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EXHIBIT 4.1
ANDOVER.NET, INC.
1999 STOCK OPTION PLAN
1. Purpose of the Plan.
This stock option plan (the "Plan") is intended to encourage ownership
of the stock of Andover.Net, Inc., a Delaware corporation (the "Company") by
employees, consultants and advisors of the Company and its subsidiaries, to
induce qualified personnel to enter and remain in the employ of the Company or
its subsidiaries and otherwise to provide additional incentive for optionees to
promote the success of its business.
2. Stock Subject to the Plan.
(a) The total number of shares of the authorized but unissued or
Treasury shares of the common stock, par value $.01 per share, of the Company
("Common Stock") for which options may be granted under the Plan shall not
exceed eighty six thousand four hundred (86,400) shares, subject to adjustment
as provided in Section 12 hereof.
(b) If an option granted hereunder shall expire or terminate for any
reason without having vested fully or having been exercised in full, the
unvested and/or unpurchased shares subject thereto shall again be available for
subsequent option grants under the Plan.
(c) Stock issuable upon exercise of an option granted under the Plan may
be subject to such restrictions on transfer, repurchase rights or other
restrictions as shall be determined by the Committee.
3. Administration of the Plan.
At the discretion of the Company's Board of Directors, the Plan shall be
administered either (i) by the full Board of Directors of the Company or (ii) by
a committee (the "Committee") consisting of two or more members of the Company's
Board of Directors. In the event the full Board of Directors is the
administrator of the Plan, references herein to the Committee shall be deemed to
include the full Board of Directors. The Board of Directors may from time to
time appoint a member or members of the Committee in substitution for or in
addition to the member or members then in
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office and may fill vacancies on the Committee however caused. The Committee
shall choose one of its members as Chairman and shall hold meetings at such
times and places as it shall deem advisable. A majority of the members of the
Committee shall constitute a quorum and any action may be taken by a majority of
those present and voting at any meeting.
Any action may also be taken without the necessity of a meeting by a
written instrument signed by a majority of the Committee. The decision of the
Committee as to all questions of interpretation and application of the Plan
shall be final, binding and conclusive on all persons. The Committee shall have
the authority to adopt, amend and rescind such rules and regulations as, in its
opinion, may be advisable in the administration of the Plan. The Committee may
correct any defect or supply any omission or reconcile any inconsistency in the
Plan or in any option agreement granted hereunder in the manner and to the
extent it shall deem expedient to carry the Plan into effect and shall be the
sole and final judge of such expediency. No Committee member shall be liable for
any action or determination made in good faith.
4. Type of Options.
Options granted pursuant to the Plan shall be authorized by action of
the Committee and may be designated as either incentive stock options meeting
the requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"), or non-qualified options which are not intended to meet the
requirements of such Section 422 of the Code, the designation to be in the sole
discretion of the Committee. The Plan shall be administered by the Committee in
such manner as to permit options to qualify as incentive stock options under the
Code.
5. Eligibility.
Options designated as incentive stock options shall be granted only to
employees (including officers and directors who are also employees) of the
Company or any of its subsidiaries, including subsidiaries which become such
after adoption of the Plan. Options designated as non-qualified options may be
granted to officers, employees, consultants, advisors and directors of the
Company or of any of its subsidiaries, including subsidiaries which become such
after adoption of the Plan. "Subsidiary" or "subsidiaries" shall be as defined
in Section 424 of the Code and the Treasury Regulations promulgated thereunder
(the "Regulations").
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The Committee shall, from time to time, at its sole discretion, select
from such eligible individuals those to whom options shall be granted and shall
determine the number of shares to be subject to each option. In determining the
eligibility of an individual to be granted an option, as well as in determining
the number of shares to be granted to any individual, the Committee in its sole
discretion shall take into account the position and responsibilities of the
individual being considered, the nature and value to the Company or its
subsidiaries of his or her service and accomplishments, his or her present and
potential contribution to the success of the Company or its subsidiaries, and
such other factors as the Committee may deem relevant.
No option designated as an incentive stock option shall be granted to
any employee of the Company or any subsidiary if such employee owns, immediately
prior to the grant of an option, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of a parent or a
subsidiary, unless the purchase price for the stock under such option shall be
at least 110% of its fair market value at the time such option is granted and
the option, by its terms, shall not be exercisable more than five years from the
date it is granted. In determining the stock ownership under this paragraph, the
provisions of Section 424(d) of the Code shall be controlling. In determining
the fair market value under this paragraph, the provisions of Section 7 hereof
shall apply.
The maximum number of shares of the Company's Common Stock with respect
to which an option or options may be granted to any employee in any calendar
year shall not exceed eighty six thousand four hundred (86,400) shares, taking
into account shares subject to options granted and terminated, or repriced,
during such calendar year.
6. Option Agreement.
Each option shall be evidenced by an option agreement (the "Agreement")
duly executed on behalf of the Company and by the optionee to whom such option
is granted, which Agreement shall comply with and be subject to the terms and
conditions of the Plan. The Agreement may contain such other terms, provisions
and conditions which are not inconsistent with the Plan as may be determined by
the Committee, provided that options designated as incentive stock options shall
meet all of the conditions for incentive stock options as defined in Section 422
of the Code. The date of grant of an option shall be as determined by the
Committee. More than one option may be granted to an individual.
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7. Option Price.
The option price or prices of shares of the Company's Common Stock for
options designated as non-qualified stock options shall be as determined by the
Committee. The option price or prices of shares of the Company's Common Stock
for incentive stock options shall be not less than the fair market value of such
Common Stock at the time the option is granted as determined by the Committee in
accordance with the Regulations promulgated under Section 422 of the Code. If
such shares are then listed on any national securities exchange, the fair market
value shall be the mean between the high and low sales prices, if any, on the
largest such exchange on the date of the grant of the option or, if none, shall
be determined by taking a weighted average of the means between the highest and
lowest sales prices on the nearest date before and the nearest date after the
date of grant in accordance with Treasury Regulations Section 25.2512-2. If the
shares are not then listed on any such exchange, the fair market value of such
shares shall be the mean between the high and low sales prices, if any, as
reported in the National Association of Securities Dealers Automated Quotation
National Market ("NASDAQ/NM") for the date of the grant of the option, or, if
none, shall be determined by taking a weighted average of the means between the
highest and lowest sales on the nearest date before and the nearest date after
the date of grant in accordance with Treasury Regulations Section 25.2512-2. If
the shares are not then either listed on any such exchange or quoted in
NASDAQ/NM, the fair market value shall be the mean between the average of the
"Bid" and the average of the "Ask" prices, if any, as reported in the National
Daily Quotation Service for the date of the grant of the option, or, if none,
shall be determined by taking a weighted average of the means between the
highest and lowest sales prices on the nearest date before and the nearest date
after the date of grant in accordance with Treasury Regulations Section
25.2512-2. If the fair market value cannot be determined under the preceding
three sentences, it shall be determined in good faith by the Committee.
8. Manner of Payment; Manner of Exercise.
(a) Options granted under the Plan may provide for the payment of the
exercise price, as determined by the Committee, and as set forth in the Option
Agreement, by delivery of (i) cash or a check payable to the order of the
Company in an amount equal to the exercise price of such options, (ii) shares of
Common Stock of the Company owned by the optionee having a fair market value
equal in amount to the exercise price of the options being exercised, (iii) any
combination of (i) and (ii), provided, however, that payment of the exercise
price by delivery of shares of Common Stock
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of the Company owned by such optionee may be made only if such payment does not
result in a charge to earnings for financial accounting purposes as determined
by the Committee or (iv) by delivery of a properly executed exercise notice to
the Company, together with a copy of irrevocable instruments to a broker to
deliver promptly to the Company the amount of sale or loan proceeds to pay the
exercise price. The fair market value of any shares of the Company's Common
Stock which may be delivered upon exercise of an option shall be determined by
the Committee in accordance with Section 7 hereof. To facilitate clause (iv)
above, the Company may enter into agreements for coordinated procedures with one
or more brokerage firms. The date of exercise shall be the date of delivery of
such exercise notice or payment.
(b) To the extent that the right to purchase shares under an option has
accrued and is in effect, options may be exercised in full at one time or in
part from time to time, by giving written notice, signed by the person or
persons exercising the option, to the Company, stating the number of shares with
respect to which the option is being exercised, accompanied by payment in full
for such shares as provided in subparagraph (a) above. Upon such exercise,
delivery of a certificate for paid-up non-assessable shares shall be made at the
principal office of the Company to the person or persons exercising the option
at such time, during ordinary business hours, not more than ten (10) days from
the date of receipt of the notice by the Company, as shall be designated in such
notice, or at such time, place and manner as may be agreed upon by the Company
and the person or persons exercising the option. Upon exercise of the option and
payment as provided above, the optionee shall become a shareholder of the
Company as to the Shares acquired upon such exercise.
9. Exercise of Options.
Each option granted under the Plan shall, subject to Section 10(b) and
Section 12 hereof, be exercisable at such time or times and during such period
as determined by the Committee which shall be set forth in the Agreement;
provided, however, that no option granted under the Plan shall have a term in
excess of ten (10) years from the date of grant.
To the extent that an option to purchase shares is not exercised by an
optionee when it becomes initially exercisable, it shall not expire but shall be
carried forward and shall be exercisable, on a cumulative basis, until the
expiration of the exercise period. No partial exercise may be made for less than
fifty (50) full shares of Common Stock.
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Notwithstanding the foregoing, the Committee may in its discretion
accelerate the exercisability of any option subject to such terms and conditions
as the Committee deems necessary and appropriate.
10. Term of Options; Exercisability.
(a) Term.
(1) Each option shall expire not more than ten (10) years from
the date of the granting thereof, but shall be subject to earlier termination as
herein provided.
(2) Except as otherwise provided in this Section 10, an option
granted to any employee optionee who ceases to be an employee of the Company or
one of its subsidiaries shall terminate 60 days after the date such optionee
ceases to be an employee of the Company or one of its subsidiaries, or on the
date on which the option expires by its terms, whichever occurs first.
(3) If such termination of employment is because of dismissal for
cause or because the employee is in breach of any employment agreement, such
option will terminate on the date the optionee ceases to be an employee of the
Company or one of its subsidiaries.
(4) If such termination of employment is because the optionee has
become permanently disabled (within the meaning of Section 22(e)(3) of the
Code), such option shall terminate on the last day of the twelfth month from the
date such optionee ceases to be an employee, or on the date on which the option
expires by its terms, whichever occurs first.
(5) In the event of the death of any optionee, any option granted
to such optionee shall terminate on the last day of the twelfth month from the
date of death, or on the date on which the option expires by its terms,
whichever occurs first.
(6) Notwithstanding subparagraphs (2), (3), (4) and (5) above,
the Committee shall have the authority to extend the expiration date of any
outstanding option in circumstances in which it deems such action to be
appropriate, provided that no such extension shall extend the term of an option
beyond the date on which the option would have expired if no termination of the
optionee's employment had occurred.
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(b) Exercisability.
(1) Except as provided below, an option granted to an employee
optionee who ceases to be an employee of the Company or one of its subsidiaries
shall be exercisable only to the extent that the right to purchase shares under
such option has accrued and is in effect on the date such optionee ceases to be
an employee of the Company or one of its subsidiaries.
(2) An option granted to an employee optionee who ceases to be an
employee of the Company or one of its subsidiaries because he or she has become
permanently disabled, as defined in Section 22(e)(3) of the Code, shall be
exercisable by such person or his or her legal representative only to the extent
that the right to purchase shares under such option has accrued and is in effect
on the date such optionee ceases to be an employee of the Company or one of its
subsidiaries.
(3) In the event of the death of any optionee, the option granted to
such optionee may be exercised only to the extent that the right to purchase
shares under such option is accrued and is in effect on the date of the death of
such optionee by the estate of such optionee, or by any person or persons who
acquired the right to exercise such option by bequest or inheritance or by
reason of the death of such optionee.
11. Options Not Transferable.
The right of any optionee to exercise any option granted to him or her
shall not be assignable or transferable by such optionee otherwise than by will
or the laws of descent and distribution, except that an optionee may transfer
options that are not incentive stock options granted under Plan to the
optionee's spouse or children or to a trust or family limited partnership or
similar organization established for the sole benefit of one or more of the
optionee, the optionee's spouse or the optionee's children; provided, that prior
to any registration by the Company under the Securities Act of 1933, as amended
(the "Securities Act"), no optionee shall assign or transfer any option if the
result of such assignment or transfer shall be to increase, upon exercise of the
option, the total number of holders of Common Stock without the prior written
consent of the Committee, which consent may be withheld by the Committee if it
reasonably believes that withholding such consent will reduce the likelihood
that the Company would be required to register its Common Stock under the
Securities Act. Incentive stock options shall be exercisable during the lifetime
of such optionee only by him/her. Any option granted under the Plan shall be
null and void and without effect upon the bankruptcy of the optionee to whom the
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option is granted, or upon any attempted assignment or transfer, except as
herein provided, including without limitation any purported assignment, whether
voluntary or by operation of law, pledge, hypothecation or other disposition,
attachment, divorce, trustee process or similar process, whether legal or
equitable, upon such option.
12. Recapitalizations, Reorganizations and the Like.
(a) In the event that the outstanding shares of the Common Stock of the
Company are changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another corporation by reason of any
reorganization, merger, consolidation, recapitalization, reclassification, stock
split-up, combination of shares, or dividends payable in capital stock,
appropriate adjustment shall be made in the number and kind of shares as to
which options may be granted under the Plan and as to which outstanding options
or portions thereof then unexercised shall be exercisable, to the end that the
proportionate interest of the optionee shall be maintained as before the
occurrence of such event; such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised portion of such
options and with a corresponding adjustment in the option price per share.
(b) In addition, unless otherwise determined by the Committee in its
sole discretion, in the case of any (i) sale or conveyance to another entity of
all or substantially all of the property and assets of the Company, including,
without limitation, by way of merger or consolidation, or (ii) Change in Control
(as hereinafter defined) of the Company, the purchaser(s) of the Company's
assets or stock may, in his, her or its discretion, deliver to the optionee the
same kind of consideration that is delivered to the shareholders of the Company
as a result of such sale, conveyance or Change in Control, the Committee may
cancel all outstanding options in exchange for consideration in cash or in kind
which consideration shall be equal in value to the value of those shares of
stock or other securities the optionee would have received had the option been
exercised (to the extent then exercisable) and no disposition of the shares
acquired upon such exercise been made prior to such sale, conveyance or Change
in Control, less the option price therefor. Upon receipt of such consideration
by the optionee, his or her option shall immediately terminate and be of no
further force and effect. The value of the stock or other securities the
optionee would have received if the option had been exercised shall be
determined in good faith by the Committee, and in the case of shares of the
Common Stock of the Company, in accordance with the provisions of Section 7
hereof. The Committee shall also have the power and right to accelerate the
exercisability of any options, notwithstanding any limitations in this Plan or
in the Agreement upon such a sale,
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conveyance or Change in Control. Upon such acceleration, any options or portion
thereof originally designated as incentive stock options that no longer qualify
as incentive stock options under Section 422 of the Code as a result of such
acceleration shall be redesignated as non-qualified stock options. A "Change in
Control" shall be deemed to have occurred if any person, together with all
affiliates of such person or persons, who prior to such time owned less than
thirty percent (30%) of the then outstanding Common Stock of the Company, shall
acquire, whether by purchase, exchange, tender offer, merger, consolidation or
otherwise, such additional shares of the Company's Common Stock in one or more
transactions, or series of transactions, such that following such transaction or
transactions, such person and affiliates beneficially own fifty percent (50%) or
more of the Company's Common Stock outstanding; provided, that in no event shall
the consummation of an initial public offering by the Company constitute a
Change of Control.
(c) Upon dissolution or liquidation of the Company, all options granted
under this Plan shall terminate, but each optionee (if at such time in the
employ of or otherwise associated with the Company or any of its subsidiaries)
shall have the right, immediately prior to such dissolution or liquidation, to
exercise his or her option to the extent then exercisable.
(d) No fraction of a share shall be purchasable or deliverable upon the
exercise of any option, but in the event any adjustment hereunder of the number
of shares covered by the option shall cause such number to include a fraction of
a share, such fraction shall be adjusted to the nearest smaller whole number of
shares.
13. No Special Employment Rights.
Nothing contained in the Plan or in any option granted under the Plan
shall confer upon any option holder any right with respect to the continuation
of his or her employment by the Company (or any subsidiary) or interfere in any
way with the right of the Company (or any subsidiary), subject to the terms of
any separate employment agreement to the contrary, at any time to terminate such
employment or to increase or decrease the compensation of the option holder from
the rate in existence at the time of the grant of an option. Whether an
authorized leave of absence, or absence in military or government service, shall
constitute termination of employment shall be determined by the Committee at the
time.
14. Withholding.
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The Company's obligation to deliver shares upon the exercise of any
option granted under the Plan and any payments or transfers under Section 12
hereof shall be subject to the option holder's satisfaction of all applicable
Federal, state and local income, excise, employment and any other tax
withholding requirements.
15. Restrictions on Issue of Shares.
(a) Notwithstanding the provisions of Section 8, the Company may delay
the issuance of shares covered by the exercise of an option and the delivery of
a certificate for such shares until one of the following conditions shall be
satisfied:
(i) The shares with respect to which such option has been exercised
are at the time of the issue of such shares effectively registered or qualified
under applicable Federal and state securities acts now in force or as hereafter
amended; or
(ii) Counsel for the Company shall have given an opinion, which
opinion shall not be unreasonably conditioned or withheld, that such shares are
exempt from registration and qualification under applicable Federal and state
securities acts now in force or as hereafter amended.
(b) It is intended that all exercises of options shall be effective, and
the Company shall use its best efforts to bring about compliance with the above
conditions within a reasonable time, except that the Company shall be under no
obligation to qualify shares or to cause a registration statement or a
post-effective amendment to any registration statement to be prepared for the
purpose of covering the issue of shares in respect of which any option may be
exercised, except as otherwise agreed to by the Company in writing.
16. Purchase for Investment; Rights of Holder on Subsequent
Registration.
Unless the shares to be issued upon exercise of an option granted under
the Plan have been effectively registered under the Securities Act of 1933, as
now in force or hereafter amended, the Company shall be under no obligation to
issue any shares covered by any option unless the person who exercises such
option, in whole or in part, shall give a written representation and undertaking
to the Company which is satisfactory in form and scope to counsel for the
Company and upon which, in the opinion of such counsel, the Company may
reasonably rely, that he or she is acquiring the shares issued pursuant to such
exercise of the option for his or her own account as an investment and not with
a view
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to, or for sale in connection with, the distribution of any such shares, and
that he or she will make no transfer of the same except in compliance with any
rules and regulations in force at the time of such transfer under the Securities
Act of 1933, or any other applicable law, and that if shares are issued without
such registration, a legend to this effect may be endorsed upon the securities
so issued. In the event that the Company shall, nevertheless, deem it necessary
or desirable to register under the Securities Act of 1933 or other applicable
statutes any shares with respect to which an option shall have been exercised,
or to qualify any such shares for exemption from the Securities Act of 1933 or
other applicable statutes, then the Company may take such action and may require
from each optionee such information in writing for use in any registration
statement, supplementary registration statement, prospectus, preliminary
prospectus or offering circular as is reasonably necessary for such purpose and
may require reasonable indemnity to the Company and its officers and directors
and controlling persons from such holder against all losses, claims, damages and
liabilities arising from such use of the information so furnished and caused by
any untrue statement of any material fact therein or caused by the omission to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances under which
they were made.
17. Loans.
The Company may make loans to optionees to permit them to exercise
options. If loans are made, the requirements of all applicable Federal and state
laws and regulations regarding such loans must be met.
18. Modification of Outstanding Options.
The Committee may authorize the amendment of any outstanding option with
the consent of the optionee when and subject to such conditions as are deemed to
be in the best interests of the Company and in accordance with the purposes of
this Plan.
19. Approval of Stockholders.
The Plan shall be subject to approval by the vote of stockholders
holding at least a majority of the voting stock of the Company present, or
represented, and entitled to vote at a duly held stockholders' meeting, or by
written consent of the stockholders as provided for under applicable state law,
within twelve (12) months after the adoption of the Plan by the Board of
Directors and shall take effect as of the date of adoption by the Board of
Directors upon such approval. The
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Committee may grant options under the Plan prior to such approval, but any such
option shall become effective as of the date of grant only upon such approval
and, accordingly, no such option may be exercisable prior to such approval.
20. Termination and Amendment.
Unless sooner terminated as herein provided, the Plan shall terminate
ten (10) years from the date upon which the Plan was duly adopted by the Board
of Directors of the Company. The Board of Directors may at any time terminate
the Plan or make such modification or amendment thereof as it deems advisable;
provided, however, that except as provided in this Section 20, the Board of
Directors may not, without the approval of the stockholders of the Company
obtained in the manner stated in Section 19, increase the maximum number of
shares for which options may be granted or change the designation of the class
of persons eligible to receive options under the Plan, or make any other change
in the Plan which requires stockholder approval under applicable law or
regulations.
21. Reservation of Stock.
The Company shall at all times during the term of the Plan reserve and
keep available such number of shares of stock as will be sufficient to satisfy
the requirements of the Plan and shall pay all fees and expenses necessarily
incurred by the Company in connection therewith.
22. Limitation of Rights in the Option Shares.
An optionee shall not be deemed for any purpose to be a stockholder of
the Company with respect to any of the options except to the extent that the
option shall have been exercised with respect thereto and, in addition, a
certificate shall have been issued theretofore and delivered to the optionee.
23. Notices.
Any communication or notice required or permitted to be given under the
Plan shall be in writing, and mailed by registered or certified mail or
delivered by hand, if to the Company, to its principal place of business,
attention: President, and, if to an optionee, to the address as appearing on the
records of the Company.
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ANDOVER.NET, INC.
STOCK OPTION AGREEMENT
UNDER 1999 STOCK OPTION PLAN
INCENTIVE STOCK OPTION
AGREEMENT entered into as of the date set forth on the signature page
hereto by and between Andover.Net, Inc., a Delaware corporation with a principal
place of business in Acton, Massachusetts (the "Company"), and the undersigned
employee of the Company (or one of its subsidiaries) (the Company and its
subsidiaries herein together referred to as the "Company") (the "Employee").
A. The Company desires to grant the Employee an incentive stock option
under the Company's 1999 Stock Option Plan (the "Plan") to acquire shares of the
Company's Common Stock, par value $.01 per share (the "Shares").
B. Section 6 of the Plan provides that each option is to be evidenced by
an option agreement, setting forth the terms and conditions of the option.
ACCORDINGLY, in consideration of the premises and of the mutual
covenants and agreements contained herein, the Company and the Employee hereby
agree as follows:
1. Grant of Option. The Company hereby irrevocably grants under the Plan
and subject to the terms and conditions of the Plan to the Employee an incentive
stock option (the "Option") to purchase all or any part of an aggregate of the
number of Shares set forth below the Employee's name on the signature page
hereto, on the terms and conditions hereinafter set forth.
2. Purchase Price. The per share purchase price ("Purchase Price") for
the Shares covered by the Option shall be as set forth below the Employee's name
on the signature page hereto.
3. Time of Exercise of Option.
(a) The Option shall not be exercisable prior to the first
anniversary of the Grant Date set forth below the Optionee's name on the
signature page hereto (the "Grant Date"). Thereafter, subject to the provisions
of this Agreement and of the Plan, the Option shall only be exercisable as
follows: on the first anniversary of the Grant Date (the "First Anniversary
Date"), twenty-five percent (25%) of the Shares shall vest. Thereafter,
additional Shares shall vest on a monthly basis, in arrears, beginning at the
end of each month after the First Anniversary Date, in increments of 2.0833% of
the Shares, such that by the fourth anniversary of the Grant Date all Shares
shall vest; provided, however, that no option granted under the Plan shall have
a term in excess of ten (10) years from the date of grant. The end of a month
shall for purposes hereof be the same day of the month as the day of the month
on which falls the First Anniversary Date, or if not one in a particular month,
the last day of such month.
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(b) In the event of a Change of Control (as hereinafter defined),
the Employee will automatically receive accelerated vesting such that fifty
percent (50%) of the unvested portion of the Option shall be vested upon such
Change of Control. In addition, the unvested portion of the Option shall
continue to vest as otherwise provided in this Section 3. For purposes of this
Agreement, a "Change of Control" shall be deemed to have occurred if any of the
following conditions have occurred: (1) the merger or consolidation of the
Company with another entity, where the Company is not the surviving entity and
where after the merger or consolidation (i) its stockholders prior to the merger
or consolidation hold less than 50% of the voting stock of the surviving entity
and (ii) its Directors prior to the merger or consolidation are less than a
majority of the Board of the surviving entity; (2) the sale of all or
substantially all of the Company's assets to a third party and subsequent to the
transaction (i) its stockholders hold less than 50% of the stock of said third
party and (ii) its Directors are less than a majority of the Board of said third
party; or (3) a transaction or series of related transactions, including a
merger of the Company with another entity where the Company is the surviving
entity, whereby (i) 50% or more of the voting stock of the Company after the
transaction(s) is owned actually or beneficially by parties who held less than
thirty percent (30%) of the voting stock, actually or beneficially, prior to the
transaction(s) and (ii) its Board of Directors after the transaction(s) or
within 60 days thereof, is comprised of less than a majority of the Directors
serving prior to the transaction(s); provided, that in no event shall the
consummation of an initial public offering by the Company constitute a Change of
Control.
4. Term of Options; Exercisability.
(a) Term.
(1) Each Option shall expire not more than ten (10) years from
the date of the granting thereof, but shall be subject to earlier termination as
herein provided.
(2) Except as otherwise provided in this Section 4, if the
Employee ceases to be an employee of the Company, the Option granted to the
Employee hereunder shall terminate on the last day of the third month after the
date such Employee ceases to be an employee of the Company, or on the date on
which the Option expires by its terms, whichever occurs first.
(3) If such termination of employment is because of dismissal
for cause or because the Employee is in breach of any employment agreement, such
Option will terminate on the date the Employee ceases to be an employee of the
Company.
(4) If such termination of employment is because the Employee
has become permanently disabled (within the meaning of Section 22(e)(3) of the
Internal Revenue Code of 1986, as amended (the "Code")), such Option shall
terminate on the last day of the twelfth month from the date such Employee
ceases to be an employee, or on the date on which the Option expires by its
terms, whichever occurs first.
<PAGE> 15
(5) In the event of the death of the Employee, the Option
granted to such Employee shall terminate on the last day of the twelfth month
from the date of death, or on the date on which the Option expires by its terms,
whichever occurs first.
(b) Exercisability.
(1) Except as provided below, if the Employee ceases to be an
employee of the Company, the Option granted to the Employee hereunder shall be
exercisable only to the extent that the right to purchase Shares under such
Option has accrued and is in effect on the date such Employee ceases to be an
employee of the Company. No partial exercise may be made for less than one
hundred (100) full Shares (or all such Shares, if fewer that 100).
(2) If the Employee ceases to be an employee of the Company
because he or she has become permanently disabled, as defined above, the Option
granted to the Employee hereunder shall be exercisable only to the extent that
the right to purchase Shares under such Option has accrued and is in effect on
the date that such Employee ceases to be an employee of the Company.
(3) In the event of the death of the Employee, the Option
granted to such Employee may be exercised only to the extent that the right to
purchase such Shares under such Option has accrued and is in effect on the date
of the death of the Employee, by the estate of such Employee, or by any person
or persons who acquired the right to exercise such Option by bequest or
inheritance or by reason of the death of such Employee.
5. Manner of Exercise of Option.
(a) To the extent that the right to exercise the Option has accrued
and is in effect, the Option may be exercised in full or in part by giving
written notice to the Company stating the number of Shares exercised and
accompanied by payment in full for such Shares. Payment may be either (i) wholly
in cash or certified check payable to the order of the Company, (ii) in whole or
in part in Shares already owned by the person exercising the Option, valued at
fair market value, or (iii) any combination of (i) and (ii), provided, however,
that payment of the exercise price by delivery of Shares owned by such optionee
may be made only if such payment does not result in a charge to earnings for
financial accounting purposes as determined by the Board of Directors. Upon such
exercise, delivery of a certificate for paid-up, non-assessable Shares shall be
made at the principal office of the Company to the person exercising the Option,
not more than thirty (30) days from the date of receipt of the notice by the
Company.
(b) The Company shall at all times during the term of the Option
reserve and keep available such number of Shares as will be sufficient to
satisfy the requirements of the Option.
6. Non-Transferability. The right of the Employee to exercise the Option
shall not be assignable or transferable by the Employee otherwise than by will
or the laws of descent and distribution, and the Option may be exercised during
the lifetime of the Employee only by him or
<PAGE> 16
her. The Option shall be null and void and without effect upon the bankruptcy of
the Employee or upon any attempted assignment or transfer, except as hereinabove
provided, including without limitation any purported assignment, whether
voluntary or by operation of law, pledge, hypothecation or other disposition,
attachment, divorce, trustee process or similar process, whether legal or
equitable, upon the Option.
7. Representation Letter and Investment Legend.
(a) In the event that for any reason the Shares to be issued upon
exercise of the Option shall not be effectively registered under the Securities
Act of 1933, as amended (the "1933 Act"), upon any date on which the Option is
exercised in whole or in part, the person exercising the Option shall give a
written representation to the Company in the form attached hereto as Exhibit 1
and the Company shall place an "investment legend", so-called, as described in
Exhibit 1, upon any certificate for the Shares issued by reason of such
exercise.
(b) The Company shall be under no obligation to qualify Shares or to
cause a registration statement or a post-effective amendment to any registration
statement to be prepared for the purpose of covering the issue of Shares.
8. Adjustments on Changes in Recapitalization, Re-organization and the
Like. Adjustments on changes in recapitalization, reorganization and the like
shall be made in accordance with Section 12 of the Plan, as in effect on the
date of this Agreement.
9. No Special Employment Rights. Nothing contained in the Plan or this
Agreement shall be construed or deemed by any person under any circumstances to
bind the Company to continue the employment of the Employee for the period
within which this Option may be exercised. However, during the period of the
Employee's employment, the Employee shall render diligently and faithfully the
services which are assigned to the Employee from time to time by the Board of
Directors or by the executive officers of the Company and shall at no time take
any action which directly or indirectly would be inconsistent with the best
interests of the Company.
10. Rights as a Stockholder. The Employee shall have no rights as a
stockholder with respect to any Shares which may be purchased by exercise of
this Option unless and until a certificate or certificates representing such
Shares are duly issued and delivered to the Employee upon due exercise of the
Option. Except as otherwise expressly provided in the Plan, no adjustment shall
be made for dividends or other rights for which the record date is prior to the
date such stock certificate is issued.
11. Withholding Taxes. Whenever Shares are to be issued upon exercise of
this Option, the Company shall have the right to require the Employee to remit
to the Company an amount sufficient to satisfy all Federal, state and local
withholding tax requirements prior to the delivery of any certificate or
certificates for such Shares.
12. Execution of Stockholders' Agreement. The Employee acknowledges that
the Option, and the Shares issuable upon the exercise thereof, are subject to
certain transfer restrictions,
<PAGE> 17
call provisions and other restrictions, as more fully set forth in that certain
Third Amended and Restated Stockholders Agreement dated September 15, 1999 among
the Company and its stockholders (the "Stockholders' Agreement"). The Employee
further acknowledges and agrees that the Option, and any exercise hereof, shall
not be effective unless and until the Employee shall have executed and delivered
to the Company a counterpart signature page to the Stockholders' Agreement
evidencing such Employee's agreement to be bound by the terms thereof.
13. Qualification under Section 422. It is understood and intended that
the Option granted hereunder shall qualify as an "incentive stock option" as
defined in Section 422 of the Code. Accordingly, the Employee understands that
in order to obtain the benefits of an incentive stock option under Section 421
of the Code, no sale or other disposition may be made of any Shares acquired
upon exercise of the Option within the one-year period beginning on the day
after the day of the transfer of such Shares to him or her, nor within the
two-year period beginning on the day after the grant of the Option. If the
Employee intends to dispose or does dispose (whether by sale, gift, transfer or
otherwise) of any such Shares within said periods, he or she will notify the
Company within thirty (30) days after such disposition.
[Remainder of Page Intentionally Left Blank]
<PAGE> 18
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
and its corporate seal to be hereto affixed by its officer thereunto duly
authorized, and the Employee has hereunto set his or her hand and seal, all as
of the day and year set forth below.
ANDOVER.NET, INC.
By:
---------------------------------
Name:
Title:
EMPLOYEE:
------------------------------------
Name:
Address:
Social Security No.:
Number of Shares:
Purchase Price Per Share:
Grant Date:
<PAGE> 19
EXHIBIT 1
TO STOCK OPTION AGREEMENT
Andover.Net, Inc.
50 Nagog Park
Acton, MA 01720
Gentlemen:
In connection with the acquisition by me of shares of common stock, par
value $.01 per share (the "Shares"), of Andover.Net, Inc., a Delaware
corporation (the "Company"), I hereby represent to the Company as follows:
(a) I hereby confirm that: (i) the Shares to be received by me will be
acquired for investment only, for my own account, not as a nominee or agent and
not with a view to the sale or distribution of any part thereof; and (ii) I have
no current intention of selling, granting participation in or otherwise
distributing the Shares. I further represent that I do not have any contract,
undertaking, agreement or arrangement with any person to sell, transfer or grant
participation to such person, or to any third person, with respect to any of the
Shares.
(b) I understand that the Shares have not been registered under the
Securities Act of 1933, as amended (the "1933 Act") on the basis that the
acquisition of the Shares by me and the issuance of securities by the Company to
me is exempt from registration under the 1933 Act and that the Company's
reliance on such exemption is predicated on my representations set forth herein.
(c) I represent that I have, either alone or together with the
assistance of a "purchaser representative" (as that term is defined in
Regulation D promulgated under the 1933 Act), such knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of my investment in the Company. I further represent that I am familiar
with the business and financial condition, properties, operations and prospects
of the Company. I further represent that I have had, prior to my acquisition of
the Shares, the opportunity to ask questions of, and receive answers from, the
Company concerning the terms and conditions of the issuance and to obtain
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify the
accuracy of any information furnished to me or to which I have had access. I am
satisfied that there is no material information concerning the condition,
properties, operations and prospects of the Company of which I am unaware. I
have made, either alone or together with my advisors, such independent
investigation of the Company as I deem to be, or my advisors deem to be,
necessary or advisable in connection with this investment.
<PAGE> 20
(d) I understand that the Shares may not be sold, transferred or
otherwise disposed of without registration under the 1933 Act and applicable
state securities laws, or an exemption therefrom, and that in the absence of an
effective registration statement covering the Shares or an available exemption
from registration under the 1933 Act or applicable state securities laws, the
Shares must be held indefinitely. In particular, I acknowledge that I am aware
that the Shares may not be sold pursuant to Rule 144 promulgated under the 1933
Act unless all of the conditions of that Rule are met. Among the current
conditions for use of Rule 144 by certain holders is the availability to the
public of current information about the Company. Such information is not now
available, and the Company has no current plans to make such information
available. I represent that, in the absence of an effective registration
statement covering the Shares, I will not sell, transfer or otherwise dispose of
the Shares.
(e) I represent that I (i) am capable of bearing the economic risk of
holding the unregistered Shares for an indefinite period of time and have
adequate means for providing for my current needs and contingencies, (ii) can
afford to suffer a complete loss of my investment in the Shares, and (iii)
understand and have taken cognizance of all risk factors related to the
acquisition of the Shares.
(f) I understand that the acquisition of the Shares involves a high
degree of risk and there will be no established market for the Company's capital
stock and it is not likely that any public market for such stock will develop in
the near future.
(g) I represent that neither I nor anyone acting on my behalf has paid
any commission or other remuneration to any person in connection with the
acquisition of the Shares.
(h) Independent of the additional restrictions on the transfer of the
Shares contained herein, I agree that I will not make a transfer, disposition or
pledge of any of the Shares other than pursuant to an effective registration
statement under the 1933 Act and applicable state securities laws, unless and
until: (i) I shall have notified the Company of the proposed disposition and
shall have furnished the Company with a statement of the circumstances
surrounding the disposition and (ii) if requested by the Company and at my
expense or at the expense of my transferee, I shall have furnished to the
Company an opinion of counsel, reasonably satisfactory (as to counsel and as to
substance) to the Company and its counsel, to the effect that such transfer may
be made without registration of the Shares under the 1933 Act, and applicable
state securities laws.
(i) I acknowledge that all certificates evidencing the Shares shall bear
the following legend:
"TRANSFER RESTRICTED
These securities have not been registered under the Securities
Act of 1933, as amended, and may not be sold, offered for sale,
pledged or hypothecated in the absence of an effective
registration statement as to the securities under said Act, or an
opinion of counsel satisfactory to the Company and its counsel
that such registration is not required."
<PAGE> 21
(j) The certificates evidencing the Shares shall also bear any legend
required by any stockholders or other similar agreement which I am required to
sign as a condition to the issuance of the Shares and any applicable state
securities law.
(k) In addition, the Company shall make a notation regarding the
restrictions on transfer of the Shares in its stock books, and the Shares shall
be transferred on the books of the Company only if transferred or sold pursuant
to an effective registration statement under the 1933 Act and applicable state
securities laws covering such Shares or pursuant to and in compliance with the
provisions of the Stockholders' Agreement referenced above. A copy of this
Agreement, together with any amendments thereto, shall remain on file with the
Secretary of the Company and shall be available for inspection to any properly
interested person without charge within five (5) days after the Company's
receipt of a written request therefor.
Very truly yours,
