As filed with the Securities and Exchange Commission on December 23, 1999
Registration No. __________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
KANA COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 77-0435679
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
740 BAY ROAD
REDWOOD CITY, CALIFORNIA 94063
(Address of principal executive offices) (Zip Code)
----------
BUSINESS EVOLUTION, INC. 1999 STOCK PLAN
NETDIALOG, INC. 1997 STOCK PLAN
(Full title of the Plan)
MICHAEL J. MCCLOSKEY
CHIEF EXECUTIVE OFFICER
KANA COMMUNICATIONS, INC.
740 BAY ROAD
REDWOOD CITY, CALIFORNIA 94063
(Name and address of agent for service)
(650) 298-9282
(Telephone number, including area code, of agent for service)
----------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price Fee
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Business Evolution, Inc.
1999 Stock Plan 24,573 $4.13 $101,486.49 $26.80
- ------------------------
Common Stock, $0.001 shares par value
- ----------------------------------------------------------------------------------------------------------------------
NetDialog, Inc. 1997 Stock Plan 77,392 $13.52 $1,046,339.84 $276.24
- -------------------------------
Common Stock, $0.001 shares par value
======================================================================================================================
Aggregate Registration Fee: $303.04
======================================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of the
Registrant's Common Stock which become issuable under the Business
Evolution, Inc. 1999 Stock Plan or NetDialog, Inc. 1997 Stock Plan with
respect to the securities registered hereunder by reason of any stock
dividend, stock split, recapitalization or other similar transaction
effected without the Registrant's receipt of consideration which results in
an increase in the number of the Registrant's outstanding shares of Common
Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the weighted average
exercise price of the outstanding options.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
Kana Communications, Inc. (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Registration Statement No. 333-82587 on Form S-1
filed with the Commission on July 9, 1999, as amended on Forms S-1/A
filed with the Commission on August 16, 1999, August 24, 1999,
September 2, 1999 and September 21, 1999.
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1999, filed with the Commission on November 15,
1999.
(c) The Registrant's Current Report on Form 8-K filed with the Commission
on December 14, 1999.
(d) The Registrant's prospectus filed with the Commission on September 22,
1999, pursuant to Rule 424(b) promulgated under the Securities Act of
1933, as amended (the "1933 Act"), in connection with the Registrant's
Registration Statement No. 333-82587, in which there is set forth the
audited financial statements for the Registrant's fiscal year ended
December 31, 1998.
(e) The Registrant's Registration Statement on Form 8-A filed with the
Commission on August 27, 1999, including any amendments or reports
filed for the purpose of updating such description, in which there is
described the terms, rights and provisions applicable to the
Registrant's Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), after the date of this Registration Statement
and prior to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which de-registers all securities
then remaining unsold shall be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5 INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law authorizes a
court to award or a corporation's board of directors to grant indemnification to
directors and officers in terms sufficiently broad to permit this
indemnification under certain circumstances for liabilities (including
reimbursement for expenses incurred) arising under the 1933 Act. Article VII,
Section 6 of the Registrant's Bylaws provides for mandatory indemnification of
its directors and executive officers and permissible indemnification of
employees and other agents to the maximum extent permitted by the Delaware
General Corporation Law. The Registrant's Certificate of Incorporation provides
that, subject to Delaware law, its directors will not be personally liable for
monetary damages for breach of the directors' fiduciary duty as directors to the
Registrant and its stockholders. This provision
II-1
<PAGE>
in the Certificate of Incorporation does not eliminate the directors'
fiduciary duty, and in appropriate circumstances equitable remedies such as
injunctive or other forms of non-monetary relief will remain available under
Delaware law. In addition, each director will continue to be subject to
liability for breach of the director's duty of loyalty to the Registrant or its
stockholders, for acts or omissions not in good faith or involving intentional
misconduct, for knowing violations of law, for actions leading to improper
personal benefit to the director, and for payment of dividends or approval of
stock repurchases or redemptions that are unlawful under Delaware law. The
provision also does not affect a director's responsibilities under any other
law, such as the federal securities laws or state or federal environmental laws.
The Registrant has entered into indemnification agreements with its officers and
directors, a form of which has been filed with the Commission as an Exhibit to
the Registrant's Registration Statement on Form S-1 (No. 333-82587), as amended
(the "Indemnification Agreements"). The Indemnification Agreements provide the
Registrant's executive officers and directors with further indemnification to
the maximum extent permitted by the Delaware General Corporation Law. Reference
is also made to Section 8 of the Underwriting Agreement contained in Exhibit 1.1
of the Registrant's Registration Statement on Form S-1 (No. 333-82587), as
amended, indemnifying officers and directors of the Registrant against certain
liabilities, and Section 1.10 of the Third Amended and Restated Investors'
Rights Agreement contained in Exhibit 4.2 of the Registrant's Registration
Statement on Form S-1 (No. 333-82587), as amended, indemnifying certain of the
Registrant's stockholders, including controlling stockholders, against certain
liabilities.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
Exhibit
Number Exhibit
------- -------
4 Instruments Defining the Rights of Stockholders. Reference is made to
Registrant's Registration Statement on Form 8-A, together with any
amendments and exhibits thereto, which are incorporated herein by
reference pursuant to Item 3(c).
5.1 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of KPMG LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.1.
24 Power of Attorney. Reference is made to page II-4 of this Registration
Statement.
99.1 Business Evolution, Inc. 1999 Stock Plan.
99.2 Business Evolution, Inc. Form of Stock Option Agreement.
99.3 Form of Option Assumption Agreement - 12 Months Acceleration (Business
Evolution Option Shares).
99.4 Form of Option Assumption Agreement- 24 Months Acceleration (Business
Evolution Option Shares).
99.5 NetDialog, Inc. 1997 Stock Plan.
99.6 NetDialog, Inc. Form of Stock Option Agreement.
99.7 Form of Option Assumption Agreement (NetDialog Option Shares).
ITEM 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement: (i) to include any prospectus required by Section
10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall
not apply if the information required to be included in a post-effective
amendment by those clauses is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are
incorporated by reference into this Registration Statement; (2) that for the
purpose of determining any liability under the 1933 Act each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and (3) to remove
from registration by means of a post-
II-2
<PAGE>
effective amendment any of the securities being registered which remain
unsold at the termination of the Business Evolution, Inc. 1999 Stock Plan or the
NetDialog, Inc. 1997 Stock Plan.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the 1933 Act
may be permitted to directors, officers or controlling persons of the Registrant
pursuant to the indemnification provisions summarized in Item 6 or otherwise,
the Registrant has been advised that, in the opinion of the Commission, such
indemnification is against public policy as expressed in the 1933 Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer, or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Redwood City, State of California on
this 23rd day of December, 1999.
KANA COMMUNICATIONS, INC.
By: /s/ Michael J. McCloskey
----------------------------------
Michael J. McCloskey
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Mark S. Gainey and Joseph D. McCarthy, and each
of them, as such person's true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for such person and in such
person's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as such person might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his or her
substitutes, may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates
indicated:
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Michael J. McCloskey Chief Executive Officer and December 23, 1999
- ------------------------------------ Director (Principal Executive
Michael J. McCloskey Officer)
/s/ Joseph D. McCarthy Vice President, Finance and December 23, 1999
- ------------------------------------ Operations (Principal Financial
Joseph D. McCarthy and Accounting Officer)
/s/ Mark S. Gainey President and Chairman of December 23, 1999
- ------------------------------------ the Board of Directors
Mark S. Gainey
/s/ David M. Beirne Director December 23, 1999
- ------------------------------------
David M. Beirne
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Robert W. Frick Director December 23, 1999
- ------------------------------------
Robert W. Frick
/s/ Eric A. Hahn Director December 23, 1999
- ------------------------------------
Eric A. Hahn
/s/ Charles A. Holloway Director December 23, 1999
- ------------------------------------
Dr. Charles A. Holloway
- ------------------------------------ Director December , 1999
Steven T. Jurvetson
- ------------------------------------ Director December , 1999
Ariel Poler
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
Exhibit Number Exhibit
- -------------- -------
4 Instruments Defining the Rights of Stockholders. Reference
is made to Registrant's Registration Statement on Form
8-A, together with any amendments and exhibits thereto,
which are incorporated herein by reference pursuant to
Item 3(c).
5.1 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of KPMG LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.1.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Business Evolution, Inc. 1999 Stock Plan.
99.2 Business Evolution, Inc. Form of Stock Option
Agreement.
99.3 Form of Option Assumption Agreement - 12 Months
Acceleration (Business Evolution Option Shares).
99.4 Form of Option Assumption Agreement- 24 Months
Acceleration (Business Evolution Option Shares).
99.5 NetDialog, Inc. 1997 Stock Plan.
99.6 NetDialog, Inc. Form of Stock Option Agreement.
99.7 Form of Option Assumption Agreement (NetDialog
Option Shares).
<PAGE>
EXHIBIT 5.1
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
December 23, 1999
Kana Communications, Inc.
740 Bay Road
Redwood City, California 94063
Re: Kana Communications, Inc. - Registration Statement for
Offering of an Aggregate of 101,965 Shares of Common Stock
Dear Ladies and Gentlemen:
We have acted as counsel to Kana Communications, Inc., a Delaware
corporation (the "Company"), in connection with the registration on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended, of
101,965 shares of the Company's common stock (the "Shares") for issuance under
the Business Evolution, Inc. 1999 Stock Plan and the NetDialog, Inc. 1997 Stock
Plan (the "Plans"). The Plans, together with the outstanding options under those
plans, have been assumed by the Company in connection with the Company's
acquisition of Business Evolution, Inc. and NetDialog, Inc.
This opinion is being furnished in accordance with the
requirements of Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the
corporate proceedings taken by the Company in connection assumption of the Plans
and the outstanding options thereunder. Based on such review, we are of the
opinion that if, as and when the Shares are issued and sold (and the
consideration therefor received) pursuant to the provisions of the stock option
agreements for the outstanding options under the Plans assumed by the Company
and in accordance with the Registration Statement, such Shares will be duly
authorized, legally issued, fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5.1 to
the Registration Statement.
This opinion letter is rendered as of the date first written
above and we disclaim any obligation to advise you of facts, circumstances,
events or developments which hereafter may be brought to our attention and which
may alter, affect or modify the opinion expressed herein. Our opinion is
expressly limited to the matters set forth above and we render no opinion,
whether by implication or otherwise, as to any other matters relating to the
Company, the assumed Plans or the Shares issuable under such plans.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF KPMG LLP, INDEPENDENT AUDITORS
The Board of Directors and Stockholders
Kana Communications, Inc.
We consent to incorporation herein by reference of our report
dated August 13, 1999, except as to Note 8, which is as of September 20, 1999,
and our report dated June 25, 1999, except as to Note 7, which is as of
September 20, 1999, relating to the supplemental and historical consolidated
balance sheets, respectively, of Kana Communications, Inc. and subsidiaries as
of December 31, 1998 and 1997 and the related supplemental and historical
consolidated statements of operations and comprehensive loss, stockholders'
equity, and cash flows for each of the years then ended, which reports appear in
the Company's Form S-1 (333-82587) as filed with the Securities and Exchange
Commission on September 21, 1999.
/s/ KPMG LLP
------------------------------
KPMG LLP
Mountain View, California
December 21, 1999
<PAGE>
EXHIBIT 99.1
BUSINESS EVOLUTION, INC.
1999 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1999 Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be Incentive Stock Options (as
defined under Section 422 of the Code) or Nonstatutory Stock Options, as
determined by the Administrator at the time of grant of an Option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock Purchase Rights may also be granted
under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or its Committee appointed pursuant
to Section 4 of the Plan.
(b) "AFFILIATE" means an entity other than a Subsidiary in which the
Company owns an equity interest or which, together with the Company, is under
common control of a third person or entity.
(c) "APPLICABLE LAWS" means the legal requirements relating to the
administration of stock option plans under applicable U.S. state corporate laws,
U.S. federal and applicable state securities laws, the Code, any Stock Exchange
rules or regulations and the applicable laws of any other country or
jurisdiction where Options or Stock Purchase Rights are granted under the Plan,
as such laws, rules, regulations and requirements shall be in place from time to
time.
(d) "BOARD" means the Board of Directors of the Company.
(e) "CODE" means the Internal Revenue Code of 1986, as amended.
(f) "COMMITTEE" means one or more committees or subcommittees of the
Board appointed by the Board to administer the Plan in accordance with Section 4
below.
(g) "COMMON STOCK" means the Common Stock of the Company.
(h) "COMPANY" means Business Evolution, Inc., a Delaware corporation.
(i) "CONSULTANT" means any person, including an advisor, who renders
services to the Company, or any Parent, Subsidiary or Affiliate, and is
compensated for such services, and any Director whether compensated for such
services or not.
(j) "CONTINUOUS SERVICE STATUS" means the absence of any interruption or
termination of service as an Employee or Consultant to the Company or a Parent,
Subsidiary or
<PAGE>
Affiliate. Continuous Service Status shall not be considered interrupted in the
case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence
approved by the Administrator, provided that such leave is for a period of not
more than 90 days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (iv) in the case of transfers
between locations of the Company or between the Company, its Parents,
Subsidiaries or Affiliates or their respective successors. Unless otherwise
determined by the Administrator, a change in status from an Employee to a
Consultant or from a Consultant to an Employee will not constitute an
interruption of Continuous Service Status.
(k) "CORPORATE TRANSACTION" means (i) a sale of all or substantially all
of the Company's assets, or a merger, consolidation or other capital
reorganization of the Company with or into another corporation, or (ii) the
initial underwritten public offering by the Company of shares of its Common
Stock pursuant to a registration statement on Form S-3 under the Securities Act
of 1933, as amended, in which the Company receives at least $10,000,000 in
proceeds (net of underwriting discounts and commissions).
(l) "DIRECTOR" means a member of the Board.
(m) "EMPLOYEE" means any person, including officers and Directors,
employed by the Company or any Parent, Subsidiary or Affiliate of the Company.
The payment by the Company of a director's fee to a Director shall not be
sufficient to constitute "employment" of such Director by the Company.
(n) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(o) "FAIR MARKET VALUE" means, as of any date, the fair market value of
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system including without limitation the National Market of
the National Association of Securities Dealers, Inc. Automated Quotation
("Nasdaq") System, its Fair Market Value shall be the closing sales price for
such stock (or the closing bid, if no sales were reported), as quoted on such
system or exchange on the date of determination, or if no trading occurred on
the date of determination, on the last market trading day prior to the time of
determination, as reported in THE WALL STREET JOURNAL or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but not on
the National Market thereof) or regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value shall be the
mean between the high bid and low asked prices for the Common Stock for the last
market trading day prior to the time of determination, as reported in THE WALL
STREET JOURNAL or such other source as the Administrator deems reliable; or
2
<PAGE>
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(p) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code, as
designated in the applicable Option Agreement.
(q) "LISTED SECURITY" means any security of the Company that is listed
or approved for listing on a national securities exchange or designated or
approved for designation as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
(r) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option, as designated in the applicable Option Agreement.
(s) "OPTION" means a stock option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written document, the form(s) of which
shall be approved from time to time by the Administrator, reflecting the terms
of an Option granted under the Plan and includes any documents attached to or
incorporated into such Option Agreement, including, but not limited to, a notice
of stock option grant and a form of exercise notice.
(u) "OPTION EXCHANGE PROGRAM" means a program approved by the
Administrator whereby outstanding Options are exchanged for Options with a lower
exercise price.
(v) "OPTIONED STOCK" means the Common Stock subject to an Option or a
Stock Purchase Right.
(w) "OPTIONEE" means an Employee or Consultant who receives an Option.
(x) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code, or any successor provision.
(y) "PARTICIPANT" means any holder of one or more Options or Stock
Purchase Rights, or of the Shares issuable or issued upon exercise of such
awards, under the Plan.
(z) "PLAN" means this 1999 Stock Plan.
(aa) "REPORTING PERSON" means an officer, Director, or greater than 10%
shareholder of the Company within the meaning of Rule 16a-2 under the Exchange
Act, who is required to file reports pursuant to Rule 16a-3 under the Exchange
Act.
(bb) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant
to a grant of a Stock Purchase Right under Section 10 below.
3
<PAGE>
(cc) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written document, the
form(s) of which shall be approved from time to time by the Administrator,
reflecting the terms of a Stock Purchase Right granted under the Plan and
includes any documents attached to such agreement.
(dd) "RULE 16B-3" means Rule 16b-3 promulgated under the Exchange Act,
as the same may be amended from time to time, or any successor provision.
(ee) "SHARE" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan. -----
(ff) "STOCK EXCHANGE" means any stock exchange or consolidated stock
price reporting system on which prices for the Common Stock are quoted at any
given time.
(gg) "STOCK PURCHASE RIGHT" means the right to purchase Common Stock
pursuant to Section 10 below.
(hh) "SUBSIDIARY" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code, or any successor
provision.
(ii) "TEN PERCENT HOLDER" means a person who owns stock representing
more than 10% of the voting power of all classes of stock of the Company or any
Parent or Subsidiary.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares that may be sold under the Plan
is 3,172,794 Shares of Common Stock. The Shares may be authorized, but unissued,
or reacquired Common Stock. If an Option expires or becomes unexercisable for
any reason without having been exercised in full, or is surrendered pursuant to
an Option Exchange Program, the unpurchased Shares that were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan. In addition, any Shares of Common Stock that are retained
by the Company upon exercise of an Option or Stock Purchase Right in order to
satisfy the exercise or purchase price for such Option or Stock Purchase Right
or any withholding taxes due with respect to such exercise shall be treated as
not issued and shall continue to be available under the Plan. Shares issued
under the Plan and later repurchased by the Company pursuant to any repurchase
right that the Company may have shall not be available for future grant under
the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) GENERAL. The Plan shall be administered by the Board or a Committee,
or a combination thereof, as determined by the Board. The Plan may be
administered by different administrative bodies with respect to different
classes of Optionees and, if permitted by the Applicable Laws, the Board may
authorize one or more officers to grant Options or Stock Purchase Rights under
the Plan.
(b) ADMINISTRATION WITH RESPECT TO REPORTING PERSONS. With respect to
Options granted to Reporting Persons and Named Executives, the Plan may (but
need not) be
4
<PAGE>
administered so as to permit such Options to qualify for the exemption set forth
in Rule 16b-3 and to qualify as performance-based compensation under Section
162(m) of the Code.
(c) COMMITTEE COMPOSITION. If a Committee has been appointed pursuant to
this Section 4, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the Board may
increase the size of any Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies (however caused) and remove all members of a Committee
and thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee administering the Plan pursuant
to Section 4(b) above, to the extent permitted or required by Rule 16b-3 and
Section 162(m) of the Code.
(d) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan and
in the case of a Committee, the specific duties delegated by the Board to such
Committee, and subject to the approval of any relevant authorities, including
the approval, if required, of any Stock Exchange, the Administrator shall have
the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(p) of the Plan;
(ii) to select the Consultants and Employees to whom Options and
Stock Purchase Rights or any combination thereof may from time to time be
granted;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination
thereof are granted;
(iv) to determine the number of Shares of Common Stock to be covered
by each such award granted
hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award
granted hereunder, which terms and conditions include but are not limited to the
exercise or purchase price, the time or times when Options or Stock Purchase
Rights may be exercised (which may be based on performance criteria), any
vesting acceleration or waiver of forfeiture restrictions, and any restriction
or limitation regarding any Option, Optioned Stock, Stock Purchase Right or
Restricted Stock, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under Section 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option shall have declined since the date the Option was granted and to
make any other amendments or adjustments to any Option that the Administrator
determines, in its discretion and under the authority granted to it under the
Plan, to be necessary or advisable, provided however that no
5
<PAGE>
amendment or adjustment to an Option that would materially and adversely affect
the rights of any Optionee shall be made without the prior written consent of
the Optionee;
(ix) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Stock
Purchase Rights;
(x) to initiate an Option Exchange Program;
(xi) to construe and interpret the terms of the Plan and awards
granted under the Plan; and
(xii) in order to fulfill the purposes of the Plan and without
amending the Plan, to modify grants of Options or Stock Purchase Rights to
Participants who are foreign nationals or employed outside of the United States
in order to recognize differences in local law, tax policies or customs.
(e) EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Participants.
5. ELIGIBILITY.
(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options and Stock Purchase
Rights may be granted to Employees and Consultants. Incentive Stock Options may
be granted only to Employees; provided however that Employees of Affiliates
shall not be eligible to receive Incentive Stock Options. An Employee or
Consultant who has been granted an Option or Stock Purchase Right may, if he or
she is otherwise eligible, be granted additional Options or Stock Purchase
Rights.
(b) TYPE OF OPTION. Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory Stock Option.
However, notwithstanding such designations, to the extent that the aggregate
Fair Market Value of Shares with respect to which Options designated as
Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of grant of such Option.
(c) AT-WILL RELATIONSHIP. The Plan shall not confer upon any Participant
any right with respect to continuation of employment or consulting relationship
with the Company, nor shall it interfere in any way with such holder's right or
the Company's right to terminate his or her employment or consulting
relationship at any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon its adoption by the
Board. It shall continue in effect for a term of ten years unless sooner
terminated under Section 15 of the Plan.
6
<PAGE>
7. TERM OF OPTION. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that the term shall be no more than ten
years from the date of grant thereof or such shorter term as may be provided in
the Option Agreement. However, in the case of an Incentive Stock Option granted
to an Optionee who, at the time the Option is granted, is a Ten Percent Holder,
the term of such Option shall be five years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per Share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Administrator
and set forth in the Option Agreement, but shall be subject to the following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who at the time of grant is a Ten
Percent Holder, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per Share exercise price
shall be no less than 100% of the Fair Market Value per Share on the date of
grant.
(ii) In the case of a Nonstatutory Stock Option that is:
(A) granted prior to the date, if any, on which the Common Stock
becomes a Listed Security to a person who at the time of grant is a Ten Percent
Holder, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of the grant if required by the Applicable
Laws and, if not so required, shall be such price as is determined by the
Administrator.
(B) granted prior to the date, if any, on which the Common Stock
becomes a Listed Security to any other eligible person, the per Share exercise
price shall be no less than 85% of the Fair Market Value per Share on the date
of grant if required by the Applicable Laws and, if not so required, shall be
such price as is determined by the Administrator.
(iii) Notwithstanding the foregoing, Options may be granted with a
per Share exercise price other than as required above pursuant to a merger or
other corporate transaction.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash; (2)
check; (3) delivery of Optionee's promissory note with such recourse, interest,
security and redemption provisions as the Administrator determines to be
appropriate; (4) cancellation of indebtedness; (5) other Shares that (x) in the
case of Shares acquired upon exercise of an Option, either have been owned by
the Optionee for more than six months on the
7
<PAGE>
date of surrender or such other period as may be required to avoid a charge to
the Company's earnings or were not acquired, directly or indirectly, from the
Company, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which such Option shall be
exercised; (6) authorization for the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market Value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised; (7) delivery of a properly
executed exercise notice together with such other documentation as the
Administrator and the broker, if applicable, shall require to effect exercise of
the Option and prompt delivery to the Company of the sale or loan proceeds
required to pay the exercise price and any applicable withholding taxes; (8) any
combination of the foregoing methods of payment; or (9) such other consideration
and method of payment for the issuance of Shares to the extent permitted under
the Applicable Laws. In making its determination as to the type of consideration
to accept, the Administrator shall consider if acceptance of such consideration
may be reasonably expected to benefit the Company, and the Administrator may
refuse to accept a particular form of consideration at the time of any Option
exercise if, in its sole discretion, acceptance of such form of consideration is
not in the best interests of the Company at such time.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, consistent with the term of the Plan and
reflected in the Option Agreement, including vesting requirements and/or
performance criteria with respect to the Company and/or the Optionee; provided
however, that, if required by the Applicable Laws, any Option granted prior to
the date, if any, upon which the Common Stock becomes a Listed Security shall
become exercisable at the rate of at least 20% per year over five years from the
date the Option is granted. In the event that any of the Shares issued upon
exercise of an Option (which exercise occurs prior to the date, if any, upon
which the Common Stock becomes a Listed Security) should be subject to a right
of repurchase in the Company's favor, such repurchase right shall, if required
by the Applicable Laws, lapse at the rate of at least 20% per year over five
years from the date the Option is granted. Notwithstanding the above, in the
case of an Option granted to an officer, Director or Consultant of the Company
or any Parent, Subsidiary or Affiliate of the Company, the Option may become
fully exercisable, or a repurchase right, if any, in favor of the Company shall
lapse, at any time or during any period established by the Administrator. The
Administrator shall have the discretion to determine whether and to what extent
the vesting of Options shall be tolled during any leave of absence.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when written notice of such exercise
has been given to the Company in accordance with the terms of the Option by the
person entitled to exercise the Option and the Company has received full payment
for the Shares with respect to which the Option is exercised. Full payment may,
as authorized by the Administrator, consist of any consideration and method of
payment allowable under Section 8(b) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
8
<PAGE>
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, not withstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 of the
Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP. In the event
of termination of an Optionee's Continuous Service Status with the Company, such
Optionee may, but only within three months (or such other period of time, not
less than 30 days, as is determined by the Administrator, with such
determination in the case of an Incentive Stock Option being made at the time of
grant of the Option) after the date of such termination (but in no event later
than the expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that the Optionee was
entitled to exercise it at the date of such termination. To the extent that the
Optionee was not entitled to exercise the Option at the date of such
termination, or if the Optionee does not exercise the Option to the extent so
entitled within the time specified above, the Option shall terminate and the
Optioned Stock underlying the unexercised portion of the Option shall revert to
the Plan. Unless otherwise determined by the Administrator, no termination shall
be deemed to occur and this Section 9(b) shall not apply if (i) the Optionee is
a Consultant who becomes an Employee, or (ii) the Optionee is an Employee who
becomes a Consultant.
(c) DISABILITY OF OPTIONEE.
(i) Notwithstanding Section 9(b) above, in the event of termination
of an Optionee's Continuous Service Status as a result of his or her total and
permanent disability (within the meaning of Section 22(e)(3) of the Code), such
Optionee may, but only within twelve months (or such other period of time as is
determined by the Administrator, with such determination in the case of an
Incentive Stock Option made at the time of grant of the Option) from the date of
such termination (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination. To the
extent that the Optionee was not entitled to exercise the Option at the date of
termination, or if the Optionee does not exercise such Option to the extent so
entitled within the time specified above, the Option shall terminate and the
Optioned Stock underlying the unexercised portion of the Option shall revert to
the Plan.
(ii) In the event of termination of an Optionee's Continuous Service
Status as a result of a disability which does not fall within the meaning of
total and permanent disability (as set forth in Section 22(e)(3) of the Code),
such Optionee may, but only within twelve months (or such other period of time
as is determined by the Administrator, with such determination in the case of an
Incentive Stock Option made at the time of grant of the Option) from the date of
such termination (but in no event later than the expiration date of the term of
9
<PAGE>
such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination.
However, to the extent that such Optionee fails to exercise an Option that is an
Incentive Stock Option (within the meaning of Section 422 of the Code) within
three months of the date of such termination, the Option will not qualify for
Incentive Stock Option treatment under the Code. To the extent that the Optionee
was not entitled to exercise the Option at the date of termination, or if the
Optionee does not exercise such Option to the extent so entitled within the time
period specified above, the Option shall terminate and the Optioned Stock
underlying the unexercised portion of the Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. In the event of the death of an Optionee during
the period of Continuous Service Status since the date of grant of the Option,
or within 30 days following termination of the Optionee's Continuous Service
Status, the Option may be exercised, at any time within twelve months following
the date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by such Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had accrued at
the date of death or, if earlier, the date of termination of the Optionee's
Continuous Service Status. To the extent that the Optionee was not entitled to
exercise the Option at the date of death or termination, as the case may be, or
if the Optionee does not exercise such Option to the extent so entitled within
the time specified above, the Option shall terminate and the Optioned Stock
underlying the unexercised portion of the Option shall revert to the Plan.
(e) EXTENSION OF EXERCISE PERIOD. The Administrator shall have full
power and authority to extend the period of time for which an Option is to
remain exercisable following termination of an Optionee's Continuous Status as
an Employee or Consultant from the periods set forth in Sections 9(b), 9(c) and
9(d) above or in the Option Agreement to such greater time as the Board shall
deem appropriate, provided, that in no event shall such Option be exercisable
later than the date of expiration of the term of such Option as set forth in the
Option Agreement.
(f) BUY-OUT PROVISIONS. The Administrator may at any time offer to buy
out for a payment in cash or Shares an Option previously granted under the Plan
based on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time such offer is made.
10. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it shall advise the
offeree in writing of the terms, conditions and restrictions related to the
offer, including the number of Shares that such person shall be entitled to
purchase, the price to be paid, and the time within which such person must
accept such offer, which shall in no event exceed 30 days from the date upon
which the Administrator made the determination to grant the Stock Purchase
Right. If required by the Applicable Laws, the purchase price of Shares subject
to Stock Purchase Rights shall not be less than 85% of the Fair Market Value of
the
10
<PAGE>
Shares as of the date of the offer, or, in the case of a person owning stock
representing more than 10% of the total combined voting power of all classes of
stock of the Company or any Parent or Subsidiary, the price shall not be less
than 100% of the Fair Market Value of the Shares as of the date of the offer. If
the Applicable Laws do not impose restrictions on the purchase price, the
purchase price of Shares subject to Stock Purchase Rights shall be as determined
by the Administrator. The offer to purchase Shares subject to Stock Purchase
Rights shall be accepted by execution of a Restricted Stock Purchase Agreement
in the form determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines otherwise,
the Restricted Stock Purchase Agreement shall grant the Company a repurchase
option exercisable upon the voluntary or involuntary termination of the
purchaser's employment with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock Purchase Agreement shall be the original purchase price paid by
the purchaser and may be paid by cancellation of any indebtedness of the
purchaser to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine; provided, however, that with respect to a purchaser
who is not an officer, Director or Consultant of the Company or of any Parent or
Subsidiary of the Company, it shall lapse at a minimum rate of 20% per year if
required by the Applicable Laws.
(c) OTHER PROVISIONS. The Restricted Stock Purchase Agreement shall
contain such other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock Purchase Agreements need not be the
same with respect to each purchaser.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is exercised,
the purchaser shall have the rights equivalent to those of a shareholder, and
shall be a shareholder when his or her purchase is entered upon the records of
the duly authorized transfer agent of the Company. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 12 of the Plan.
11. TAXES.
(a) As a condition of the exercise of an Option or Stock Purchase Right
granted under the Plan, the Participant (or in the case of the Participant's
death, the person exercising the Option) shall make such arrangements as the
Administrator may require for the satisfaction of any applicable federal, state,
local or foreign withholding tax obligations that may arise in connection with
the exercise of an Option or Stock Purchase Right and the issuance of Shares.
The Company shall not be required to issue any Shares under the Plan until such
obligations are satisfied.
(b) In the case of an Employee and in the absence of any other
arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to satisfy
such tax obligations from the next payroll payment otherwise payable after the
date of an exercise of the Option.
11
<PAGE>
(c) This Section 11(c) shall apply only after the date, if any, upon
which the Common Stock becomes a Listed Security. In the case of a Participant
other than an Employee (or in the case of an Employee where the next payroll
payment is not sufficient to satisfy such tax obligations, with respect to any
remaining tax obligations), in the absence of any other arrangement and to the
extent permitted under the Applicable Laws, the Participant shall be deemed to
have elected to have the Company withhold from the Shares to be issued upon
exercise of the Option or Stock Purchase Right that number of Shares having a
Fair Market Value determined as of the applicable Tax Date (as defined below)
equal to the amount required to be withheld. For purposes of this Section 11,
the Fair Market Value of the Shares to be withheld shall be determined on the
date that the amount of tax to be withheld is to be determined under the
Applicable Laws (the "TAX DATE").
(d) If permitted by the Administrator, in its discretion, a Participant
may satisfy his or her tax withholding obligations upon exercise of an Option or
Stock Purchase Right by surrendering to the Company Shares that (i) in the case
of Shares previously acquired from the Company, have been owned by the
Participant for more than six months on the date of surrender, and (ii) have a
Fair Market Value determined as of the applicable Tax Date equal to the amount
required to be withheld.
(e) Any election or deemed election by a Participant to have Shares
withheld to satisfy tax withholding obligations under Section 11(c) or (d) above
shall be irrevocable as to the particular Shares as to which the election is
made and shall be subject to the consent or disapproval of the Administrator.
Any election by a Participant under Section 11(d) above must be made on or prior
to the applicable Tax Date.
(f) In the event an election to have Shares withheld is made by a
Participant and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Participant shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Participant shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Options and
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or by the laws of
descent or distribution; provided however that, after the date, if any, upon
which the Common Stock becomes a Listed Security, the Administrator may in its
discretion grant transferable Nonstatutory Stock Options pursuant to Option
Agreements specifying (i) the manner in which such Nonstatutory Stock Options
are transferable and (ii) that any such transfer shall be subject to the
Applicable Laws. The designation of a beneficiary by an Optionee will not
constitute a transfer. An Option or Stock Purchase Right may be exercised,
during the lifetime of the holder of the Option or Stock Purchase Right, only by
such holder or a transferee permitted by this Section 12.
12
<PAGE>
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, CORPORATE TRANSACTIONS AND
CERTAIN OTHER TRANSACTIONS.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock that have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or that have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per Share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued Shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination, recapitalization or reclassification of the Common Stock (including
any change in the number of Shares of Common Stock effected in connection with a
change of domicile of the Company), or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares of Common Stock subject to an Option
or Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the dissolution or
liquidation of the Company, each outstanding Option or Stock Purchase Right
shall terminate immediately prior to the consummation of such action, unless
otherwise provided by the Administrator.
(c) CORPORATE TRANSACTIONS. Except as otherwise specified in a
particular Award Agreement, in the event of a Corporate Transaction, each
outstanding Option and Stock Purchase Right shall be assumed or an equivalent
option or right shall be substituted by the successor corporation or a Parent or
Subsidiary of such successor corporation, unless such successor corporation does
not agree to assume the outstanding Options or Stock Purchase Rights or to
substitute equivalent options or rights, in which case such Options or Stock
Purchase Rights shall terminate upon the consummation of the Corporate
Transaction. Whether or not such outstanding Options and Stock Purchase Rights
are assumed or substituted as specified in the foregoing sentence, each Option
and Stock Purchase Right shall become automatically vested immediately prior to
the consummation of the Corporate Transaction as if the holder continued to be
an Employee or Consultant for an additional twelve months following the date of
the Corporate Transaction.
For purposes of this Section 13(c), an Option or a Stock Purchase Right
shall be considered assumed, without limitation, if, at the time of issuance of
the stock or other consideration upon a Corporate Transaction, each holder of an
Option or Stock Purchase Right would be entitled to receive upon exercise of the
Option or Stock Purchase Right the same number and kind of shares of stock or
the same amount of property, cash or securities as such holder would have been
entitled to receive upon the occurrence of the transaction if the holder
13
<PAGE>
had been, immediately prior to such transaction, the holder of the number of
Shares of Common Stock covered by the Option or the Stock Purchase Right at such
time (after giving effect to any adjustments in the number of Shares covered by
the Option or Stock Purchase Right as provided for in this Section 13); provided
however that if such consideration received in the transaction is not solely
common stock of the successor corporation or its Parent, the Administrator may,
with the consent of the successor corporation, provide for the consideration to
be received upon exercise of the Option or Stock Purchase Right to be solely
common stock of the successor corporation or its Parent equal to the Fair Market
Value of the per Share consideration received by holders of Common Stock in the
transaction.
(d) CERTAIN DISTRIBUTIONS. In the event of any distribution to the
Company's shareholders of securities of any other entity or other assets (other
than dividends payable in cash or stock of the Company) without receipt of
consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per Share of Common Stock covered by each
outstanding Option or Stock Purchase Right to reflect the effect of such
distribution.
14. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date of grant
of an Option or Stock Purchase Right shall, for all purposes, be the date on
which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Administrator;
provided, however, that in the case of any Incentive Stock Option, the grant
date shall be the later of the date on which the Administrator makes the
determination granting such Incentive Stock Option or the date of commencement
of the Optionee's employment relationship with the Company. Notice of the
determination shall be given to each Employee or Consultant to whom an Option or
Stock Purchase Right is so granted within a reasonable time after the date of
such grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AUTHORITY TO AMEND OR TERMINATE. The Board may at any time amend,
alter, suspend, discontinue or terminate the Plan, but no amendment, alteration,
suspension, discontinuation or termination (other than an adjustment made
pursuant to Section 13 above) shall be made that would materially and adversely
affect the rights of any Optionee or holder of Stock Purchase Rights under any
outstanding grant, without his or her consent. In addition, to the extent
necessary and desirable to comply with the Applicable Laws, the Company shall
obtain shareholder approval of any Plan amendment in such a manner and to such a
degree as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or termination of
the Plan shall materially and adversely affect Options already granted, unless
mutually agreed otherwise between the Optionee and the Administrator, which
agreement must be in writing and signed by the Optionee and the Company.
16. CONDITIONS UPON ISSUANCE OF SHARES. Notwithstanding any other provision
of the Plan or any agreement entered into by the Company pursuant to the Plan,
the Company shall not be obligated, and shall have no liability for, failure to
issue or deliver any Shares under the
14
<PAGE>
Plan unless such issuance or delivery would comply with the Applicable Laws,
with such compliance determined by the Company in consultation with its legal
counsel.
As a condition to the exercise of an Option or Stock Purchase Right, the
Company may require the person exercising such Option or Stock Purchase Right to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required by law.
17. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. AGREEMENTS. Options and Stock Purchase Rights shall be evidenced by
Option Agreements and Restricted Stock Purchase Agreements, respectively, in
such form(s) as the Administrator shall from time to time approve.
19. SHAREHOLDER APPROVAL. If required by the Applicable Laws, continuance
of the Plan shall be subject to approval by the shareholders of the Company
within twelve months before or after the date the Plan is adopted. Such
shareholder approval shall be obtained in the degree and manner required under
the Applicable Laws.
20. INFORMATION AND DOCUMENTS TO OPTIONEES AND PURCHASERS. Prior to the
date, if any, upon which the Common Stock becomes a Listed Security and if
required by the Applicable Laws, the Company shall provide financial statements
at least annually to each Optionee and to each individual who acquired Shares
pursuant to the Plan, during the period such Optionee or purchaser has one or
more Options or Stock Purchase Rights outstanding, and in the case of an
individual who acquired Shares pursuant to the Plan, during the period such
individual owns such Shares. The Company shall not be required to provide such
information if the issuance of Options or Stock Purchase Rights under the Plan
is limited to key employees whose duties in connection with the Company assure
their access to equivalent information. In addition, at the time of issuance of
any securities under the Plan, the Company shall provide to the Optionee or the
purchaser a copy of the Plan and any agreement(s) pursuant to which securities
granted under the Plan are issued.
15
<PAGE>
EXHIBIT 99.2
BUSINESS EVOLUTION, INC.
1999 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
(Optionee)
(OptioneeAddress1)
(OptioneeAddress2)
You have been granted an option to purchase Common Stock "COMMON STOCK"
of BUSINESS EVOLUTION, INC. (the "COMPANY") as follows:
<TABLE>
<S> <C>
Board Approval Date: (BoardApprovalDate)
Date of Grant (Later of Board
Approval Date or Commence-
ment of Employment/Consulting): (GrantDate)
Vesting Commencement Date: (VestingCommenceDate)
Exercise Price per Share: $(ExercisePrice)
Total Number of Shares Granted: (NoofShares)
Total Exercise Price: $(TotalExercisePrice)
Type of Option: (NOSHARESISO) Incentive Stock Option
(NOSHARESNSO) Nonstatutory Stock Option
Term/Expiration Date: (ExpirDate)
Vesting Schedule: This Option may be
exercised, in whole or in
part, in accordance with the
following schedule: 25% of
the Shares subject to the
Option shall vest on the 12
month anniversary of the
Vesting Commencement Date and
1/48 of the total number of
Shares subject to the Option
shall vest on the
(MonthVestDate) of each
month thereafter.
Termination Period: This Option may be
exercised for 30 days after
termination of employment or
consulting relationship
except as set out in Sections
6 and 7 of the Stock Option
Agreement (but in no event
later than the Expiration
Date).
</TABLE>
<PAGE>
By your signature and the signature of the Company's representative below,
you and the Company agree that this Option is granted under and governed by the
terms and conditions of the 1999 Stock Option Plan and the Stock Option
Agreement, both of which are attached and made a part of this document.
(OPTIONEE): BUSINESS EVOLUTION, INC.
By:
- --------------------------------- -------------------------------
Signature
- --------------------------------- --------------------------------
Print Name Print Name and Title
2
<PAGE>
BUSINESS EVOLUTION, INC.
1999 STOCK PLAN
STOCK OPTION AGREEMENT
1. GRANT OF OPTION. BUSINESS EVOLUTION, INC., a Delaware corporation (the
"COMPANy"), hereby grants to (Optionee) ("OPTIONEE"), an option (the "OPTION")
to purchase a total number of shares of Common Stock (the "SHARES") set forth in
the Notice of Stock Option Grant, at the exercise price per share set forth in
the Notice of Stock Option Grant (the "EXERCISE PRICE") subject to the terms,
definitions and provisions of the BUSINESS EVOLUTION, INC. 1999 Stock Plan (the
"PLAN") adopted by the Company, which is incorporated herein by reference.
Unless otherwise defined herein, the terms defined in the Plan shall have the
same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is intended to qualify
as an Incentive Stock Option as defined in Section 422 of the Code.
2. EXERCISE OF OPTION. This Option shall be exercisable during its Term in
accordance with the Vesting Schedule set out in the Notice of Stock Option Grant
and with the provisions of Section 9 of the Plan as follows:
(a) RIGHT TO EXERCISE.
(i) This Option may not be exercised for a fraction of a share.
(ii) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 5, 6 and 7 below, subject to the limitation contained in Section
2(a)(i).
(iii) In no event may this Option be exercised after the Expiration
Date of this Option as set forth in the Notice of Stock Option Grant.
(b) METHOD OF EXERCISE. This Option shall be exercisable by execution
and delivery of the Exercise Notice and Restricted Stock Purchase Agreement
attached hereto as EXHIBIT A (the "EXERCISE AGREEMENT") or of any other form of
written notice approved for such purpose by the Company which shall state the
election to exercise the Option, the number of Shares in respect of which the
Option is being exercised, and such other representations and agreements as to
the holder's investment intent with respect to such shares of Common Stock as
may be required by the Company pursuant to the provisions of the Plan. Such
written notice shall be signed by Optionee and shall be delivered in person or
by certified mail to the Secretary of the Company. The written notice shall be
accompanied by payment of the Exercise Price. This Option shall be deemed to be
exercised upon receipt by the Company of such written notice accompanied by the
Exercise Price.
<PAGE>
No Shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of
applicable law and the requirements of any stock exchange upon which the Shares
may then be listed. Assuming such compliance, for income tax purposes the Shares
shall be considered transferred to Optionee on the date on which the Option is
exercised with respect to such Shares.
3. METHOD OF PAYMENT. Payment of the Exercise Price shall be by cash, check
or any other method permitted under the Plan; provided however that the
Administrator may refuse to allow Optionee to tender a particular form of
payment (other than cash or check) if, in the Administrator's sole discretion,
acceptance of such form of consideration would not be in the best interests of
the Company at such time.
4. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations as promulgated by the
Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.
5. TERMINATION OF RELATIONSHIP. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant, Optionee may, to the extent
otherwise so entitled at the date of such termination (the "TERMINATION DATE"),
exercise this Option during the Termination Period set forth in the Notice of
Stock Option Grant. To the extent that Optionee was not entitled to exercise
this Option at such Termination Date, or if Optionee does not exercise this
Option within the Termination Period, the Option shall terminate.
6. DISABILITY OF OPTIONEE.
(a) Notwithstanding the provisions of Section 5 above, in the event of
termination of Optionee's Continuous Status as an Employee or Consultant as a
result of Optionee's total and permanent disability (as defined in Section
22(e)(3) of the Code), Optionee may, but only within twelve months from the
Termination Date (but in no event later than the Expiration Date set forth in
the Notice of Stock Option Grant), exercise this Option to the extent Optionee
was entitled to exercise it as of such Termination Date. To the extent that
Optionee was not entitled to exercise the Option as of the Termination Date, or
if Optionee does not exercise such Option (to the extent so entitled) within the
time specified in this Section 6(a), the Option shall terminate.
(b) Notwithstanding the provisions of Section 5 above, in the event of
termination of Optionee's consulting relationship or Continuous Status as an
Employee as a result of disability not constituting a total and permanent
disability (as set forth in Section 22(e)(3) of the Code), Optionee may, but
only within six months from the Termination Date (but in no event later than the
Expiration Date set forth in the Notice of Stock Option Grant), exercise the
Option to the extent Optionee was entitled to exercise it as of such Termination
Date;
2
<PAGE>
provided, however, that if this is an Incentive Stock Option and Optionee
fails to exercise this Incentive Stock Option within three months from the
Termination Date, this Option will cease to qualify as an Incentive Stock Option
(as defined in Section 422 of the Code) and Optionee will be treated for federal
income tax purposes as having received ordinary income at the time of such
exercise in an amount generally measured by the difference between the Exercise
Price for the Shares and the Fair Market Value of the Shares on the date of
exercise. To the extent that Optionee was not entitled to exercise the Option at
the Termination Date, or if Optionee does not exercise such Option to the extent
so entitled within the time specified in this Section 6(b), the Option shall
terminate.
7. DEATH OF OPTIONEE. In the event of the death of Optionee (a) during the
Term of this Option and while an Employee or Consultant of the Company and
having been in Continuous Status as an Employee or Consultant since the date of
grant of the Option, or (b) within 30 days after Optionee's Termination Date,
the Option may be exercised at any time within six months following the date of
death (but in no event later than the Expiration Date set forth in the Notice of
Stock Option Grant), by Optionee's estate or by a person who acquired the right
to exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the Termination Date.
8. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by him or her. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
9. TERM OF OPTION. This Option may be exercised only within the Term set
forth in the Notice of Stock Option Grant, subject to the limitations set forth
in Section 7 of the Plan.
10. TAX CONSEQUENCES. Set forth below is a brief summary as of the date of
this Option of certain of the federal and California tax consequences of
exercise of this Option and disposition of the Shares under the laws in effect
as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISE OF INCENTIVE STOCK OPTION. If this Option qualifies as an
Incentive Stock Option, there will be no regular federal or California income
tax liability upon the exercise of the Option, although the excess, if any, of
the Fair Market Value of the Shares on the date of exercise over the Exercise
Price will be treated as an adjustment to the alternative minimum tax for
federal tax purposes and may subject Optionee to the alternative minimum tax in
the year of exercise.
(b) EXERCISE OF NONSTATUTORY STOCK OPTION. If this Option does not
qualify as an Incentive Stock Option, there may be a regular federal income tax
liability and a California income tax liability upon the exercise of the Option.
Optionee will be treated as having received compensation income (taxable at
ordinary income tax rates) equal to the excess, if any, of the Fair Market Value
of the Shares on the date of exercise over the Exercise Price. If Optionee is an
3
<PAGE>
employee, the Company will be required to withhold from Optionee's compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
(c) DISPOSITION OF SHARES. In the case of a Nonstatutory Stock Option,
if Shares are held for more than one year, any gain realized on disposition of
the Shares will be treated as long-term capital gain for federal and California
income tax purposes. In the case of an Incentive Stock Option, if Shares
transferred pursuant to the Option are held for more than one year after
exercise and are disposed of at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and California income tax purposes. In either case, the
long-term capital gain will be taxed for federal income tax and alternative
minimum tax purposes at a maximum rate of 20% if the Shares are held more than
one year after exercise. If Shares purchased under an Incentive Stock Option are
disposed of within one year after exercise or within two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the difference
between the Exercise Price and the lesser of (i) the Fair Market Value of the
Shares on the date of exercise, or (ii) the sale price of the Shares.
(d) NOTICE OF DISQUALIFYING DISPOSITION OF INCENTIVE STOCK OPTION
SHARES. If the Option granted to Optionee herein is an Incentive Stock Option,
and if Optionee sells or otherwise disposes of any of the Shares acquired
pursuant to the Incentive Stock Option on or before the later of (i) the date
two years after the Date of Grant, or (ii) the date one year after the date of
exercise, Optionee shall immediately notify the Company in writing of such
disposition. Optionee acknowledges and agrees that he or she may be subject to
income tax withholding by the Company on the compensation income recognized by
Optionee from the early disposition by payment in cash or out of the current
earnings paid to Optionee.
11. WITHHOLDING TAX OBLIGATIONS.
(a) GENERAL WITHHOLDING OBLIGATIONS. As a condition to the exercise of
Option granted hereunder, Optionee shall make such arrangements as the
Administrator may require for the satisfaction of any federal, state, local or
foreign withholding tax obligations that may arise in connection with the
exercise, receipt or vesting of the Option. The Company shall not be required to
issue any Shares under the Plan until such obligations are satisfied. Optionee
understands that, upon exercising a Nonstatutory Stock Option, he or she will
recognize income for tax purposes in an amount equal to the excess of the then
Fair Market Value of the Shares over the Exercise Price. If Optionee is an
employee, the Company will be required to withhold from Optionee's compensation,
or collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income. Additionally, Optionee may at
some point be required to satisfy tax withholding obligations with respect to
the disqualifying disposition of an Incentive Stock Option. Optionee shall
satisfy his or her tax withholding obligation arising upon the exercise of this
Option by one or some combination of the following methods: (i) by cash or check
payment, (ii) out of Optionee's current compensation, (iii) if permitted by the
Administrator, in its discretion, by surrendering to the Company Shares which
(A) in the case of Shares previously acquired from the Company, have been owned
by Optionee for more than six months on the date of surrender, and (B) have a
Fair
4
<PAGE>
Market Value determined as of the applicable Tax Date (as defined in Section
11(c) below) on the date of surrender equal to the amount required to be
withheld, or (iv) by electing to have the Company withhold from the Shares to be
issued upon exercise of the Option that number of Shares having a Fair Market
Value determined as of the applicable Tax Date equal to the amount required to
be withheld.
(b) STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. In the
event the Administrator allows Optionee to satisfy his or her tax withholding
obligations as provided in Section 11(a)(iii) or (iv) above, such satisfaction
must comply with the requirements of this Section (11)(b) and all applicable
laws. All elections by Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(i) the election must be made on or prior to the applicable Tax Date
(as defined in Section 11(c) below);
(ii) once made, the election shall be irrevocable as to the
particular Shares of the Option as to which the election is made; and
(iii) all elections shall be subject to the consent or disapproval
of the Administrator.
In the event the election to have Shares withheld is made by Optionee and
the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, Optionee shall receive the full number of
Shares with respect to which the Option is exercised but Optionee shall be
unconditionally obligated to tender back to the Company the proper number of
Shares on the Tax Date.
(c) DEFINITIONS. For purposes of this Section 11, the Fair Market Value of
the Shares to be withheld shall be determined on the date that the amount of tax
to be withheld is to be determined under the applicable laws (the "TAX DATE").
12. MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing such underwritten offering of the Company's securities,
Optionee agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any securities of the Company (other
than those included in the registration) without the prior written consent of
the Company or such underwriters, as the case may be, for such period of time
(not to exceed 180 days) from the effective date of such registration as may be
requested by the Company or such managing underwriters and to execute an
agreement reflecting the foregoing as may be requested by the underwriters at
the time of the Company's initial public offering.
[SIGNATURE PAGE FOLLOWS]
5
<PAGE>
This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original and all of which together shall constitute one
document.
BUSINESS EVOLUTION, INC.
By:
----------------------------
-------------------------------
(Print name and title)
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE
OPTION HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT OR CONSULTANCY AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated:
--------------------------- ------------------------------
(Optionee)
6
<PAGE>
EXHIBIT A
BUSINESS EVOLUTION, INC.
1999 STOCK PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement ("AGREEMENT") is made as of ______________, by and between
BUSINESS EVOLUTION, INC., a Delaware corporation (the "COMPANY"), and (Optionee)
("PURCHASER"). To the extent any capitalized terms used in this Agreement are
not defined, they shall have the meaning ascribed to them in the 1999 Stock
Plan.
1. EXERCISE OF OPTION. Subject to the terms and conditions hereof,
Purchaser hereby elects to exercise his or her option to purchase __________
shares of the Common Stock (the "SHARES") of the Company under and pursuant to
the Company's 1999 Stock Plan (the "PLAN") and the Stock Option Agreement dated
______________, (the "OPTION AGREEMENT"). The purchase price for the Shares
shall be $(ExercisePrice) per Share for a total purchase price of
$_______________. The term "SHARES" refers to the purchased Shares and all
securities received in replacement of the Shares or as stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. TIME AND PLACE OF EXERCISE. The purchase and sale of the Shares under
this Agreement shall occur at the principal office of the Company simultaneously
with the execution and delivery of this Agreement in accordance with the
provisions of Section 2(b) of the Option Agreement. On such date, the Company
will deliver to Purchaser a certificate representing the Shares to be purchased
by Purchaser (which shall be issued in Purchaser's name) against payment of the
exercise price therefor by Purchaser by (a) check made payable to the Company,
(b) cancellation of indebtedness of the Company to Purchaser, (c) delivery of
shares of the Common Stock of the Company in accordance with Section 3 of the
Option Agreement, or (d) a combination of the foregoing.
3. LIMITATIONS ON TRANSFER. In addition to any other limitation on transfer
created by applicable securities laws, Purchaser shall not assign, encumber or
dispose of any interest in the Shares except in compliance with the provisions
below and applicable securities laws.
(a) RIGHT OF FIRST REFUSAL. Before any Shares held by Purchaser or any
transferee of Purchaser (either being sometimes referred to herein as the
"HOLDER") may be sold or otherwise transferred (including transfer by gift or
operation of law), the Company or its assignee(s) shall have a right of first
refusal to purchase the Shares on the terms and conditions set forth in this
Section 3(a) (the "RIGHT OF FIRST REFUSAL").
(i) NOTICE OF PROPOSED TRANSFER. The Holder of the Shares shall
deliver to the Company a written notice (the "NOTICE") stating: (i) the Holder's
bona fide
<PAGE>
intention to sell or otherwise transfer such Shares; (ii) the name of each
proposed purchaser or other transferee ("PROPOSED TRANSFEREE"); (iii) the number
of Shares to be transferred to each Proposed Transferee; and (iv) the terms and
conditions of each proposed sale or transfer. The Holder shall offer the Shares
at the same price (the "OFFERED PRICE") and upon the same terms (or terms as
similar as reasonably possible) to the Company or its assignee(s).
(ii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within 30 days
after receipt of the Notice, the ---------------------------------- Company
and/or its assignee(s) may, by giving written notice to the Holder, elect to
purchase all, but not less than all, of the Shares proposed to be transferred to
any one or more of the Proposed Transferees, at the purchase price determined in
accordance with subsection (iii) below.
(iii) PURCHASE PRICE. The purchase price ("PURCHASE PRICE") for the
Shares purchased by the Company or its assignee(s) under this Section 3(a) shall
be the Offered Price. If the Offered Price includes consideration other than
cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(iv) PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in cash (by check), by cancellation of
all or a portion of any outstanding indebtedness of the Holder to the Company
(or, in the case of repurchase by an assignee, to the assignee), or by any
combination thereof within 30 days after receipt of the Notice or in the manner
and at the times set forth in the Notice.
(v) HOLDER'S RIGHT TO TRANSFER. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s) as provided in this Section 3(a), then the Holder
may sell or otherwise transfer such Shares to that Proposed Transferee at the
Offered Price or at a higher price, provided that such sale or other transfer is
consummated within 60 days after the date of the Notice and provided further
that any such sale or other transfer is effected in accordance with any
applicable securities laws and the Proposed Transferee agrees in writing that
the provisions of this Section 3 shall continue to apply to the Shares in the
hands of such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, or if the Holder
proposes to change the price or other terms to make them more favorable to the
Proposed Transferee, a new Notice shall be given to the Company, and the Company
and/or its assignees shall again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
(vi) EXCEPTION FOR CERTAIN FAMILY TRANSFERS. Anything to the
contrary contained in this Section 3(a) notwithstanding, the transfer of any or
all of the Shares during Purchaser's lifetime or on Purchaser's death by will or
intestacy to Purchaser's Immediate Family (as defined below) or a trust for the
benefit of Purchaser's Immediate Family shall be exempt from the provisions of
this Section 3(a). "IMMEDIATE FAMILY" as used herein shall mean spouse, lineal
descendant or antecedent, father, mother, brother or sister. In such case, the
transferee or other recipient shall receive and hold the Shares so transferred
subject to the
2
<PAGE>
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section 3.
(b) INVOLUNTARY TRANSFER.
(i) COMPANY'S RIGHT TO PURCHASE UPON INVOLUNTARY TRANSFER. In the
event, at any time after the date of this Agreement, of any transfer by
operation of law or other involuntary transfer (including divorce or death, but
excluding, in the event of death, a transfer to Immediate Family as set forth in
Section 3(a)(vi) above) of all or a portion of the Shares by the record holder
thereof, the Company shall have the right to purchase all of the Shares
transferred at the greater of the purchase price paid by Purchaser pursuant to
this Agreement or the Fair Market Value of the Shares on the date of transfer.
Upon such a transfer, the person acquiring the Shares shall promptly notify the
Secretary of the Company of such transfer. The right to purchase such Shares
shall be provided to the Company for a period of 30 days following receipt by
the Company of written notice by the person acquiring the Shares.
(ii) PRICE FOR INVOLUNTARY TRANSFER. With respect to any stock to be
transferred pursuant to Section 3(b)(i), the price per Share shall be a price
set by the Board of Directors of the Company that will reflect the current value
of the stock in terms of present earnings and future prospects of the Company.
The Company shall notify Purchaser or his or her executor of the price so
determined within 30 days after receipt by it of written notice of the transfer
or proposed transfer of Shares. However, if the Purchaser does not agree with
the valuation as determined by the Board of Directors of the Company, the
Purchaser shall be entitled to have the valuation determined by an independent
appraiser to be mutually agreed upon by the Company and the Purchaser and whose
fees shall be borne equally by the Company and the Purchaser.
(c) ASSIGNMENT. The right of the Company to purchase any part of the
Shares may be assigned in whole or in part to any shareholder or shareholders of
the Company or other persons or organizations.
(d) RESTRICTIONS BINDING ON TRANSFEREES. All transferees of Shares or
any interest therein will receive and hold such Shares or interest subject to
the provisions of this Agreement. Any sale or transfer of the Shares shall be
void unless the provisions of this Agreement are satisfied.
(e) TERMINATION OF RIGHTS. The Right of First Refusal and the Company's
right to repurchase the Shares in the event of an involuntary transfer pursuant
to Section 3(b) above shall terminate upon the first sale of Common Stock of the
Company to the general public pursuant to a registration statement filed with
and declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "SECURITIES ACT").
(f) MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing such underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any
3
<PAGE>
securities of the Company (other than those included in the registration)
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 180 days) from the effective
date of such registration as may be requested by the Company or such managing
underwriters and to execute an agreement reflecting the foregoing as may be
requested by the underwriters at the time of the Company's initial public
offering.
4. INVESTMENT AND TAXATION REPRESENTATIONS. In connection with the purchase
of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the Shares. Purchaser is
purchasing the Shares for investment for his or her own account only and not
with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act.
(b) Purchaser understands that the Shares have not been registered under
the Securities Act by reason of a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of Purchaser's investment
intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted securities"
under applicable U.S. federal and state securities laws and that, pursuant to
these laws, Purchaser must hold the Shares indefinitely unless they are
registered with the Securities and Exchange Commission and qualified by state
authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse tax
consequences as a result of Purchaser's purchase or disposition of the Shares.
Purchaser represents that Purchaser has consulted any tax consultants Purchaser
deems advisable in connection with the purchase or disposition of the Shares and
that Purchaser is not relying on the Company for any tax advice.
5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The certificate or certificates representing the Shares
shall bear the following legends (as well as any legends required by applicable
state and federal corporate and securities laws):
(i) THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND HAVE
BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A
4
<PAGE>
VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISTRIBUTION MAY BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL IN A FORM SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED
UNDER THE SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE COMPANY AND THE SHAREHOLDER, A
COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
(d) REMOVAL OF LEGEND. When all of the following events have occurred,
the Shares then held by Purchaser will no longer be subject to the legend
referred to in Section 5(a)(ii): (i) the termination of the Right of First
Refusal; and (ii) the expiration or termination of the market standoff
provisions of Section 3(f) (and of any agreement entered pursuant to Section
3(f)). After such time, and upon Purchaser's request, a new certificate or
certificates representing the Shares not repurchased shall be issued without the
legend referred to in Section 5(a)(ii), and delivered to Purchaser.
6. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect in any
manner whatsoever the right or power of the Company, or a Parent or Subsidiary
of the Company, to terminate Purchaser's employment or consulting relationship,
for any reason, with or without cause.
7. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and transactions pursuant
hereto and the rights and obligations of the parties hereto shall be governed,
construed and interpreted in accordance with the laws of the State of
California, without giving effect to principles of conflicts of law.
5
<PAGE>
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement sets forth
the entire agreement and understanding of the parties relating to the subject
matter herein and merges all prior discussions between them. No modification of
or amendment to this Agreement, nor any waiver of any rights under this
Agreement, shall be effective unless in writing signed by the parties to this
Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
(c) SEVERABILITY. If one or more provisions of this Agreement are held
to be unenforceable under applicable law, the parties agree to renegotiate such
provision in good faith. In the event that the parties cannot reach a mutually
agreeable and enforceable replacement for such provision, then (i) such
provision shall be excluded from this Agreement, (ii) the balance of the
Agreement shall be interpreted as if such provision were so excluded and (iii)
the balance of the Agreement shall be enforceable in accordance with its terms.
(d) CONSTRUCTION. This Agreement is the result of negotiations between
and has been reviewed by each of the parties hereto and their respective
counsel, if any; accordingly, this Agreement shall be deemed to be the product
of all of the parties hereto, and no ambiguity shall be construed in favor of or
against any one of the parties hereto.
(e) NOTICES. Any notice required or permitted by this Agreement shall be
in writing and shall be deemed sufficient when delivered personally or sent by
telegram or fax or 48 hours after being deposited in the U.S. mail, as certified
or registered mail, with postage prepaid, and addressed to the party to be
notified at such party's address as set forth below or as subsequently modified
by written notice.
(f) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of this Agreement
shall inure to the benefit of, and be enforceable by the Company's successors
and assigns. The rights and obligations of Purchaser under this Agreement may
only be assigned with the prior written consent of the Company.
(h) CALIFORNIA CORPORATE SECURITIES LAW. THE SALE OF THE SECURITIES
WHICH ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE
COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF THE
SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR
PRIOR TO THE QUALIFICATION IS UNLAWFUL, UNLESS THE SALE OF SECURITIES IS EXEMPT
FROM QUALIFICATION BY SECTION 25100, 25102 OR 25105 OF THE CALIFORNIA
CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON THE QUALIFICATION BEING OBTAINED, UNLESS THE SALE IS SO EXEMPT.
[SIGNATURE PAGE FOLLOWS]
6
<PAGE>
The parties have executed this Exercise Notice and Restricted Stock
Purchase Agreement as of the date first set forth above.
COMPANY:
BUSINESS EVOLUTION, INC.
By:
----------------------------------
Name:
--------------------------------
(print)
Title:
-------------------------------
(CompanyAddressLine1)
(CompanyAddressLine2)
PURCHASER:
(OPTIONEE)
-------------------------------------
(Signature)
-------------------------------------
(Print Name)
Address:
(OptioneeAddress1)
(OptioneeAddress2)
I, ______________________, spouse of (Optionee), have read and hereby approve
the foregoing Agreement. In consideration of the Company's granting my spouse
the right to purchase the Shares as set forth in the Agreement, I hereby agree
to be bound irrevocably by the Agreement and further agree that any community
property or similar interest that I may have in the Shares shall hereby be
similarly bound by the Agreement. I hereby appoint my spouse as my
attorney-in-fact with respect to any amendment or exercise of any rights under
the Agreement.
-------------------------------------
Spouse of (Optionee)
7
<PAGE>
RECEIPT
The undersigned hereby acknowledges receipt of Certificate No. _____
for __________ shares of Common Stock of BUSINESS EVOLUTION, INC.
Dated:
-------------------------- ----------------------------
(Optionee)
<PAGE>
RECEIPT
__________________BUSINESS EVOLUTION, INC. hereby acknowledges receipt of a
check in the amount of $___________ given by (Optionee) as consideration for
Certificate No. _________ for ____________ shares of Common Stock of BUSINESS
EVOLUTION, INC.
Dated:
---------------------
BUSINESS EVOLUTION, INC.
By:
-------------------------------
Name:
-----------------------------
(print)
Title:
----------------------------
EXHIBIT 99.3
12 MONTHS ACCELERATION
KANA COMMUNICATIONS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
BUSINESS EVOLUTION, INC.
1999 STOCK PLAN
OPTIONEE: [First_Name] [Last_Name],
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 3rd day
of December, 1999 by Kana Communications, Inc., a Delaware corporation ("Kana").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of Business
Evolution, Inc., a Delaware corporation ("Business Evolution"), which were
granted to Optionee under the Business Evolution 1999 Stock Plan (the "Plan").
WHEREAS, Business Evolution has been acquired by Kana through
the merger of Business Evolution with and into Kana (the "Merger") pursuant to
the Agreement and Plan of Reorganization, by and between Kana and Business
Evolution (the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require the
obligations of Business Evolution under each outstanding option under the Plan
to be assumed by Kana 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
0.053370518 of a share of Kana common stock ("Kana Stock") for each outstanding
share of Business Evolution common stock ("Business Evolution Stock").
WHEREAS, the purpose of this Agreement is to evidence the
assumption by Kana 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 Kana in the Merger.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Business Evolution Stock subject to the options
held by Optionee immediately prior to the Effective Time (the "Business
Evolution Options") and the exercise price payable per share are set forth
below. Kana hereby assumes, as of the Effective Time, all the duties and
obligations of Business Evolution under each of the Business Evolution Options.
In connection with such assumption, the number of shares of Kana Stock
purchasable under each Business Evolution Option hereby assumed and the exercise
price payable thereunder have been adjusted to reflect the Exchange Ratio.
Accordingly, the number of shares of Kana Stock subject to each Business
Evolution Option hereby assumed shall be as specified for that option below, and
the adjusted exercise price payable per share of Kana Stock under the assumed
Business Evolution Option shall also be as indicated for that option below.
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------ ---------------------------------------------------------
BUSINESS EVOLUTION STOCK OPTIONS KANA ASSUMED OPTIONS
- ------------------------------------------------------------ ---------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------- ---------------------------- ------------------------ --------------------------------
# of Shares of Business Exercise Price # of Shares Adjusted Exercise
Evolution Common Stock per Share of Kana Common Stock Price per Share
- ------------------------------- ---------------------------- ------------------------ --------------------------------
Business Evolution Shares $Business Evolution Price Kana Shares $Kana Price
- ------------------------------- ---------------------------- ------------------------ --------------------------------
</TABLE>
2. The intent of the foregoing adjustments to each assumed Business
Evolution Option is to assure that the spread between the aggregate fair market
value of the shares of Kana Stock purchasable under each such option and the
aggregate exercise price as adjusted pursuant to this Agreement will,
immediately after the consummation of the Merger, be not less than the spread
which existed, immediately prior to the Merger, between the then aggregate fair
market value of the Business Evolution Stock subject to the Business Evolution
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 Business Evolution Option
immediately prior to the Merger.
3. Each Business Evolution 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 Business Evolution Option
hereby assumed by Kana:
(a) Unless the context otherwise requires, all references in each
Option Agreement and, if applicable, in the Plan (to the extent
incorporated Option Agreement) (i) to the "Company" shall mean Kana,
(ii) to "Shares" shall mean shares of Kana Stock, (iii) to the "Board"
shall mean the Board of Directors of Kana and (iv) to the "Committee"
shall mean the Compensation Committee of the Kana Board of Directors.
(b) Except as modified by this Agreement, the grant date and the
expiration date of each assumed Business Evolution Option and all other
provisions which govern either the exercise or the termination of the
assumed Business Evolution Option shall remain the same as set forth in the
Option Agreement applicable to that option, and the provisions of the Plan
and the Option Agreement shall accordingly govern and control Optionee's
rights under this Agreement to purchase Kana Stock under the assumed
Business Evolution Option.
(c) Each Business Evolution Option hereby assumed by Kana shall
continue to vest and become exercisable in accordance with the same
2
<PAGE>
installment vesting schedule in effect for that option under the applicable
Option Agreement immediately prior to the Effective Time, except that (i)
Optionee shall, for purposes of such vesting schedule, be immediately
credited with an additional twelve (12) months of service as of the
Effective Time so that the vesting of each such installment shall be
accelerated by twelve (12) months and (ii) the number of shares subject to
each such installment shall be adjusted to reflect the Exchange Ratio.
(d) For purposes of applying any and all provisions of the Option
Agreement and/or the Plan relating to Optionee's status as an employee or a
consultant of Business Evolution, Optionee shall be deemed to continue in
such status as an employee or a consultantfor so long as Optionee renders
services as an employee or a consultant to Kana or any present or future
majority-owned Kana subsidiary. Accordingly, the provisions of the Option
Agreement governing the termination of the assumed Business Evolution
Options upon Optionee's cessation of service as an employee or a consultant
of Business Evolution shall hereafter be applied on the basis of Optionee's
cessation of employee or consultant status with Kana and its subsidiaries,
and each assumed Business Evolution 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.
(e) The adjusted exercise price payable for the Kana Stock subject to
each assumed Business Evolution 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 Kana Stock
delivered in payment of such adjusted exercise price, the period for which
such shares were held as Business Evolution Stock prior to the Merger shall
be taken into account.
(f) In order to exercise each assumed Business Evolution Option,
Optionee must deliver to Kana a written notice of exercise in which the
number of shares of Kana 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 Kana Stock and
should be delivered to Kana at the following address:
Kana Communications, Inc.
740 Bay Road
Redwood City, CA 94063
Attention: William Bose
5. Except to the extent specifically modified by this 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.
3
<PAGE>
IN WITNESS WHEREOF, Kana Communications, Inc. has caused this
Stock Option Assumption Agreement to be executed on its behalf by its
duly-authorized officer as of the 3rd day of December, 1999.
KANA COMMUNICATIONS, INC.
By: __________________________
MARK S. GAINEY, PRESIDENT
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 Business Evolution Options hereby assumed by Kana
are as set forth in the Option Agreement, the Plan, as applicable, and such
Stock Option Assumption Agreement.
---------------------------------
[FIRST_NAME] [LAST_NAME], OPTIONEE
DATED: __________________, 1999
4
<PAGE>
EXHIBIT 99.4
24 MONTHS ACCELERATION
KANA COMMUNICATIONS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
BUSINESS EVOLUTION, INC.
1999 STOCK PLAN
OPTIONEE: [First_Name] [Last_Name],
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 3rd day
of December, 1999 by Kana Communications, Inc., a Delaware corporation ("Kana").
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of Business
Evolution, Inc., a Delaware corporation ("Business Evolution"), which were
granted to Optionee under the Business Evolution 1999 Stock Plan (the "Plan").
WHEREAS, Business Evolution has been acquired by Kana through
the merger of Business Evolution with and into Kana (the "Merger") pursuant to
the Agreement and Plan of Reorganization, by and between Kana and Business
Evolution (the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require the
obligations of Business Evolution under each outstanding option under the Plan
to be assumed by Kana 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
0.053370518 of a share of Kana common stock ("Kana Stock") for each outstanding
share of Business Evolution common stock ("Business Evolution Stock").
WHEREAS, the purpose of this Agreement is to evidence the
assumption by Kana of the outstanding options held by the 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 Kana in the merger.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Business Evolution Stock subject to the options
held by Optionee immediately prior to the Effective Time (the "Business
Evolution Options") and the exercise price payable per share are set forth
below. Kana hereby assumes, as of the Effective Time, all the duties and
obligations of Business Evolution under each of the Business Evolution Options.
In connection with such assumption, the number of shares of Kana Stock
purchasable under each Business Evolution Option hereby assumed and the exercise
price payable thereunder have been adjusted to reflect the Exchange Ratio.
Accordingly, the number of shares of Kana Stock subject to each Business
Evolution Option hereby assumed shall be as
<PAGE>
specified for that option below, and the adjusted exercise price payable per
share of Kana Stock under the assumed Business Evolution Option shall also be as
indicated for that option below.
<TABLE>
<CAPTION>
- ------------------------------------------------------------ ---------------------------------------------------------
BUSINESS EVOLUTION STOCK OPTIONS KANA ASSUMED OPTIONS
- ------------------------------------------------------------ ---------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------- ---------------------------- ------------------------ --------------------------------
# of Shares of Business Exercise Price # of Shares Adjusted Exercise
Evolution Common Stock per Share of Kana Common Stock Price per Share
- ------------------------------- ---------------------------- ------------------------ --------------------------------
Business Evolution Shares $Business Evolution Price Kana Shares $Kana Price
- ------------------------------- ---------------------------- ------------------------ --------------------------------
</TABLE>
2. The intent of the foregoing adjustments to each assumed Business
Evolution Option is to assure that the spread between the aggregate fair market
value of the shares of Kana Stock purchasable under each such option and the
aggregate exercise price as adjusted pursuant to this Agreement will,
immediately after the consummation of the Merger, be not less than the spread
which existed, immediately prior to the Merger, between the then aggregate fair
market value of the Business Evolution Stock subject to the Business Evolution
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 Business Evolution Option
immediately prior to the Merger.
3. Each Business Evolution 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 Business Evolution Option
hereby assumed by Kana:
(a) Unless the context otherwise requires, all references in each
Option Agreement and, if applicable, in the Plan (to the extent
incorporated into such Option Agreement) (i) to the "Company" shall mean
Kana, (ii) to "Shares" shall mean shares of Kana Stock, (iii) to the
"Board" shall mean the Board of Directors of Kana and (iv) to the
"Committee" shall mean the Compensation Committee of the Kana Board of
Directors.
(b) Except as modified by this Agreement, the grant date and the
expiration date of each assumed Business Evolution Option and all other
provisions which govern either the exercise or the termination of the
assumed Business Evolution Option shall remain the same as set forth in the
Option Agreement applicable to that option, and the provisions of the Plan
and the Option Agreement shall accordingly govern and control Optionee's
rights under this Agreement to purchase Kana Stock under the assumed
Business Evolution Option.
(c) Each Business Evolution Option hereby assumed by Kana shall
continue to vest and become exercisable in accordance with the same
2
<PAGE>
installment vesting schedule in effect for that option under the applicable
Option Agreement immediately prior to the Effective Time; except that (i)
Optionee shall, for purposes of such vesting schedule, be immediately
credited with an additional twenty-four (24) months of service as of the
Effective Time so that the vesting of each such installment shall be
accelerated by twenty-four (24) months and (ii) the number of shares
subject to each such installment shall be adjusted to reflect the Exchange
Ratio.
(d) For purposes of applying any and all provisions of the Option
Agreement and/or the Plan relating to Optionee's status as an employee or a
consultant of Business Evolution, 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 Kana or any present or future
majority-owned Kana subsidiary. Accordingly, the provisions of the Option
Agreement governing the termination of the assumed Business Evolution
Options upon Optionee's cessation of service as an employee or a consultant
of Business Evolution shall hereafter be applied on the basis of Optionee's
cessation of employee or consultant status with Kana and its subsidiaries,
and each assumed Business Evolution 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.
(e) The adjusted exercise price payable for the Kana Stock subject to
each assumed Business Evolution 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 Kana Stock
delivered in payment of such adjusted exercise price, the period for which
such shares were held as Business Evolution Stock prior to the Merger shall
be taken into account.
(f) In order to exercise each assumed Business Evolution Option,
Optionee must deliver to Kana a written notice of exercise in which the
number of shares of Kana 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 Kana Stock and
should be delivered to Kana at the following address:
Kana Communications, Inc.
740 Bay Road
Redwood City, CA 94063
Attention: William Bose
5. Except to the extent specifically modified by this 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.
3
<PAGE>
IN WITNESS WHEREOF, Kana Communications, Inc. has caused this
Stock Option Assumption Agreement to be executed on its behalf by its
duly-authorized officer as of the 3rd day of December, 1999.
KANA COMMUNICATIONS, INC.
By: ____________________________
MARK S. GAINEY, PRESIDENT
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 Business Evolution Options hereby assumed by Kana
are as set forth in the Option Agreement, the Plan, as applicable, and such
Stock Option Assumption Agreement.
____________________________________
[FIRST_NAME] [LAST_NAME], OPTIONEE
DATED: __________________, 1999
4
EXHIBIT 99.5
NETDIALOG, INC.
1997 STOCK PLAN
(As Amended July 28, 1998)
1. PURPOSES OF THE PLAN. The purposes of this 1997 Stock Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder. Stock purchase rights may also be granted
under the Plan.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its
Committees appointed pursuant to Section 4 of the Plan.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as
amended.
(d) "COMMITTEE" means the Committee appointed by the Board of
Directors in accordance with Section 4(a) of the Plan.
(e) "COMMON STOCK" means the Common Stock of the Company.
(f) "COMPANY" means netDialog, Inc., a California corporation.
(g) "CONSULTANT" means any person, including an advisor, who
is engaged by the Company or any Parent or Subsidiary to render services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE OR CONSULTANT" means the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of: (i) sick leave; (ii) military leave;
(iii) any other leave of absence approved by the Administrator, provided that
such leave is for a period of not more than ninety (90) days, unless
reemployment upon the expiration of such leave is guaranteed by contract or
statute, or unless provided otherwise pursuant to Company policy adopted from
time to time; or (iv) in the case of transfers between locations of the Company
or between the Company, its Subsidiaries or their respective successors. For
purposes of this Plan, a change in status from an Employee to a Consultant or
from a Consultant to an Employee will not constitute an interruption of
Continuous Status as an Employee or Consultant.
<PAGE>
(i) "EMPLOYEE" means any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the Company,
with the status of employment determined based upon such minimum number of hours
or periods worked as shall be determined by the Administrator in its discretion,
subject to any requirements of the Code. The payment by the Company of a
director's fee to a Director shall not be sufficient to constitute "employment"
of such Director by the Company.
(j) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(k) "FAIR MARKET VALUE" means, as of any date, the fair market
value of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system including without limitation the
National Market of the National Association of Securities Dealers, Inc.Automated
Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales
price for such stock (or the closing bid, if no sales were reported), as quoted
on such system or exchange, or the exchange with the greatest volume of trading
in Common Stock for the last market trading day prior to the time of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System
(but not on the National Market thereof) or regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
for the last market trading day prior to the time of determination, as reported
in The Wall Street Journal or such other source as the Administrator deems
reliable; or
(iii) In the absence of an established market for the
Common Stock, the Fair Market
Value thereof shall be determined in good faith by the Administrator.
(l) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code, as designated in the applicable written option agreement.
(m) "NONSTATUTORY STOCK OPTION" means an Option not intended
to qualify as an Incentive Stock Option, as designated in the applicable written
option agreement.
(n) "OPTION" means a stock option granted pursuant to the
Plan.
(o) "OPTIONED STOCK" means the Common Stock subject to an
Option or a Stock Purchase Right.
(p) "OPTIONEE" means an Employee or Consultant who receives
an Option or a Stock Purchase Right.
(q) "PARENT" means a "parent corporation", whether now or
hereafter existing, as defined in Section 424(e) of the Code, or any successor
provision.
-2-
<PAGE>
(r) "PLAN" means this 1997 Stock Plan.
(s) "REPORTING PERSON" means an officer, director, or greater
than ten percent shareholder of the Company within the meaning of Rule 16a-2
under the Exchange Act, who is required to file reports pursuant to Rule 16a-3
under the Exchange Act.
(t) "RESTRICTED STOCK" means shares of Common Stock acquired
pursuant to a grant of a Stock Purchase Right under Section 10 below.
(u) "RULE 16B-3" means Rule 16b-3 promulgated under the
Exchange Act, as the same may be amended from time to time, or any successor
provision.
(v) "SHARE" means a share of the Common Stock, as adjusted
in accordance with Section 12 of the Plan.
(w) "STOCK EXCHANGE" means any stock exchange or consolidated
stock price reporting system on which prices for the Common Stock are quoted at
any given time.
(x) "STOCK PURCHASE RIGHT" means the right to purchase
Common Stock pursuant to Section 10 below.
(y) "SUBSIDIARY" means a "subsidiary corporation," whether now
or hereafter existing, as defined in Section 424(f) of the Code, or any
successor provision.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12
of the Plan, the maximum aggregate number of Shares that may be optioned and
sold under the Plan is 2,600,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock. If an Option should expire
or become unexercisable for any reason without having been exercised in full,
the unpurchased Shares that were subject thereto shall, unless the Plan shall
have been terminated, become available for future grant under the Plan. In
addition, any Shares of Common Stock which are retained by the Company upon
exercise of an Option or Stock Purchase Right in order to satisfy the exercise
or purchase price for such Option or Stock Purchase Right or any withholding
taxes due with respect to such exercise shall be treated as not issued and shall
continue to be available under the Plan. Shares repurchased by the Company
pursuant to any repurchase right which the Company may have shall not be
available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) INITIAL PLAN PROCEDURE. Prior to the date, if any, upon
which the Company becomes subject to the Exchange Act, the Plan shall be
administered by the Board or a committee appointed by the Board.
(b) PLAN PROCEDURE AFTER THE DATE, IF ANY, UPON WHICH THE
COMPANY BECOMES SUBJECT TO THE EXCHANGE ACT.
-3-
<PAGE>
(i) MULTIPLE ADMINISTRATIVE BODIES. If permitted
by Rule 16b-3,grants under the Plan may be made by different bodies with respect
to directors, non-director officers and Employees or Consultants who are not
Reporting Persons.
(ii) ADMINISTRATION WITH RESPECT TO REPORTING PERSONS
With respect to grants of Options or Stock Purchase Rights to Employees who are
Reporting Persons, such grants shall be made by (A) the Board if the Board may
make grants to Reporting Persons under the Plan in compliance with Rule 16b-3,
or (B) a committee designated by the Board to make grants to Reporting Persons
under the Plan, which committee shall be constituted in such a manner as to
permit grants under the Plan to comply with Rule 16b-3. Once appointed, such
committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the committee and thereafter directly
make grants to Reporting Persons under the Plan, all to the extent permitted by
Rule 16b-3.
(iii) ADMINISTRATION WITH RESPECT TO CONSULTANTS AND
OTHER EMPLOYEES. With respect to grants of Options or Stock Purchase Rights to
Employees or Consultants who are not Reporting Persons, the Plan shall be
administered by (A) the Board or (B) a committee designated by the Board, which
committee shall be constituted in such a manner as to satisfy the legal
requirements relating to the administration of incentive stock option plans, if
any, of California corporate and securities laws, of the Code and of any
applicable Stock Exchange (the "APPLICABLE LAWS"). Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by the Applicable Laws.
(c) POWERS OF THE ADMINISTRATOR. Subject to the provisions of
the Plan and in the case of a Committee, the specific duties delegated by the
Board to such Committee, and subject to the approval of any relevant
authorities, including the approval, if required, of any Stock Exchange, the
Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(k) of the Plan;
(ii) to select the Consultants and Employees to whom
Options and Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options
and Stock Purchase Rights or any combination thereof are granted hereunder;
(iv) to determine the number of shares of Common Stock
to be covered by each such award granted hereunder;
-4-
<PAGE>
(v) to approve forms of agreement for use under
the Plan;
(vi) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder;
(vii) to determine whether and under what circumstance
an Option may be settled in cash under Section 9(f) instead of Common Stock;
(viii) to reduce the exercise price of any Option to
the then current Fair Market Value if the Fair Market Value of the Common Stock
covered by such Option shallhave declined since the date the Option was granted;
(ix) to determine the terms and restrictions
applicable to Stock Purchase Rights and the Restricted Stock purchased by
exercising such Stock Purchase Rights; and
(x) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan; and
(xi) in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options or Stock Purchase Rights
to participants who are foreign nationals or employed outside of the United
States in order to recognize differences in local law, tax policies or customs.
(d) EFFECT OF ADMINISTRATOR'S DECISION. All decisions,
determinations and interpretations of the Administrator shall be final and
binding on all holders of Options or Stock Purchase Rights.
5. ELIGIBILITY.
(a) RECIPIENTS OF GRANTS. Nonstatutory Stock Options and Stock
Purchase Rights may be granted to Employees and Consultants. Incentive Stock
Options may be granted only to Employees. An Employee or Consultant who has been
granted an Option or Stock Purchase Right may, if he or she is otherwise
eligible, be granted additional Options or Stock Purchase Rights.
(b) TYPE OF OPTION. Each Option shall be designated in the
written option agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designations, to the extent that the
aggregate Fair Market Value of Shares with respect to which Options designated
as Incentive Stock Options are exercisable for the first time by any Optionee
during any calendar year (under all plans of the Company or any Parent or
Subsidiary) exceeds $100,000, such excess Options shall be treated as
Nonstatutory Stock Options. For purposes of this Section 5(b), Incentive Stock
Options shall be taken into account in the order in which they were granted, and
the Fair Market Value of the Shares subject to an Incentive Stock Option shall
be determined as of the date of the grant of such Option.
-5-
<PAGE>
(c) The Plan shall not confer upon any Optionee any right with
respect to continuation of employment or consulting relationship with the
Company, nor shall it interfere in any way with such Optionee's right or the
Company's right to terminate his or her employment or consulting relationship at
any time, with or without cause.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company as described in Section 19 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 15 of the Plan.
7. TERM OF OPTION. The term of each Option shall be the term stated in
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement and provided further that, in the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Option shall be five (5) years from the date of
grant thereof or such shorter term as may be provided in the written option
agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) The per share exercise price for the Shares to be issued
pursuant to exercise of an Option shall be such price as is determined by the
Board and set forth in the applicable agreement, but shall be subject to the
following:
(i) In the case of an Incentive Stock Option that is:
(A) granted to an Employee who, at the time
of the grant of such Incentive Stock Option, owns stock representing more than
ten percent (10%) of the total combined voting power of all classes of stock of
the Company or any Parent or Subsidiary, the per Share exercise price shall be
no less than 110% of the Fair Market Value per Share on the date of grant.
(B) granted to any other Employee, the per
Share exercise price shall be no less than 100% of the Fair Market Value per
Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option that
is:
(A) granted to a person who, at the time of the
grant of such Option, owns stock representing more than ten percent (10%) of the
total combined voting power of all classes of stock of the Company or any Parent
or Subsidiary, the per Share exercise price shall be no less than 110% of the
Fair Market Value per Share on the date of the grant.
(B) granted to any person, the per Share
exercise price shall be no less than 85% of the Fair Market Value per Share on
the date of grant.
-6-
<PAGE>
(b) The consideration to be paid for the Shares to be issued
upon exercise of an Option, including the method of payment, shall be determined
by the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares that (x) in the case of Shares
acquired upon exercise of an Option, have been owned by the Optionee for more
than six months on the date of surrender or such other period as may be required
to avoid a charge to the Company's earnings, and (y) have a Fair Market Value on
the date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) authorization for the Company to
retain from the total number of Shares as to which the Option is exercised that
number of Shares having a Fair Market Value on the date of exercise equal to the
exercise price for the total number of Shares as to which the Option is
exercised, (6) delivery of a properly executed exercise notice together with
such other documentation as the Administrator and the broker, if applicable,
shall require to effect an exercise of the Option and delivery to the Company of
the sale or loan proceeds required to pay the exercise price and any applicable
income or employment taxes, (7) delivery of an irrevocable subscription
agreement for the Shares that irrevocably obligates the option holder to take
and pay for the Shares not more than twelve months after the date of delivery of
the subscription agreement, (8) any combination of the foregoing methods of
payment, or (9) such other consideration and method of payment for the issuance
of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Administrator shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Administrator, and reflected in the written
option agreement, which may include vesting requirements and/or performance
criteria with respect to the Company and/or the Optionee; provided that such
Option shall become exercisable at the rate of at least twenty percent (20%) per
year over five (5) years from the date the Option is granted. In the event that
any of the Shares issued upon exercise of an Option should be subject to a right
of repurchase in the Company's favor, such repurchase right shall lapse at the
rate of at least twenty percent (20%) per year over five (5) years from the date
the Option is granted. Notwithstanding the above, in the case of an option
granted to an officer, director or Consultant of the Company or any Parent or
Subsidiary of the Company, the option may become fully exercisable, or a
repurchase right, if any, in favor of the Company shall lapse, at any time or
during any period established by the Administrator.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and the
Company has received full payment for the Shares with respect to which the
Option is exercised. Full payment may, as authorized by the Board, consist of
any consideration and method of payment allowable under Section 8(b) of the Plan
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly
-7-
<PAGE>
authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock, not
withstanding the exercise of the Option. The Company shall issue (or cause to be
issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares that thereafter may be available, both for purposes of the Plan
and for sale under the Option, by the number of Shares as to which the Option is
exercised.
(b) TERMINATION OF EMPLOYMENT OR CONSULTING RELATIONSHIP.
Subject to Section 9(c), in the event of termination of an Optionee's Continuous
Status as an Employee or Consultant with the Company, such Optionee may, but
only within three (3) months (or such other period of time not less than thirty
(30) days as is determined by the Administrator, with such determination in the
case of an Incentive Stock Option being made at the time of grant of the Option
and not exceeding three (3) months) after the date of such termination (but in
no event later than the expiration date of the term of such Option as set forth
in the Option Agreement), exercise his or her Option to the extent that the
Optionee was entitled to exercise it at the date of such termination. To the
extent that Optionee was not entitled to exercise the Option at the date of such
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate. No
termination shall be deemed to occur and this Section 9(b) shall not apply if
(i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee
is an Employee who becomes a Consultant.
(c) DISABILITY OF OPTIONEE.
(i) Notwithstanding Section 9(b) above, in the event
of termination of an Optionee's Continuous Status as an Employee or Consultant
as a result of his or her total and permanent disability (within the meaning of
Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option to the
extent so entitled within the time specified herein, the Option shall terminate.
(ii) In the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of a disability which
does not fall within the meaning of total and permanent disability (as set forth
in Section 22(e)(3) of the Code), Optionee may, but only within six (6) months
from the date of such termination (but in no event later than the expiration
date of the term of such Option as set forth in the Option Agreement), exercise
the Option to the extent otherwise entitled to exercise it at the date of such
termination. However, to the extent that such Optionee fails to exercise an
Option which is an Incentive Stock Option ("ISO") (within the meaning of Section
422 of the Code) within three (3) months of the date of such termination, the
Option will not qualify for ISO treatment under the Code. To the extent
-8-
<PAGE>
that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent
so entitled within six months (6) from the date of termination, the Option
shall terminate.
(d) DEATH OF OPTIONEE. In the event of the death of an
Optionee during the period of Continuous Status as an Employee or Consultant
since the date of grant of the Option, or within thirty (30) days following
termination of Optionee's Continuous Status as an Employee or Consultant, the
Option may be exercised, at any time within six (6) months following the date of
death (but in no event later than the expiration date of the term of such Option
as set forth in the Option Agreement), by Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of death or, if
earlier, the date of termination of Optionee's Continuous Status as an Employee
or Consultant. To the extent that Optionee was not entitled to exercise the
Option at the date of death or termination, as the case may be, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate.
(e) RULE 16B-3. Options granted to Reporting Persons shall
comply with Rule 16b-3 and shall contain such additional conditions or
restrictions as may be required thereunder to qualify for the maximum exemption
for Plan transactions.
(f) BUYOUT PROVISIONS. The Administrator may at any time offer
to buy out for a payment in cash or Shares, an Option previously granted, based
on such terms and conditions as the Administrator shall establish and
communicate to the Optionee at the time that such offer is made.
10. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued
either alone, in addition to, or in tandem with other awards granted under the
Plan and/or cash awards made outside of the Plan. After the Administrator
determines that it will offer Stock Purchase Rights under the Plan, it shall
advise the offeree in writing of the terms, conditions and restrictions related
to the offer, including the number of Shares that such person shall be entitled
to purchase, the price to be paid (which price shall not be less than 85% of the
Fair Market Value of the Shares as of the date of the offer, or, in the case of
a person owning stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the price shall not be less than one hundred percent (100%) of the
Fair Market Value of the Shares as of the date of the offer), and the time
within which such person must accept such offer, which shall in no event exceed
thirty (30) days from the date upon which the Administrator made the
determination to grant the Stock Purchase Right. The offer shall be accepted by
execution of a Restricted Stock purchase agreement in the form determined by the
Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right
shall be referred to herein as "Restricted Stock."
(b) REPURCHASE OPTION. Unless the Administrator determines
otherwise, the Restricted Stock purchase agreement shall grant the Company a
repurchase option exercisable upon the voluntary or involuntary termination of
the purchaser's employment with the Company
-9-
<PAGE>
for any reason (including death or disability). The purchase price for Shares
repurchased pursuant to the Restricted Stock purchase agreement shall be the
original purchase price paid by the purchaser and may be paid by cancellation of
any indebtedness of the purchaser to the Company. The repurchase option shall
lapse at such rate as the Administrator may determine; provided that with
respect to an Optionee who is not an officer, director or Consultant of the
Company or of any Parent or Subsidiary of the Company, it shall lapse at a
minimum rate of 20% per year.
(c) OTHER PROVISIONS. The Restricted Stock purchase agreement
shall contain such other terms, provisions and conditions not inconsistent with
the Plan as may be determined by the Administrator in its sole discretion. In
addition, the provisions of Restricted Stock purchase agreements need not be the
same with respect to each purchaser.
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser shall have the rights equivalent to those of a
shareholder, and shall be a shareholder when his or her purchase is entered upon
the records of the duly authorized transfer agent of the Company. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date the Stock Purchase Right is exercised, except as provided in Section 12
of the Plan.
11. STOCK WITHHOLDING TO SATISFY WITHHOLDING TAX OBLIGATIONS. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this paragraph. When an Optionee incurs tax liability in
connection with an Option or Stock Purchase Right, which tax liability is
subject to tax withholding under applicable tax laws, and the Optionee is
obligated to pay the Company an amount required to be withheld under applicable
tax laws, the Optionee may satisfy the withholding tax obligation by one or some
combination of the following methods: (a) by cash payment, or (b) out of
Optionee's current compensation, (c) if permitted by the Administrator, in its
discretion, by surrendering to the Company Shares that (i) in the case of Shares
previously acquired from the Company, have been owned by the Optionee for more
than six months on the date of surrender, and (ii) have a fair market value on
the date of surrender equal to or less than Optionee's marginal tax rate times
the ordinary income recognized, or (d) by electing to have the Company withhold
from the Shares to be issued upon exercise of the Option, or the Shares to be
issued in connection with the Stock Purchase Right, if any, that number of
Shares having a fair market value equal to the amount required to be withheld.
For this purpose, the fair market value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be determined
(the "TAX DATE").
Any surrender by a Reporting Person of previously owned Shares
to satisfy tax withholding obligations arising upon exercise of this Option must
comply with the applicable provisions of Rule 16b-3.
All elections by an Optionee to have Shares withheld to
satisfy tax withholding obligations shall be made in writing in a form
acceptable to the Administrator and shall be subject to the following
restrictions:
-10-
<PAGE>
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to the
particular Shares of the Option or Stock Purchase Right as to which the election
is made; and
(c) all elections shall be subject to the consent or
disapproval of the Administrator.
In the event the election to have Shares withheld is made by
an Optionee and the Tax Date is deferred under Section 83 of the Code because no
election is filed under Section 83(b) of the Code, the Optionee shall receive
the full number of Shares with respect to which the Option or Stock Purchase
Right is exercised but such Optionee shall be unconditionally obligated to
tender back to the Company the proper number of Shares on the Tax Date.
12. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, MERGER OR CERTAIN OTHER
TRANSACTIONS.
(a) CHANGES IN CAPITALIZATION. Subject to any required action
by the shareholders of the Company, the number of shares of Common Stock covered
by each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock that have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or that have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination, recapitalization or reclassification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issuance by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an Option or Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed
dissolution or liquidation of the Company, the Board shall notify the Optionee
at least fifteen (15) days prior to such proposed action. To the extent it has
not been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
(c) MERGER OR SALE OF ASSETS. In the event of a proposed sale
of all or substantially all of the Company's assets or a merger of the Company
with or into another corporation where the successor corporation issues its
securities to the Company's shareholders, each outstanding Option or Stock
Purchase Right shall be assumed or an equivalent option or
-11-
<PAGE>
right shall be substituted by such successor corporation or a parent or
subsidiary of such successor corporation, unless the successor corporation does
not agree to assume the Option or Stock Purchase Right or to substitute an
equivalent option or right, in which case such Option or Stock Purchase Right
shall terminate upon the consummation of the merger or sale of assets.
(d) CERTAIN DISTRIBUTIONS. In the event of any distribution to
the Company's shareholders of securities of any other entity or other assets
(other than dividends payable in cash or stock of the Company) without receipt
of consideration by the Company, the Administrator may, in its discretion,
appropriately adjust the price per share of Common Stock covered by each
outstanding Option or Stock Purchase Right to reflect the effect of such
distribution.
13. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Options
and Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised or purchased during the lifetime of
the Optionee or Stock Purchase Rights Holder only by the Optionee or Stock
Purchase Rights Holder.
14. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date of
grant of an Option or Stock Purchase Right shall, for all purposes, be the date
on which the Administrator makes the determination granting such Option or Stock
Purchase Right, or such other date as is determined by the Board; provided
however that in the case of any Incentive Stock Option, the grant date shall be
the later of the date on which the Administrator makes the determination
granting such Incentive Stock Option or the date of commencement of the
Optionee's employment relationship with the Company. Notice of the determination
shall be given to each Employee or Consultant to whom an Option or Stock
Purchase Right is so granted within a reasonable time after the date of such
grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AUTHORITY TO AMEND OR TERMINATE. The Board may at any time
amend, alter, suspend or discontinue the Plan, but no amendment, alteration,
suspension or discontinuation shall be made that would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Rule 16b-3 or
with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of any Stock Exchange), the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) EFFECT OF AMENDMENT OR TERMINATION. No amendment or
termination of the Plan shall adversely affect Options already granted, unless
mutually agreed otherwise between the Optionee and the Board, which agreement
must be in writing and signed by the Optionee and the Company.
16. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance and delivery of
such Shares pursuant thereto shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as
-12-
<PAGE>
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any Stock Exchange. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required by law.
17. RESERVATION OF SHARES. The Company, during the term of this Plan,
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall relieve the Company of any
liability in respect of the failure to issue or sell such Shares as to which
such requisite authority shall not have been obtained.
18. AGREEMENTS. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Administrator shall approve from time to
time.
19. SHAREHOLDER APPROVAL. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any Stock Exchange upon which the Common Stock is listed. All Options
and Stock Purchase Rights issued under the Plan shall become void in the event
such approval is not obtained.
20. INFORMATION AND DOCUMENTS TO OPTIONEES AND PURCHASERS. The Company
shall provide financial statements at least annually to each Optionee and to
each individual who acquired Shares Pursuant to the Plan, during the period such
Optionee or purchaser has one or more Options or Stock Purchase Rights
outstanding, and in the case of an individual who acquired Shares pursuant to
the Plan, during the period such individual owns such Shares. The Company shall
not be required to provide such information if the issuance of Options or Stock
Purchase Rights under the Plan is limited to key employees whose duties in
connection with the Company assure their access to equivalent information. In
addition, at the time of issuance of any securities under the Plan, the Company
shall provide to the Optionee or the Purchaser a copy of the Plan and a copy of
the agreement(s) pursuant to which securities under the Plan are issued.
-13-
<PAGE>
EXHIBIT 99.6
NETDIALOG, INC.
1997 STOCK OPTION PLAN
NOTICE OF STOCK OPTION GRANT
[Optionee]
_____________________________
_____________________________
You have been granted an option to purchase Common Stock "COMMON STOCK"
of netDialog, Inc. (the "COMPANY") as follows:
Board Approval Date: [BoardApprovalDate]
Date of Grant (Later of Board
Approval Date or Commence-
ment of Employment/Consulting): [GrantDate]
Vesting Commencement Date: [VestingCommenceDate]
Exercise Price per Share: $[ExercisePrice]
Total Number of Shares Granted: [Options]
Total Exercise Price: $[TotalExercisePrice]
Type of Option: [TypeofOption]
Term/Expiration Date: [ExpirDate]
Vesting Schedule: This Option may be exercised,
in whole or in part, in
accordance with the following
chedule: [CliffVestAmount]
of the Shares subject to the
Option shall vest on the
[CliffMonthNumber] month
anniversary of the Vesting
Commencement Date and
1/[TotalVestingMonths]of
the total number of Shares
subject to the Option shall
vest on [Month VestDate]day
of each month thereafter.
Termination Period: Option may be exercised for
[NumberDaystoExercise]
after termination of
employment or consulting
relationship except as set
out in Sections 6 and 7 of
the Stock Option Agreement
(but in no event later than
the Expiration Date).
<PAGE>
By your signature and the signature of the Company's representative
below, you and the Company agree that this option is granted under and governed
by the terms and conditions of the 1997 Stock Option Plan and the Stock Option
Agreement, both of which are attached and made a part of this document.
[OPTIONEE]: NETDIALOG, INC.
By: ____________________________
___________________________
Signature
___________________________ ____________________________
Print Name Print Name and Title
-2-
<PAGE>
NETDIALOG, INC.
1997 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
1. GRANT OF OPTION. netDialog, Inc., a California corporation
(the "COMPANY"), hereby grants to [Optionee] ("OPTIONEE"), an option (the
"OPTION") to purchase a total number of shares of Common Stock (the "Shares")
set forth in the Notice of Stock Option Grant, at the exercise price per share
set forth in the Notice of Stock Option Grant (the "EXERCISE PRICE") subject to
the terms, definitions and provisions of the netDialog, Inc. 1997 Stock Option
Plan (the "PLAN") adopted by the Company, which is incorporated herein by
reference. Unless otherwise defined herein, the terms defined in the Plan shall
have the same defined meanings in this Option.
If designated an Incentive Stock Option, this Option is
intended to qualify as an Incentive Stock Option as defined in Section 422 of
the Code.
2. EXERCISE OF OPTION. This Option shall be exercisable during
its Term in accordance with the Vesting Schedule set out in the Notice of Stock
Option Grant and with the provisions of Section 9 of the Plan as follows:
(a) RIGHT TO EXERCISE.
(i) This Option may not be exercised for a fraction
of a share.
(ii) In the event of Optionee's death, disability or
other termination of employment, the exercisability of the Option is governed
by Sections 5, 6 and 7 below, subject to the limitation contained in Section
2(a)(i).
(iii) In no event may this Option be exercised after
the date of expiration of the Term of this Option as set forth in the Notice of
Stock Option Grant.
(b) METHOD OF EXERCISE. This Option shall be exercisable
by execution and delivery of the Exercise Notice and Restricted Stock Purchase
Agreement attached hereto as EXHIBIT A (the "EXERCISE AGREEMENT") or of any
other form of written notice approved for such purpose by the Company which
shall state the election to exercise the Option, the number of Shares in respect
of which the Option is being exercised, and such other representations and
agreements as to the holder's investment intent with respect to such shares of
Common Stock as may be required by the Company pursuant to the provisions of the
Plan. Such written notice shall be signed by Optionee and shall be delivered in
person or by certified mail to the Secretary of the Company. The written notice
shall be accompanied by payment of the Exercise Price. This Option shall be
deemed to be exercised upon receipt by the Company of such written notice
accompanied by the Exercise Price.
<PAGE>
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of applicable law and the requirements of any stock exchange upon which the
Shares may then be listed. Assuming such compliance, for income tax purposes the
Shares shall be considered transferred to Optionee on the date on which the
Option is exercised with respect to such Shares.
3. METHOD OF PAYMENT. Payment of the Exercise Price shall be by
any of the following, or a combination thereof, at the election of Optionee:
(a) cash;
(b) check;
(c) surrender of other shares of Common Stock of the
Company which (i) in the case of Shares acquired pursuant to the exercise of a
Company option, have been owned by Optionee for more than six (6) months on the
date of surrender, and (ii) have a fair market value on the date of surrender
equal to the Exercise Price of the Shares as to which the Option is being
exercised; or
(d) if there is a public market for the Shares and they
are registered under the Securities Act of 1933, as amended, delivery of a
properly executed exercise notice together with irrevocable instructions to a
broker to deliver promptly to the Company the amount of sale or loan proceeds
required to pay the exercise price.
4. RESTRICTIONS ON EXERCISE. This Option may not be exercised
until such time as the Plan has been approved by the shareholders of the
Company, or if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, including any
rule under Part 207 of Title 12 of the Code of Federal Regulations as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
5. TERMINATION OF RELATIONSHIP. In the event of termination of
Optionee's Continuous Status as an Employee or Consultant, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "TERMINATION
DATE"), exercise this Option during the Termination Period set forth in the
Notice of Stock Option Grant. To the extent that Optionee was not entitled to
exercise this Option at such Termination Date, or if Optionee does not exercise
this Option within the Termination Period, the Option shall terminate.
6. DISABILITY OF OPTIONEE.
(a) Notwithstanding the provisions of Section 5 above, in
the event of termination of Continuous Status as an Employee or Consultant as a
result of Optionee's total and permanent disability (as defined in Section
22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the
Termination Date (but in no event later than the Expiration Date set forth in
-2-
<PAGE>
the Notice of Stock Option Grant), exercise this Option to the extent Optionee
was entitled to exercise it as of such Termination Date. To the extent that
Optionee was not entitled to exercise the Option as of the Termination Date, or
if Optionee does not exercise such Option (to the extent so entitled) within the
time specified in this Section 6(a), the Option shall terminate.
(b) Notwithstanding the provisions of Section 5 above, in
the event of termination of Optionee's consulting relationship or Continuous
Status as an Employee as a result of disability not constituting a total and
permanent disability (as set forth in Section 22(e)(3) of the Code), Optionee
may, but only within six (6) months from the Termination Date (but in no event
later than the Expiration Date set forth in the Notice of Stock Option Grant),
exercise the Option to the extent Optionee was entitled to exercise it as of
such Termination Date; provided, however, that if this is an Incentive Stock
Option and Optionee fails to exercise this Incentive Stock Option within three
(3) months from the Termination Date, this Option will cease to qualify as an
Incentive Stock Option (as defined in Section 422 of the Code) and Optionee will
be treated for federal income tax purposes as having received ordinary income at
the time of such exercise in an amount generally measured by the difference
between the Exercise Price for the Shares and the fair market value of the
Shares on the date of exercise. To the extent that Optionee was not entitled to
exercise the Option at the Termination Date, or if Optionee does not exercise
such Option to the extent so entitled within the time specified in this Section
6(b), the Option shall terminate.
7. DEATH OF OPTIONEE. In the event of the death of Optionee (a)
during the Term of this Option and while an Employee or Consultant of the
Company and having been in Continuous Status as an Employee or Consultant since
the date of grant of the Option, or (b) within thirty (30) days after Optionee's
Termination Date, the Option may be exercised at any time within six (6) months
following the date of death (but in no event later than the Expiration Date set
forth in the Notice of Stock Option Grant), by Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued at the Termination
Date.
8. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred
in any manner otherwise than by will or by the laws of descent or distribution
and may be exercised during the lifetime of Optionee only by him or her. The
terms of this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of Optionee.
9. TERM OF OPTION.This Option may be exercised only within the Term
set forth in the Notice of Stock Option Grant, subject to the limitations set
forth in Section 7 of the Plan.
10. TAX CONSEQUENCES. Set forth below is a brief summary as of the
date of this Option of certain of the federal and California tax consequences of
exercise of this Option and disposition of the Shares under the laws in effect
as of the Date of Grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
-3-
<PAGE>
(a) EXERCISE OF INCENTIVE STOCK OPTION. If this Option
qualifies as an Incentive Stock Option, there will be no regular federal or
California income tax liability upon the exercise of the Option, although the
excess, if any, of the fair market value of the Shares on the date of exercise
over the Exercise Price will be treated as an adjustment to the alternative
minimum tax for federal tax purposes and may subject Optionee to the alternative
minimum tax in the year of exercise.
(b) EXERCISE OF NONSTATUTORY STOCK OPTION.If this Option does
not qualify as an Incentive Stock Option, there may be a regular federal income
tax liability and a California income tax liability upon the exercise of the
Option. Optionee will be treated as having received compensation income (taxable
at ordinary income tax rates) equal to the excess, if any, of the fair market
value of the Shares on the date of exercise over the Exercise Price. If Optionee
is an employee, the Company will be required to withhold from Optionee's
compensation or collect from Optionee and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
(c) DISPOSITION OF SHARES.In the case of a Nonstatutory Stock
Option, if Shares are held for at least one year, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
and California income tax purposes. In the case of an Incentive Stock Option, if
Shares transferred pursuant to the Option are held for at least one year after
exercise and are disposed of at least two years after the Date of Grant, any
gain realized on disposition of the Shares will also be treated as long-term
capital gain for federal and California income tax purposes. If Shares purchased
under an Incentive Stock Option are disposed of within such one-year period or
within two years after the Date of Grant, any gain realized on such disposition
will be treated as compensation income (taxable at ordinary income rates) to the
extent of the difference between the Exercise Price and the lesser of (i) the
fair market value of the Shares on the date of exercise, or (ii) the sale price
of the Shares.
(d) NOTICE OF DISQUALIFYING DISPOSITION OF INCENTIVE STOCK
OPTION SHARES. If the Option granted to Optionee herein is an Incentive Stock
Option, and if Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to the Incentive Stock Option on or before the later of (i)
the date two years after the Date of Grant, or (ii) the date one year after the
date of exercise, Optionee shall immediately notify the Company in writing of
such disposition. Optionee acknowledges and agrees that he or she may be subject
to income tax withholding by the Company on the compensation income recognized
by Optionee from the early disposition by payment in cash or out of the current
earnings paid to Optionee.
11. WITHHOLDING TAX OBLIGATIONS. Optionee understands that, upon
exercising a Nonstatutory Stock Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of the
Shares over the Exercise Price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"). If Optionee is
an employee, the Company will be required to withhold from Optionee's
compensation, or collect from Optionee and pay to the applicable taxing
-4-
<PAGE>
authorities an amount equal to a percentage of this compensation income.
Additionally, Optionee may at some point be required to satisfy tax withholding
obligations with respect to the disqualifying disposition of an Incentive Stock
Option. Optionee shall satisfy his or her tax withholding obligation arising
upon the exercise of this Option by one or some combination of the following
methods: (a) by cash payment, (b) out of Optionee's current compensation, (c) if
permitted by the Administrator, in its discretion, by surrendering to the
Company Shares which (i) in the case of Shares previously acquired from the
Company, have been owned by Optionee for more than six months on the date of
surrender, and (ii) have a fair market value on the date of surrender equal to
or greater than Optionee's marginal tax rate times the ordinary income
recognized, or (d) by electing to have the Company withhold from the Shares to
be issued upon exercise of the Option that number of Shares having a fair market
value equal to the amount required to be withheld. For this purpose, the fair
market value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "TAX DATE").
If Optionee is subject to Section 16 of the Exchange Act (an
"INSIDER"), any surrender of previously owned Shares to satisfy tax withholding
obligations arising upon exercise of this Option must comply with the applicable
provisions of Rule 16b-3 promulgated under the Exchange Act ("RULE 16B-3").
All elections by Optionee to have Shares withheld to satisfy tax
withholding obligations shall be made in writing in a form acceptable to the
Administrator and shall be subject to the following restrictions:
(a) the election must be made on or prior to the applicable
Tax Date;
(b) once made, the election shall be irrevocable as to
the particular Shares of the Option as to which the election is made; and
(c) all elections shall be subject to the consent or
disapproval of the Administrator.
12. MARKET STANDOFF AGREEMENT. In connection with the initial public
offering of the Company's securities and upon request of the Company or the
underwriters managing any underwritten offering of the Company's securities,
Optionee hereby agrees not to sell, make any short sale of, loan, grant any
option for the purchase of, or otherwise dispose of any Shares (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, for such period of time (not to exceed
180 days) from the effective date of such registration as may be requested by
the Company or such managing underwriters and to execute an agreement reflecting
the foregoing as may be requested by the underwriters at the time of the public
offering.
[Signature Page Follows]
-5-
<PAGE>
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
document.
NETDIALOG, INC.
By: ____________________________
____________________________
(Print name and title)
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT OR CONSULTANCY AT THE
WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO
TERMINATE OPTIONEE'S EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT
CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated: ________________________ ______________________________
[Optionee]
-6-
<PAGE>
EXHIBIT A
NETDIALOG, INC.
1997 STOCK OPTION PLAN
EXERCISE NOTICE AND RESTRICTED STOCK PURCHASE AGREEMENT
This Agreement ("AGREEMENT") is made as of ______________, by and
between netDialog, Inc., a California corporation (the "COMPANY"), and
[Optionee] ("PURCHASER"). To the extent any capitalized terms used in this
Agreement are not defined, they shall have the meaning ascribed to them in the
1997 Stock Option Plan.
1. EXERCISE OF OPTION. Subject to the terms and conditions hereof,
Purchaser hereby elects to exercise his or her option to purchase __________
shares of the Common Stock (the "SHARES") of the Company under and pursuant to
the Company's 1997 Stock Option Plan (the "PLAN") and the Stock Option Agreement
dated ______________, (the "OPTION AGREEMENT"). The purchase price for the
Shares shall be $[ExercisePrice] per Share for a total purchase price of
$_______________. The term "SHARES" refers to the purchased Shares and all
securities received in replacement of the Shares or as stock dividends or
splits, all securities received in replacement of the Shares in a
recapitalization, merger, reorganization, exchange or the like, and all new,
substituted or additional securities or other properties to which Purchaser is
entitled by reason of Purchaser's ownership of the Shares.
2. TIME AND PLACE OF EXERCISE. The purchase and sale of the Shares
under this Agreement shall occur at the principal office of the Company
simultaneously with the execution and delivery of this Agreement in accordance
with the provisions of Section 2(b) of the Option Agreement. On such date, the
Company will deliver to Purchaser a certificate representing the Shares to be
purchased by Purchaser (which shall be issued in Purchaser's name) against
payment of the exercise price therefor by Purchaser by (a) check made payable to
the Company, (b) cancellation of indebtedness of the Company to Purchaser, (c)
delivery of shares of the Common Stock of the Company in accordance with Section
3 of the Option Agreement, or (d) by a combination of the foregoing.
3. LIMITATIONS ON TRANSFER. In addition to any other limitation on
transfer created by applicable securities laws, Purchaser shall not assign,
encumber or dispose of any interest in the Shares except in compliance with the
provisions below and applicable securities laws.
(a) RIGHT OF FIRST REFUSAL. Before any Shares held by
Purchaser or any transferee of Purchaser (either being sometimes referred to
herein as the "HOLDER") may be sold or otherwise transferred (including transfer
by gift or operation of law), the Company or its assignee(s) shall have a right
of first refusal to purchase the Shares on the terms and conditions set forth in
this Section 3(a) (the "RIGHT OF FIRST REFUSAL").
(i) NOTICE OF PROPOSED TRANSFER. The Holder of
the Shares shall deliver to the Company a written notice (the "NOTICE") stating:
(i) the Holder's bona fide intention to sell or otherwise transfer such Shares;
<PAGE>
(ii) the name of each proposed purchaser or other transferee ("PROPOSED
TRANSFEREE"); (iii) the number of Shares to be transferred to each Proposed
Transferee; and (iv) the terms and conditions of each proposed sale or transfer.
The Holder shall offer the Shares at the same price (the "OFFERED PRICE") and
upon the same terms (or terms as similar as reasonably possible) to the Company
or its assignee(s).
(ii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any
time within thirty (30) days after receipt of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all,
but not less than all, of the Shares proposed to be transferred to any one or
more of the Proposed Transferees, at the purchase price determined in accordance
with subsection (iii) below.
(iii) PURCHASE PRICE. The purchase price
("PURCHASE PRICE") for the Shares purchased by the Company or its assignee(s)
under this Section 3(a) shall be the Offered Price. If the Offered Price
includes consideration other than cash, the cash equivalent value of the
non-cash consideration shall be determined by the Board of Directors of the
Company in good faith.
(iv) PAYMENT.Payment of the Purchase Price shall be
made, at the option of the Company or its assignee(s), in cash (by check), by
cancellation of all or a portion of any outstanding indebtedness of the Holder
to the Company (or, in the case of repurchase by an assignee, to the assignee),
or by any combination thereof within 30 days after receipt of the Notice or in
the manner and at the times set forth in the Notice.
(v) HOLDER'S RIGHT TO TRANSFER.If all of the
Shares proposed in the Notice to be transferred to a given Proposed Transferee
are not purchased by the Company and/or its assignee(s) as provided in this
Section 3(a), then the Holder may sell or otherwise transfer such Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 60 days after the date of the
Notice and provided further that any such sale or other transfer is effected in
accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Section 3 shall continue to apply
to the Shares in the hands of such Proposed Transferee. If the Shares described
in the Notice are not transferred to the Proposed Transferee within such period,
or if the Holder proposes to change the price or other terms to make them more
favorable to the Proposed Transferee, a new Notice shall be given to the
Company, and the Company and/or its assignees shall again be offered the Right
of First Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
(vi) EXCEPTION FOR CERTAIN FAMILY TRANSFERS.
Anything to the contrary contained in this Section 3(a) notwithstanding, the
transfer of any or all of the Shares during Purchaser's lifetime or on
Purchaser's death by will or intestacy to Purchaser's Immediate Family or a
trust for the benefit of Purchaser's Immediate Family shall be exempt from the
provisions of this Section 3(a). "IMMEDIATE FAMILY" as used herein shall mean
spouse, lineal descendant or antecedent, father, mother, brother or sister. In
such case, the transferee or other recipient shall receive and hold the Shares
so transferred subject to the provisions of this Section, and there shall be no
further transfer of such Shares except in accordance with the terms of this
Section 3.
-8-
<PAGE>
(b) INVOLUNTARY TRANSFER.
(i) COMPANY'S RIGHT TO PURCHASE UPON INVOLUNTARY
TRANSFER. In the event, at any time after the date of this Agreement, of any
transfer by operation of law or other involuntary transfer (including death or
divorce, but excluding a transfer to Immediate Family as set forth in Section
3(a)(vi) above) of all or a portion of the Shares by the record holder thereof,
the Company shall have an option to purchase all of the Shares transferred at
the greater of the purchase price paid by Purchaser pursuant to this Agreement
or the fair market value of the Shares on the date of transfer. Upon such a
transfer, the person acquiring the Shares shall promptly notify the Secretary of
the Company of such transfer. The right to purchase such Shares shall be
provided to the Company for a period of thirty (30) days following receipt by
the Company of written notice by the person acquiring the Shares.
(ii) PRICE FOR INVOLUNTARY TRANSFER. With respect to
any stock to be transferred pursuant to Section 3(b)(i), the price per Share
shall be a price set by the Board of Directors of the Company that will reflect
the current value of the stock in terms of present earnings and future prospects
of the Company. The Company shall notify Purchaser or his or her executor of the
price so determined within thirty (30) days after receipt by it of written
notice of the transfer or proposed transfer of Shares. However, if the Purchaser
does not agree with the valuation as determined by the Board of Directors of the
Company, the Purchaser shall be entitled to have the valuation determined by an
independent appraiser to be mutually agreed upon by the Company and the
Purchaser and whose fees shall be borne equally by the Company and the
Purchaser.
(c) ASSIGNMENT. The right of the Company to purchase any part
of the Shares may be assigned in whole or in part to any shareholder or
shareholders of the Company or other persons or organizations; PROVIDED,
HOWEVER, that an assignee, other than a corporation that is the parent or a 100%
owned subsidiary of the Company, must pay the Company, upon assignment of such
right, cash equal to the difference between the original purchase price and fair
market value, if the original purchase price is less than the fair market value
of the Shares subject to the assignment.
(d) RESTRICTIONS BINDING ON TRANSFEREES. All transferees of
Shares or any interest therein will receive and hold such Shares or interest
subject to the provisions of this Agreement. Any sale or transfer of the
Company's Shares shall be void unless the provisions of this Agreement are
satisfied.
(e) TERMINATION OF RIGHTS. The right of first refusal granted
the Company by Section 3(a) above and the option to repurchase the Shares in the
event of an involuntary transfer granted the Company by Section 3(b) above shall
terminate upon the first sale of Common Stock of the Company to the general
public pursuant to a registration statement filed with and declared effective by
the Securities and Exchange Commission under the Securities Act of 1933, as
amended (the "SECURITIES ACT"). Upon termination of the right of first refusal
described in Section 3(a) above, a new certificate or certificates representing
the Shares not repurchased shall be issued, on request, without the legend
referred to in Section 6(a)(ii) herein and delivered to Purchaser.
-9-
<PAGE>
4. INVESTMENT AND TAXATION REPRESENTATIONS. In connection with the
purchase of the Shares, Purchaser represents to the Company the following:
(a) Purchaser is aware of the Company's business affairs and
financial condition and has acquired sufficient information about the Company to
reach an informed and knowledgeable decision to acquire the securities.
Purchaser is purchasing these securities for investment for his or her own
account only and not with a view to, or for resale in connection with, any
"distribution" thereof within the meaning of the Securities Act.
(b) Purchaser understands that the securities have not been
registered under the Securities Act by reason of a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of
Purchaser's investment intent as expressed herein.
(c) Purchaser understands that the Shares are "restricted
securities" under applicable U.S. federal and state securities laws and that,
pursuant to these laws, Purchaser must hold the Shares indefinitely unless they
are registered with the Securities and Exchange Commission and qualified by
state authorities, or an exemption from such registration and qualification
requirements is available. Purchaser acknowledges that the Company has no
obligation to register or qualify the Shares for resale. Purchaser further
acknowledges that if an exemption from registration or qualification is
available, it may be conditioned on various requirements including, but not
limited to, the time and manner of sale, the holding period for the Shares, and
requirements relating to the Company which are outside of the Purchaser's
control, and which the Company is under no obligation and may not be able to
satisfy.
(d) Purchaser understands that Purchaser may suffer adverse
tax consequences as a result of Purchaser's purchase or disposition of the
Shares. Purchaser represents that Purchaser has consulted any tax consultants
Purchaser deems advisable in connection with the purchase or disposition of the
Shares and that Purchaser is not relying on the Company for any tax advice.
5. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. The certificate or certificates representing the
Shares shall bear the following legends (as well as any legends required by
applicable state and federal corporate and securities laws):
i) THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AND HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW
TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR
DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED
THERETO OR AN OPINION OF COUNSEL IN A FORM
SATISFACTORY TO THE COMPANY THAT SUCH
-10-
<PAGE>
REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
(ii) THE SHARES REPRESENTED BY THIS CERTIFICATE
MAY BE TRANSFERRED ONLY IN ACCORDANCE WITH
THE TERMS OF AN AGREEMENT BETWEEN THE
COMPANY AND THE SHAREHOLDER, A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
(b) STOP-TRANSFER NOTICES. Purchaser agrees that, in order to
ensure compliance with the restrictions referred to herein, the Company may
issue appropriate "stop transfer" instructions to its transfer agent, if any,
and that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER.The Company shall not be required (i)
to transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares shall have been so
transferred.
6. NO EMPLOYMENT RIGHTS. Nothing in this Agreement shall affect in
any manner whatsoever the right or power of the Company, or a parent or
subsidiary of the Company, to terminate Purchaser's employment, for any reason,
with or without cause.
7. MARKET STAND-OFF AGREEMENT. In connection with the initial
public offering of the Company's securities and upon request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
Purchaser agrees not to sell, make any short sale of, loan, grant any option for
the purchase of, or otherwise dispose of any Shares (other than those included
in the registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed 180
days) from the effective date of such registration as may be requested by the
Company or such managing underwriters and to execute an agreement reflecting the
foregoing as may be requested by the underwriters at the time of the public
offering.
8. MISCELLANEOUS.
(a) GOVERNING LAW. This Agreement and all acts and
transactions pursuant hereto and the rights and obligations of the parties
hereto shall be governed, construed and interpreted in accordance with the laws
of the State of California, without giving effect to principles of conflicts of
law.
(b) ENTIRE AGREEMENT; ENFORCEMENT OF RIGHTS. This Agreement
sets forth the entire agreement and understanding of the parties relating to the
subject matter herein and merges all prior discussions between them. No
modification of or amendment to this Agreement, nor any waiver of any rights
under this Agreement, shall be effective unless in writing signed by the parties
to this Agreement. The failure by either party to enforce any rights under this
Agreement shall not be construed as a waiver of any rights of such party.
-11-
<PAGE>
(c) SEVERABILITY. If one or more provisions of this Agreement
are held to be unenforceable under applicable law, the parties agree to
renegotiate such provision in good faith. In the event that the parties cannot
reach a mutually agreeable and enforceable replacement for such provision, then
(i) such provision shall be excluded from this Agreement, (ii) the balance of
the Agreement shall be interpreted as if such provision were so excluded and
(iii) the balance of the Agreement shall be enforceable in accordance with its
terms.
(d) CONSTRUCTION. This Agreement is the result of
negotiations between and has been reviewed by each of the parties hereto and
their respective counsel, if any; accordingly, this Agreement shall be deemed to
be the product of all of the parties hereto, and no ambiguity shall be construed
in favor of or against any one of the parties hereto.
(e) NOTICES. Any notice required or permitted by this
Agreement shall be in writing and shall be deemed sufficient when delivered
personally or sent by telegram or fax or forty-eight (48) hours after being
deposited in the U.S. mail, as certified or registered mail, with postage
prepaid, and addressed to the party to be notified at such party's address as
set forth below or as subsequently modified by written notice.
(f) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original and all of which
together shall constitute one instrument.
(g) SUCCESSORS AND ASSIGNS. The rights and benefits of this
Agreement shall inure to the benefit of, and be enforceable by the Company's
successors and assigns. The rights and obligations of Purchaser under this
Agreement may only be assigned with the prior written consent of the Company.
[Signature Page Follows]
-12-
<PAGE>
The parties have executed this Exercise Notice and Restricted Stock
Purchase Agreement as of the date first set forth above.
COMPANY:
NETDIALOG, INC.
By:
-----------------------
Name:
---------------------
(print)
Title:
--------------------
411 Borel Avenue, #440
San Mateo, CA 94402
PURCHASER:
[OPTIONEE]
-----------------------------------------------
(Signature)
----------------------------------------------
(Print Name)
Address:
--------------------------------------------
--------------------------------------------
I, ______________________, spouse of [Optionee], have read and hereby approve
the foregoing Agreement. IN consideration of the Company's granting my spouse
the right to purchase the Shares as set forth in the Agreement, I hereby agree
to be irrevocably bound by the Agreement and further agree that any community
property or other such interest shall hereby by similarly bound by the
Agreement. I hereby appoint my spouse as my attorney-in-fact with respect to any
amendment or exercise of any rights under the Agreement.
----------------------------
Spouse of [Optionee]
<PAGE>
RECEIPT
The undersigned hereby acknowledges receipt of Certificate No. _____
for __________ shares of Common Stock of [Optionee] (the "COMPANY").
Dated: _______________
---------------------------
[Optionee]
<PAGE>
RECEIPT
__________________netDialog, Inc, a California corporation, (the "COMPANY")
hereby acknowledges receipt of a check in the amount of $___________ given by
[Optionee] as consideration for Certificate No. _________ for ____________
shares of Common Stock of netDialog, Inc.
Dated: ______________ NETDIALOG, INC.
By:
------------------------------
Name:
------------------------
(print)
Title:
------------------------
<PAGE>
EXHIBIT 99.7
KANA COMMUNICATIONS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
NETDIALOG, INC.
1997 STOCK PLAN
OPTIONEE: (First_Name) (Last_Name),
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 3rd day
of December, 1999.
WHEREAS, the undersigned individual ("Optionee") holds one or
more outstanding options to purchase shares of the common stock of netDialog,
Inc., a Delaware corporation ("netDialog"), which were granted to Optionee under
the netDialog 1997 Stock Plan (the "Plan").
WHEREAS, each of those options is evidenced by a Stock Option
Agreement (the "Option Agreement") issued to Optionee under the Plan.
WHEREAS, netDialog has been acquired by Kana Communications,
Inc., a Delaware corporation ("Kana"), through the merger of netDialog with and
into Kana (the "Merger") pursuant to the Agreement and Plan of Reorganization by
and between Kana and netDialog (the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require the
obligations of netDialog under each outstanding option under the Plan to be
assumed by Kana at the consummation of the Merger (the "Effective Time") and the
holder of each such outstanding option to be issued an agreement evidencing the
assumption of that option.
WHEREAS, pursuant to the provisions of the Merger Agreement,
the exchange ratio (the "Exchange Ratio") in effect for the Merger is 0.02763 of
a share of Kana common stock ("Kana Stock") for each outstanding share of
netDialog common stock ("netDialog Stock").
WHEREAS, the purpose of this Agreement is to evidence the
assumption by Kana of the outstanding options held by Optionee under the Plan at
time of the consummation of the Merger (the "Effective Time") and to reflect
certain adjustments to those options that have become necessary in connection
with their assumption by Kana in the Merger.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of netDialog Stock subject to the
options held by Optionee immediately prior to the Effective Time (the "netDialog
Options") and the exercise price payable per share are set forth below. Kana
hereby assumes, as of the Effective Time, all the duties and obligations of
netDialog under each of the
<PAGE>
netDialog Options. In connection with such assumption, the number of shares of
Kana Stock purchasable under each netDialog Option hereby assumed and the
exercise price payable thereunder have been adjusted to reflect the Exchange
Ratio. Accordingly, the number of shares of Kana Stock subject to each netDialog
Option hereby assumed shall be as specified for that option below, and the
adjusted exercise price payable per share of Kana Stock under the assumed
netDialog Option shall also be as indicated for that option below.
- --------------------------------------------------------------------------------
NETDIALOG STOCK OPTIONS KANA ASSUMED OPTIONS
- --------------------------------------------------------------------------------
# of Shares of # of Shares
netDialog Exercise Price of Kana Adjusted Exercise
Common Stock per Share Common Stock Price per Share
- --------------------------------------------------------------------------------
netDialog Shares $netDialog Price Kana Shares $Kana Price
- --------------------------------------------------------------------------------
2. The intent of the foregoing adjustments to each assumed
netDialog Option is to assure that the spread between the aggregate fair market
value of the shares of Kana Stock purchasable under each such option and the
aggregate exercise price as adjusted pursuant to this Agreement will,
immediately after the consummation of the Merger, be not less than the spread
that existed, immediately prior to the Merger, between the then aggregate fair
market value of the netDialog Stock subject to the netDialog Option and the
aggregate exercise price in effect at such time under the Option Agreement. Such
adjustments are also intended to preserve, on a per share basis immediately
after the Merger, the same ratio of exercise price per option share to fair
market value per share that existed under the netDialog Option immediately prior
to the Merger.
3. Each netDialog Option as assumed by Kana shall continue to
have a maximum term of ten (10) years measured 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 netDialog Option
hereby assumed by Kana:
(a) Unless the context otherwise requires,
all references in each Option Agreement hereby assumed by Kana
and in the Plan (to the extent incorporated into such Option
Agreement) shall be adjusted as follows: (i) all references to
the "Company" shall mean Kana, (ii) all references to "Shares"
shall mean shares of Kana Stock, (iii) all references to the
"Board" shall mean the Board of Directors of Kana and (iv) all
references to the "Committee" shall mean the Compensation
Committee of the Kana Board of Directors.
2
<PAGE>
(b) Except as modified by this Agreement,
the grant date and expiration date of each assumed netDialog
Option and all other provisions that govern either the
exercise or the termination of the assumed netDialog Option
shall remain the same as set forth in the Option Agreement
applicable to that option, and the provisions of the Plan and
the Option Agreement shall accordingly govern and control
Optionee's rights to purchase Kana Stock under the assumed
netDialog Option.
(c) Pursuant to the terms of the Option
Agreement, none of the assumed netDialog Options shall vest or
become exercisable on an accelerated basis upon the
consummation of the Merger. Accordingly, each netDialog Option
assumed by Kana shall continue to vest and become exercisable
for any remaining unvested shares of Kana Stock subject to
that option in accordance with the same installment vesting
schedule in effect under the applicable Option Agreement
immediately prior to the Effective Time; provided, however,
that the number of shares subject to each such installment
shall be adjusted to reflect the Exchange Ratio.
(d) For purposes of applying any and all
provisions of the Option Agreement and/or the Plan relating to
Optionee's status as an employee or a consultant of netDialog,
Optionee shall be deemed to continue in such employee or
consultant status for so long as Optionee renders services as
an employee or a consultant to Kana or any present or future
majority-owned Kana subsidiary. Accordingly, the provisions of
the Option Agreement governing the termination of the assumed
netDialog Options upon Optionee's cessation of service as an
employee or a consultant of netDialog shall hereafter be
applied on the basis of Optionee's cessation of such status
with Kana and its subsidiaries, and each assumed netDialog
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.
(e) The adjusted exercise price payable for
the Kana Stock subject to each assumed netDialog 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 Kana Stock
delivered in payment of such adjusted exercise price, the
period for which such shares were held as netDialog Stock
prior to the Merger shall be taken into account.
3
<PAGE>
(f) In order to exercise each assumed
netDialog Option, Optionee must deliver to Kana a written
notice of exercise in which the number of shares of Kana 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 Kana Stock and
should be delivered to Kana at the following address:
Kana Communications, Inc.
740 Bay Road
Redwood City, CA 94063
Attention: William Bose
5. Except to the extent specifically modified by this 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, Kana Communications, Inc. has caused this
Stock Option Assumption Agreement to be executed on its behalf by its duly
authorized officer as of the 3rd day of December, 1999.
KANA COMMUNICATIONS, INC.
By:
-----------------------------
MARK S. GAINEY, PRESIDENT
4
<PAGE>
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 netDialog Options hereby assumed by Kana are as
set forth in the Option Agreement, the Plan (to the extent incorporated into
such Option Agreement) and such Stock Option Assumption Agreement.
--------------------------------
(FIRST_NAME) (LAST_NAME), OPTIONEE
DATED: __________________, 1999
5
