basis of Optionee's
cessation of employee or consultant status with Digital Island and its
subsidiaries, and each assumed SoftAware Option shall accordingly
terminate, within the designated time period in effect under the
Option Agreement for that option, following such cessation of employee
or consultant status.
(f) The adjusted exercise price payable for the Digital
Island Stock subject to each assumed SoftAware Option shall be payable
in any of the forms authorized under the Option Agreement applicable
to that option. For purposes of determining the holding period of any
shares of Digital Island Stock delivered in payment of such adjusted
exercise price, the period for which such shares were held as
SoftAware Stock prior to the Merger shall be taken into account.
(g) In order to exercise each assumed SoftAware Option,
Optionee must deliver to Digital Island a written notice of exercise
in which the number of shares of Digital Island Stock to be purchased
thereunder must be indicated. The exercise notice must be accompanied
by payment of the adjusted exercise price payable for the purchased
shares of Digital Island Stock and should be delivered to Digital
Island at the following address:
Digital Island, Inc.
45 Fremont Street, 12th Floor
San Francisco, CA 94105
Attention: Paula Lawrence
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5. Except to the extent specifically modified by this Stock Option
Assumption Agreement, all of the terms and conditions of each Option Agreement
as in effect immediately prior to the Merger shall continue in full force and
effect and shall not in any way be amended, revised or otherwise affected by
this Stock Option Assumption Agreement.
IN WITNESS WHEREOF, Digital Island, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the 5th day of October, 2000.
DIGITAL ISLAND, INC.
By: ______________________________
Name, Title
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock Option
Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her SoftAware Options hereby assumed by Digital Island
are as set forth in the Option Agreement, the Plan and such Stock Option
Assumption Agreement.
__________________________________________
OPTIONEE
DATED: ________________, 2000
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