<PAGE> 1
As filed with the Securities and Exchange Commission on July 20, 1999
Registration No. ____________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------
CISCO SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0059951
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
170 WEST TASMAN DRIVE, SAN JOSE, CALIFORNIA 95134-1706
(Address of principal executive offices) (Zip Code)
SENTIENT NETWORKS, INC. 1997 STOCK PLAN
SENTIENT NETWORKS, INC. (FORMERLY CELLSTREAM NETWORKS, INC.)
1995 STOCK OPTION PLAN
---------------------
(Full title of the Plans)
JOHN T. CHAMBERS
PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
CISCO SYSTEMS, INC.
170 WEST TASMAN DRIVE, SAN JOSE, CALIFORNIA 95134-1706
(Name and address of agent for service)
(408) 526-4000
(Telephone number, including area code, of agent for service)
---------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
============================================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share Price Fee
---------- ------------- --------- ----- ---
<S> <C> <C> <C> <C>
Sentient Networks, Inc. 1997 198,916 $5.28 $1,050,276.48 $291.98
Stock Plan Common Stock
Sentient Networks, Inc. 1995 19,720 $2.43 $47,919.60 $13.33
Stock Option Plan Common Stock
Aggregate Registration Fee $305.31
=============================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Registrant's Common Stock which become issuable under the Sentient
Networks, Inc. 1997 Stock Plan or the Sentient Networks, Inc. 1995 Stock
Option Plan 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> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
Cisco Systems, 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 Annual Report on Form 10-K for the fiscal year
ended July 25, 1998 filed with the Commission on September 25,
1998, pursuant to Section 13 of the Securities Exchange Act of
1934, as amended (the "1934 Act");
(b) The Registrant's Current Reports on Form 8-K filed with the
Commission on October 13, 1998, November 20, 1998 (for period
date November 2, 1998), November 20, 1998 (for period date
November 4, 1998), May 14, 1999, and July 2, 1999;
(c) The Registrant's Quarterly Reports on Form 10-Q for the periods
ending October 24, 1998, and May 1, 1999, filed with the
Commission on December 8, 1998, and June 15, 1999, respectively.
And the Registrants Quarterly Report on Form 10-Q for the period
ending January 23, 1999, filed with the Commission on March 9,
1999, as amended on Form 10-Q/A filed with the Commission on May
14, 1999.
(d) The Registrant's Registration Statement No. 000-18225 on Form 8-A
filed with Commission on January 11, 1990, together with
Amendment No.1 on Form 8-A/A filed with the Commission on
February 15, 1990, and including any other 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, and;
(e) The Registrant's Registration Statement No. 000-18225 on Form 8-A
filed with the Commission on June 11, 1998, 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 Preferred Stock
Purchase Rights.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 15(d) of 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 317 of the California Corporations Code authorizes a
court to award, or a corporation's Board of Directors to grant, indemnity to
directors and officers in terms sufficiently broad to permit indemnification
II-1
<PAGE> 3
(including reimbursement of expenses incurred) under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended, (the "1933
Act"). The Registrant's Restated Articles of Incorporation, as amended, and
Amended and Restated Bylaws provide for indemnification of its directors,
officers, employees and other agents to the maximum extent permitted by the
California Corporations Code. In addition, the Registrant has entered into
Indemnification Agreements with each of its directors and officers.
Item 7. Exemption from Registration Claimed
Not Applicable.
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4 Instruments Defining the Rights of Stockholders. Reference
is made to Registrant's Registration Statements No.
000-18225 on Form 8-A, together with the amendments and
exhibits thereto, which are incorporated herein by reference
pursuant to Items 3(d) and 3(e).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Sentient Networks, Inc. 1997 Stock Plan.
99.2 Sentient Networks, Inc. 1997 Stock Plan Form of Summary of
Stock Purchase.
99.3 Sentient Networks, Inc. 1997 Stock Plan Form of Stock
Purchase Agreement.
99.4 Sentient Networks, Inc. 1997 Stock Plan Form of Stock Option
Agreement.
99.5 Sentient Networks, Inc. 1997 Stock Plan Form of Notice of
Stock Option Grant.
99.6 Sentient Networks, Inc (Formerly Cellstream Networks, Inc.)
1995 Stock Option Plan.
99.7 Sentient Networks, Inc. (Formerly Cellstream Networks, Inc.)
1995 Stock Option Plan Form of Notice of Grant of Stock
Option.
99.8 Sentient Networks, Inc. (Formerly Cellstream Networks, Inc.)
1995 Stock Option Plan Form of Stock Purchase Agreement.
99.9 Sentient Networks, Inc. (Formerly Cellstream Networks, Inc.)
1995 Stock Option Plan Form of Stock Option Agreement.
99.10 Form of Option Assumption Agreement.
</TABLE>
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-effective amendment any of the securities
being registered which remain unsold at the termination of the Sentient
Networks, Inc. 1997 Stock Plan or the Sentient Networks, Inc. 1995 Stock Option
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
II-2
<PAGE> 4
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> 5
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 San Jose, State of California on this
20th day of July, 1999.
CISCO SYSTEMS, INC.
By: /s/ John T. Chambers
----------------------------------------
John T. Chambers
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose
signature appears below constitutes and appoints John T. Chambers and Larry R.
Carter, 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/John T. Chambers President, Chief Executive July 20, 1999
- --------------------------------- Office and Director
John T. Chambers (Principal Executive Officer)
/s/Larry R. Carter Senior Vice President, Finance July 20, 1999
- --------------------------------- and Administration, Chief Financial
Larry R. Carter Officer and Secretary
(Principal Financial and Accounting
Officer)
/s/John P. Morgridge Chairman of the Board and July 20, 1999
- --------------------------------- Director
John P. Morgridge
/s/Donald T. Valentine Vice Chairman of the Board and July 20, 1999
- --------------------------------- Director
Donald T. Valentine
</TABLE>
II-4
<PAGE> 6
<TABLE>
<CAPTION>
<S> <C> <C>
/s/James F. Gibbons Director July 20, 1999
- ------------------------
James F. Gibbons
/s/Robert L. Puette Director July 20, 1999
- ------------------------
Robert L. Puette
- ------------------------ Director July __, 1999
Masayoshi Son
/s/Steven M. West Director July 20, 1999
- ------------------------
Steven M. West
/s/Edward R. Kozel Director July 20, 1999
- ------------------------
Edward R. Kozel
- ------------------------ Director July __, 1999
Carol A. Bartz
/s/James C. Morgan Director July 20, 1999
- ------------------------
James C. Morgan
/s/Mary Cirillo Director July 20, 1999
- ------------------------
Mary Cirillo
/s/Arun Sarin Director July 20, 1999
- ------------------------
Arun Sarin
</TABLE>
II-5
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibit
- -------------- -------
<S> <C>
4 Instruments Defining the Rights of Stockholders. Reference
is made to Registrant's Registration Statements No.
000-18225 on Form 8-A, together with the amendments and
exhibits thereto, which are incorporated herein by reference
pursuant to Items 3(d) and 3(e).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of PricewaterhouseCoopers LLP, Independent
Accountants.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in
Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Sentient Networks, Inc. 1997 Stock Plan.
99.2 Sentient Networks, Inc. 1997 Stock Plan Form of Summary of
Stock Purchase.
99.3 Sentient Networks, Inc. 1997 Stock Plan Form of Stock
Purchase Agreement.
99.4 Sentient Networks, Inc. 1997 Stock Plan Form of Stock Option
Agreement.
99.5 Sentient Networks, Inc. 1997 Stock Plan Form of Notice of
Stock Option Grant.
99.6 Sentient Networks, Inc (Formerly Cellstream Networks, Inc.)
1995 Stock Option Plan.
99.7 Sentient Networks, Inc. (Formerly Cellstream Networks, Inc.)
1995 Stock Option Plan Form of Notice of Grant of Stock
Option.
99.8 Sentient Networks, Inc. (Formerly Cellstream Networks, Inc.)
1995 Stock Option Plan Form of Stock Purchase Agreement.
99.9 Sentient Networks, Inc. (Formerly Cellstream Networks, Inc.)
1995 Stock Option Plan Form of Stock Option Agreement.
99.10 Form of Option Assumption Agreement.
</TABLE>
<PAGE> 1
EXHIBIT 5
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
July 20, 1999
Cisco Systems, Inc.
170 West Tasman Drive
San Jose, California 95134-1706
Re: Cisco Systems, Inc. - Registration Statement for
Offering of an Aggregate of 218,636 Shares of Common
Stock
Dear Ladies and Gentlemen:
We have acted as counsel to Cisco Systems, Inc., a California
corporation (the "Company"), in connection with the registration on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended, of
an aggregate of 218,636 shares of common stock (the "Shares") and related stock
options under (i) the Sentient Networks, Inc. 1997 Stock Plan and (ii) the
Sentient Networks, Inc. 1995 Stock Option Plan (together, the "Plans"). 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 with the assumption of
the Plans and the options outstanding 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 option agreements
duly authorized under the Plans 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 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 Plans or the Shares.
Very truly yours,
/S/BROBECK, PHLEGER & HARRISON LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 (Sentient options) of our report dated August 4, 1998
relating to the financial statements, which appears in the 1998 Annual Report to
Shareholders of Cisco Systems, Inc. which is incorporated by reference in Cisco
Systems, Inc. Annual Report on Form 10-K for the year ended July 25, 1998. We
also consent to the incorporation by reference of our report dated August 4,
1998 relating to the financial statement schedule, which appears in such Annual
Report on Form 10-K.
PricewaterhouseCoopers LLP
San Jose, California
July 14, 1999
<PAGE> 1
EXHIBIT 99.1
SENTIENT NETWORKS, INC.
1997 STOCK PLAN
AMENDED AND RESTATED ON FEBRUARY 9, 1999
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE NO.
--------
<S> <C>
SECTION 1. ESTABLISHMENT AND PURPOSE........................................................1
SECTION 2. ADMINISTRATION...................................................................1
(a) Committees of the Board of Directors..................................................1
(b) Authority of the Board of Directors...................................................1
SECTION 3. ELIGIBILITY......................................................................1
(a) General Rule..........................................................................1
(b) Ten-Percent Stockholders..............................................................1
SECTION 4. STOCK SUBJECT TO PLAN............................................................2
(a) Basic Limitation......................................................................2
(b) Additional Shares.....................................................................2
SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES..........................................2
(a) Stock Purchase Agreement..............................................................2
(b) Duration of Offers and Nontransferability of Rights...................................2
(c) Purchase Price........................................................................3
(d) Withholding Taxes.....................................................................3
(e) Restrictions on Transfer of Shares....................................................3
(f) Accelerated Vesting...................................................................3
SECTION 6. TERMS AND CONDITIONS OF OPTIONS..................................................3
(a) Stock Option Agreement................................................................3
(b) Number of Shares......................................................................4
(c) Exercise Price........................................................................4
(d) Withholding Taxes.....................................................................4
(e) Exercisability........................................................................4
(f) Accelerated Exercisability............................................................4
(g) Term..................................................................................5
(h) Nontransferability....................................................................5
(i) Termination of Service (Except by Death)..............................................5
(j) Leaves of Absence.....................................................................6
(k) Death of Optionee.....................................................................6
(l) No Rights as a Stockholder............................................................6
(m) Modification, Extension and Assumption of Options.....................................6
(n) Restrictions on Transfer of Shares and Minimum Vesting................................6
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C>
(o) Accelerated Vesting..................................................................7
SECTION 7. PAYMENT FOR SHARES...............................................................7
(a) General Rule..........................................................................7
(b) Surrender of Stock....................................................................7
(c) Services Rendered.....................................................................7
(d) Promissory Note.......................................................................7
(e) Exercise/Sale.........................................................................7
(f) Exercise/Pledge.......................................................................8
SECTION 8. ADJUSTMENT OF SHARES.............................................................8
(a) General...............................................................................8
(b) Mergers and Consolidations............................................................8
(c) Reservation of Rights.................................................................8
SECTION 9. SECURITIES LAWS REQUIREMENTS.....................................................9
(a) General..............................................................................9
(b) Financial Reports.....................................................................9
SECTION 10. NO RETENTION RIGHTS.............................................................9
SECTION 11. DURATION AND AMENDMENTS.........................................................9
(a) Term of the Plan......................................................................9
(b) Right to Amend or Terminate the Plan..................................................9
(c) Effect of Amendment or Termination...................................................10
SECTION 12. DEFINITIONS....................................................................10
SECTION 13. EXECUTION......................................................................12
</TABLE>
ii
<PAGE> 4
SENTIENT NETWORKS, INC. 1997 STOCK PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE.
The purpose of the Plan is to offer selected individuals an opportunity
to acquire a proprietary interest in the success of the Company, or to increase
such interest, by purchasing Shares of the Company's Stock. The Plan provides
both for the direct award or sale of Shares and for the grant of Options to
purchase Shares. Options granted under the Plan may include Nonstatutory Options
as well as ISOs intended to qualify under Section 422 of the Code.
Capitalized terms are defined in Section 12.
SECTION 2. ADMINISTRATION.
(a) COMMITTEES OF THE BOARD OF DIRECTORS. The Plan may be
administered by one or more Committees. Each Committee shall consist of one or
more members of the Board of Directors who have been appointed by the Board of
Directors. Each Committee shall have such authority and be responsible for such
functions as the Board of Directors has assigned to it. If no Committee has been
appointed, the entire Board of Directors shall administer the Plan. Any
reference to the Board of Directors in the Plan shall be construed as a
reference to the Committee (if any) to whom the Board of Directors has assigned
a particular function.
(b) AUTHORITY OF THE BOARD OF DIRECTORS. Subject to the provisions of
the Plan, the Board of Directors shall have full authority and discretion to
take any actions it deems necessary or advisable for the administration of the
Plan. All decisions, interpretations and other actions of the Board of Directors
shall be final and binding on all Purchasers, all Optionees and all persons
deriving their rights from a Purchaser or Optionee.
SECTION 3. ELIGIBILITY.
(a) GENERAL RULE. Only Employees, Outside Directors and Consultants
shall be eligible for the grant of Options or the direct award or sale of
Shares. Only Employees shall be eligible for the grant of ISOs.
(b) TEN-PERCENT STOCKHOLDERS. An individual who owns more than 10% of
the total combined voting power of all classes of outstanding stock of the
Company, its Parent or any of its Subsidiaries shall not be eligible for
designation as an Optionee or Purchaser unless (i) the Exercise Price is at
least 110% of the Fair Market Value of a Share on the date of grant, (ii) the
Purchase Price (if any) is at least 100% of the Fair Market Value of a Share and
(iii) in the case of an ISO, such ISO by its terms is not exercisable after the
expiration of five years from the date of grant. For purposes of this Subsection
(b), in determining stock ownership, the attribution rules of Section 424(d) of
the Code shall be applied.
1
<PAGE> 5
SECTION 4. STOCK SUBJECT TO PLAN.
(a) BASIC LIMITATION. Shares offered under the Plan may be authorized
but unissued Shares or treasury Shares. The aggregate number of Shares that may
be issued under the Plan (upon exercise of Options or other rights to acquire
Shares) shall not exceed 3,723,643 Shares, subject to adjustment pursuant to
Section 8. The number of Shares that are subject to Options or other rights
outstanding at any time under the Plan shall not exceed the number of Shares
that then remain available for issuance under the Plan. The Company, during the
term of the Plan, shall at all times reserve and keep available sufficient
Shares to satisfy the requirements of the Plan.
(b) ADDITIONAL SHARES. In the event that any outstanding Option or
other right for any reason expires or is canceled or otherwise terminated, the
Shares allocable to the unexercised portion of such Option or other right shall
again be available for the purposes of the Plan. In the event that Shares issued
under the Plan are reacquired by the Company pursuant to any forfeiture
provision, right of repurchase or right of first refusal, such Shares shall
again be available for the purposes of the Plan, except that the aggregate
number of Shares which may be issued upon the exercise of ISOs shall in no event
exceed 3,723,643 Shares (subject to adjustment pursuant to Section 8).
SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES.
(a) STOCK PURCHASE AGREEMENT. Each award or sale of Shares under the
Plan (other than upon exercise of an Option) shall be evidenced by a Stock
Purchase Agreement between the Purchaser and the Company. Such award or sale
shall be subject to all applicable terms and conditions of the Plan and may be
subject to any other terms and conditions which are not inconsistent with the
Plan and which the Board of Directors deems appropriate for inclusion in a Stock
Purchase Agreement. The provisions of the various Stock Purchase Agreements
entered into under the Plan need not be identical.
(b) DURATION OF OFFERS AND NONTRANSFERABILITY OF RIGHTS. Any right to
acquire Shares under the Plan (other than an Option) shall automatically expire
if not exercised by the Purchaser within 30 days after the grant of such right
was communicated to the Purchaser by the Company. Such right shall not be
transferable and shall be exercisable only by the Purchaser to whom such right
was granted.
(c) PURCHASE PRICE. The Purchase Price of Shares to be offered under
the Plan shall not be less than 85% of the Fair Market Value of such Shares, and
a higher percentage may be required by Section 3(b). Subject to the preceding
sentence, the Purchase Price shall be determined by the Board of Directors at
its sole discretion. The Purchase Price shall be payable in a form described in
Section 7.
(d) WITHHOLDING TAXES. As a condition to the purchase of Shares, the
Purchaser shall make such arrangements as the Board of Directors may require for
the satisfaction of any
2
<PAGE> 6
federal, state, local or foreign withholding tax obligations that may arise in
connection with such purchase.
(e) RESTRICTIONS ON TRANSFER OF SHARES AND MINIMUM VESTING. Any
Shares awarded or sold under the Plan shall be subject to such special
forfeiture conditions, rights of repurchase, rights of first refusal and other
transfer restrictions as the Board of Directors may determine. Such restrictions
shall be set forth in the applicable Stock Purchase Agreement and shall apply in
addition to any restrictions that may apply to holders of Shares generally. Any
right to repurchase a Purchaser's Shares at the original Purchase Price (if any)
upon termination of the Purchaser's Service shall lapse at least as rapidly as
the following schedule:
<TABLE>
<CAPTION>
Anniversary of Date Percentage of
of Sale or Award Shares Vested
---------------- -------------
<S> <C>
First 20%
Second 40%
Third 60%
Fourth 80%
Fifth 100%
</TABLE>
Any such repurchase right may be exercised only within 90 days after the
termination of the Purchaser's Service for cash or for cancellation of
indebtedness incurred in purchasing the Shares.
(f) ACCELERATED VESTING. Unless the applicable Stock Purchase
Agreement provides otherwise, any right to repurchase a Purchaser's Shares at
the original Purchase Price (if any) upon termination of the Purchaser's Service
shall lapse and all of such Shares shall become vested if (i) the Company is
subject to a Change in Control and (ii) the repurchase right is not assigned to
the entity that employs the Purchaser immediately after the Change in Control or
to its parent or subsidiary.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS.
(a) STOCK OPTION AGREEMENT. Each grant of an Option under the Plan
shall be evidenced by a Stock Option Agreement between the Optionee and the
Company. Such Option shall be subject to all applicable terms and conditions of
the Plan and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Board of Directors deems appropriate
for inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical.
(b) NUMBER OF SHARES. Each Stock Option Agreement shall specify the
number of Shares that are subject to the Option and shall provide for the
adjustment of such number in accordance with Section 8. The Stock Option
Agreement shall also specify whether the Option is an ISO or a Nonstatutory
Option.
3
<PAGE> 7
(c) EXERCISE PRICE. Each Stock Option Agreement shall specify the
Exercise Price. The Exercise Price of an ISO shall not be less than 100% of the
Fair Market Value of a Share on the date of grant, and a higher percentage may
be required by Section 3(b). The Exercise Price of a Nonstatutory Option shall
not be less than 85% of the Fair Market Value of a Share on the date of grant,
and a higher percentage may be required by Section 3(b). Subject to the
preceding two sentences, the Exercise Price under any Option shall be determined
by the Board of Directors at its sole discretion. The Exercise Price shall be
payable in a form described in Section 7.
(d) WITHHOLDING TAXES. As a condition to the exercise of an Option,
the Optionee shall make such arrangements as the Board of Directors may require
for the satisfaction of any federal, state, local or foreign withholding tax
obligations that may arise in connection with such exercise. The Optionee shall
also make such arrangements as the Board of Directors may require for the
satisfaction of any federal, state, local or foreign withholding tax obligations
that may arise in connection with the disposition of Shares acquired by
exercising an Option.
(e) EXERCISABILITY. Each Stock Option Agreement shall specify the
date when all or any installment of the Option is to become exercisable. An
Option shall become exercisable at least as rapidly as set forth in the
following schedule:
<TABLE>
<CAPTION>
Anniversary of Percentage of Shares
Date of Option Grant Exercisable
-------------------- -----------
<S> <C>
First 20%
Second 40%
Third 60%
Fourth 80%
Fifth 100%
</TABLE>
Subject to the preceding sentence, the exercisability provisions of any Stock
Option Agreement shall be determined by the Board of Directors at its sole
discretion.
(f) ACCELERATED EXERCISABILITY. Unless the applicable Stock Option
Agreement provides otherwise, all of an Optionee's Options shall become
exercisable in full if (i) the Company is subject to a Change in Control, (ii)
such Options do not remain outstanding, (iii) such Options are not assumed by
the surviving corporation or its parent and (iv) the surviving corporation or
its parent does not substitute options with substantially the same terms for
such Options.
(g) BASIC TERM. The Stock Option Agreement shall specify the term of
the Option. The term shall not exceed 10 years from the date of grant, and a
shorter term may be required by Section 3(b). Subject to the preceding sentence,
the Board of Directors at its sole discretion shall determine when an Option is
to expire.
(h) NONTRANSFERABILITY. No Option shall be transferable by the
Optionee other than by beneficiary designation, will or the laws of descent and
distribution. An Option may be
4
<PAGE> 8
exercised during the lifetime of the Optionee only by the Optionee or by the
Optionee's guardian or legal representative. No Option or interest therein may
be transferred, assigned, pledged or hypothecated by the Optionee during the
Optionee's lifetime, whether by operation of law or otherwise, or be made
subject to execution, attachment or similar process.
(i) TERMINATION OF SERVICE (EXCEPT BY DEATH). If an Optionee's
Service terminates for any reason other than the Optionee's death, then the
Optionee's Options shall expire on the earliest of the following occasions:
(i) The expiration date determined pursuant to Subsection (g)
above;
(ii) The date three months after the termination of the
Optionee's Service for any reason other than Disability; or
(iii) The date six months after the termination of the Optionee's
Service by reason of Disability.
The Optionee may exercise all or part of the Optionee's Options at any time
before the expiration of such Options under the preceding sentence, but only to
the extent that such Options had become exercisable before the Optionee's
Service terminated (or became exercisable as a result of the termination) and
the underlying Shares had vested before the Optionee's Service terminated (or
vested as a result of the termination). The balance of such Options shall lapse
when the Optionee's Service terminates. In the event that the Optionee dies
after the termination of the Optionee's Service but before the expiration of the
Optionee's Options, all or part of such Options may be exercised (prior to
expiration) by the executors or administrators of the Optionee's estate or by
any person who has acquired such Options directly from the Optionee by
beneficiary designation, bequest or inheritance, but only to the extent that
such Options had become exercisable before the Optionee's Service terminated (or
became exercisable as a result of the termination) and the underlying Shares had
vested before the Optionee's Service terminated (or vested as a result of the
termination).
(j) LEAVES OF ABSENCE. For purposes of Subsection (i) above, Service
shall be deemed to continue while the Optionee is on a bona fide leave of
absence, if such leave was approved by the Company in writing and if continued
crediting of Service for this purpose is expressly required by the terms of such
leave or by applicable law (as determined by the Company).
(k) DEATH OF OPTIONEE. If an Optionee dies while the Optionee is in
Service, then the Optionee's Options shall expire on the earlier of the
following dates:
(i) The expiration date determined pursuant to Subsection (g)
above; or
(ii) The date 12 months after the Optionee's death.
5
<PAGE> 9
All or part of the Optionee's Options may be exercised at any time before the
expiration of such Options under the preceding sentence by the executors or
administrators of the Optionee's estate or by any person who has acquired such
Options directly from the Optionee by beneficiary designation, bequest or
inheritance, but only to the extent that such Options had become exercisable
before the Optionee's death or became exercisable as a result of the death. The
balance of such Options shall lapse when the Optionee dies.
(l) NO RIGHTS AS A STOCKHOLDER. An Optionee, or a transferee of an
Optionee, shall have no rights as a stockholder with respect to any Shares
covered by the Optionee's Option until such person becomes entitled to receive
such Shares by filing a notice of exercise and paying the Exercise Price
pursuant to the terms of such Option.
(m) MODIFICATION, EXTENSION AND ASSUMPTION OF OPTIONS. Within the
limitations of the Plan, the Board of Directors may modify, extend or assume
outstanding Options or may accept the cancellation of outstanding Options
(whether granted by the Company or another issuer) in return for the grant of
new Options for the same or a different number of Shares and at the same or a
different Exercise Price. The foregoing notwithstanding, no modification of an
Option shall, without the consent of the Optionee, impair the Optionee's rights
or increase the Optionee's obligations under such Option.
(n) RESTRICTIONS ON TRANSFER OF SHARES AND MINIMUM VESTING. Any
Shares issued upon exercise of an Option shall be subject to such special
forfeiture conditions, rights of repurchase, rights of first refusal and other
transfer restrictions as the Board of Directors may determine. Such restrictions
shall be set forth in the applicable Stock Option Agreement and shall apply in
addition to any restrictions that may apply to holders of Shares generally. Any
right to repurchase an Optionee's Shares at the original Exercise Price upon
termination of the Optionee's Service shall lapse at least as rapidly as the
schedule set forth in Subsection (e) above. Any such repurchase right may be
exercised only within 90 days after the termination of the Optionee's Service
for cash or for cancellation of indebtedness incurred in purchasing the Shares.
(o) ACCELERATED VESTING. Unless the applicable Stock Option Agreement
provides otherwise, any right to repurchase an Optionee's Shares at the original
Exercise Price upon termination of the Optionee's Service shall lapse and all of
such Shares shall become vested if (i) the Company is subject to a Change in
Control and (ii) the repurchase right is not assigned to the entity that employs
the Optionee immediately after the Change in Control or to its parent or
subsidiary.
SECTION 7. PAYMENT FOR SHARES.
(a) GENERAL RULE. The entire Purchase Price or Exercise Price of
Shares issued under the Plan shall be payable in cash or cash equivalents at the
time when such Shares are purchased, except as otherwise provided in this
Section 7.
6
<PAGE> 10
(b) SURRENDER OF STOCK. To the extent that a Stock Option Agreement
so provides, payment may be made all or in part with Shares owned by the
Optionee or the Optionee's representative. Such Shares shall be surrendered to
the Company in good form for transfer and shall be valued at their Fair Market
Value on the date when the Option is exercised. This Subsection (b) shall not
apply to the extent that acceptance of Shares in payment of the Exercise Price
would cause the Company to recognize compensation expense with respect to the
Option for financial reporting purposes.
(c) SERVICES RENDERED. At the discretion of the Board of Directors,
Shares may be awarded under the Plan in consideration of services rendered to
the Company, a Parent or a Subsidiary prior to the award.
(d) PROMISSORY NOTE. To the extent that a Stock Option Agreement or
Stock Purchase Agreement so provides, all or a portion of the Exercise Price or
Purchase Price (as the case may be) of Shares issued under the Plan may be paid
with a full-recourse promissory note. The par value of the Shares, if newly
issued, shall be paid in cash or cash equivalents. The Shares shall be pledged
as security for payment of the principal amount of the promissory note and
interest thereon. The interest rate payable under the terms of the promissory
note shall not be less than the minimum rate (if any) required to avoid the
imputation of additional interest under the Code. Subject to the foregoing, the
Board of Directors (at its sole discretion) shall specify the term, interest
rate, amortization requirements (if any) and other provisions of such note.
(e) EXERCISE/SALE. To the extent that a Stock Option Agreement so
provides, and if Stock is publicly traded, payment may be made all or in part by
the delivery (on a form prescribed by the Company) of an irrevocable direction
to a securities broker approved by the Company to sell Shares and to deliver all
or part of the sales proceeds to the Company in payment of all or part of the
Exercise Price and any withholding taxes.
(f) EXERCISE/PLEDGE. To the extent that a Stock Option Agreement so
provides, and if Stock is publicly traded, payment may be made all or in part by
the delivery (on a form prescribed by the Company) of an irrevocable direction
to pledge Shares to a securities broker or lender approved by the Company, as
security for a loan, and to deliver all or part of the loan proceeds to the
Company in payment of all or part of the Exercise Price and any withholding
taxes.
SECTION 8. ADJUSTMENT OF SHARES.
(a) GENERAL. In the event of a subdivision of the outstanding Stock,
a declaration of a dividend payable in Shares, a declaration of an extraordinary
dividend payable in a form other than Shares in an amount that has a material
effect on the Fair Market Value of the Stock, a combination or consolidation of
the outstanding Stock into a lesser number of Shares, a recapitalization, a
spin-off, a reclassification or a similar occurrence, the Board of Directors
shall make appropriate adjustments in one or more of (i) the number of Shares
available for future
7
<PAGE> 11
grants under Section 4, (ii) the number of Shares covered by each outstanding
Option or (iii) the Exercise Price under each outstanding Option.
(b) MERGERS AND CONSOLIDATIONS. In the event that the Company is a party
to a merger or consolidation, outstanding Options shall be subject to the
agreement of merger or consolidation. Such agreement, without the Optionees'
consent, may provide for:
(i) The continuation of such outstanding Options by the Company
(if the Company is the surviving corporation);
(ii) The assumption of the Plan and such outstanding Options by
the surviving corporation or its parent;
(iii) The substitution by the surviving corporation or its parent
of options with substantially the same terms for such outstanding
Options; or
(iv) The cancellation of such outstanding Options without payment
of any consideration.
(c) RESERVATION OF RIGHTS. Except as provided in this Section 8, an
Optionee or Purchaser shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any dividend
or (iii) any other increase or decrease in the number of shares of stock of any
class. Any issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number or
Exercise Price of Shares subject to an Option. The grant of an Option pursuant
to the Plan shall not affect in any way the right or power of the Company to
make adjustments, reclassifications, reorganizations or changes of its capital
or business structure, to merge or consolidate or to dissolve, liquidate, sell
or transfer all or any part of its business or assets.
SECTION 9. SECURITIES LAW REQUIREMENTS.
(a) GENERAL. Shares shall not be issued under the Plan unless the
issuance and delivery of such Shares comply with (or are exempt from) all
applicable requirements of law, including (without limitation) the Securities
Act of 1933, as amended, the rules and regulations promulgated thereunder, state
securities laws and regulations, and the regulations of any stock exchange or
other securities market on which the Company's securities may then be traded.
(b) FINANCIAL REPORTS. The Company each year shall furnish to
Optionees, Purchasers and stockholders who have received Stock under the Plan
its balance sheet and income statement, unless such Optionees, Purchasers or
stockholders are key Employees whose duties with the Company assure them access
to equivalent information. Such balance sheet and income statement need not be
audited.
8
<PAGE> 12
SECTION 10. NO RETENTION RIGHTS.
Nothing in the Plan or in any right or Option granted under the Plan
shall confer upon the Purchaser or Optionee any right to continue in Service for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Company (or any Parent or Subsidiary employing or
retaining the Purchaser or Optionee) or of the Purchaser or Optionee, which
rights are hereby expressly reserved by each, to terminate his or her Service at
any time and for any reason, with or without cause.
SECTION 11. DURATION AND AMENDMENTS.
(a) TERM OF THE PLAN. The Plan, as set forth herein, shall become
effective on the date of its adoption by the Board of Directors, subject to the
approval of the Company's stockholders. In the event that the stockholders fail
to approve the Plan within 12 months after its adoption by the Board of
Directors, any grants of Options or sales or awards of Shares that have already
occurred shall be rescinded, and no additional grants, sales or awards shall be
made thereafter under the Plan. The Plan shall terminate automatically 10 years
after its adoption by the Board of Directors and may be terminated on any
earlier date pursuant to Subsection (b) below.
(b) RIGHT TO AMEND OR TERMINATE THE PLAN. The Board of Directors may
amend, suspend or terminate the Plan at any time and for any reason; provided,
however, that any amendment of the Plan which increases the number of Shares
available for issuance under the Plan (except as provided in Section 8), or
which materially changes the class of persons who are eligible for the grant of
ISOs, shall be subject to the approval of the Company's stockholders.
Stockholder approval shall not be required for any other amendment of the Plan.
On November 11, 1997, the Board of Directors amended and restated the Plan to
increase the number of Shares available for issuance under the Plan by 971,734
for a total of 1,771,734 Shares.
(c) EFFECT OF AMENDMENT OR TERMINATION. No Shares shall be issued or
sold under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Share previously issued or any Option
previously granted under the Plan.
SECTION 12. DEFINITIONS.
(a) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company, as constituted from time to time.
(b) "CHANGE IN CONTROL" shall mean:
(i) The consummation of a merger or consolidation of the Company
with or into another entity or any other corporate reorganization, if
more than 50% of the combined voting power of the continuing or
surviving entity's securities outstanding immediately after such merger,
consolidation or other reorganization
9
<PAGE> 13
is owned by persons who were not stockholders of the Company immediately
prior to such merger, consolidation or other reorganization; or
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Company's incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
(c) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" shall mean the Company's Compensation Committee or such
other committee of the Board of Directors, as described in Section 2(a).
(e) "COMPANY" shall mean Sentient Networks, Inc., a Delaware
corporation.
(f) "CONSULTANT" shall mean an individual who performs bona fide
services for the Company, a Parent or a Subsidiary as a consultant or advisor,
excluding Employees and Outside Directors.
(g) "DISABILITY" shall mean that the Optionee is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment.
(h) "EMPLOYEE" shall mean any individual who is a common-law employee of
the Company, a Parent or a Subsidiary.
(i) "EXERCISE PRICE" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Board of Directors in
the applicable Stock Option Agreement.
(j) "FAIR MARKET VALUE" shall mean the fair market value of a Share,
as determined by the Board of Directors in good faith. Such determination shall
be conclusive and binding on all persons.
(k) "ISO" shall mean an employee incentive stock option described in
Section 422(b) of the Code.
(l) "NONSTATUTORY OPTION" shall mean a stock option not described in
Sections 422(b) or 423(b) of the Code.
(m) "OPTION" shall mean an ISO or Nonstatutory Option granted under the
Plan and entitling the holder to purchase Shares.
(n) "OPTIONEE" shall mean an individual who holds an Option.
10
<PAGE> 14
(o) "OUTSIDE DIRECTOR" shall mean a member of the Board of Directors who
is not an Employee.
(p) "PARENT" shall mean any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.
(q) "PLAN" shall mean this Sentient Networks, Inc. 1997 Stock Plan.
(r) "PURCHASE PRICE" shall mean the consideration for which one Share
may be acquired under the Plan (other than upon exercise of an Option), as
specified by the Board of Directors.
(s) "PURCHASER" shall mean an individual to whom the Board of
Directors has offered the right to acquire Shares under the Plan (other than
upon exercise of an Option).
(t) "SERVICE" shall mean service as an Employee, Outside Director or
Consultant.
(u) "SHARE" shall mean one share of Stock, as adjusted in accordance
with Section 8 (if applicable).
(v) "STOCK" shall mean the Common Stock of the Company, with a par
value of $.001 per Share.
(w) "STOCK OPTION AGREEMENT" shall mean the agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to the Optionee's Option.
(x) "STOCK PURCHASE AGREEMENT" shall mean the agreement between the
Company and a Purchaser who acquires Shares under the Plan which contains the
terms, conditions and restrictions pertaining to the acquisition of such Shares.
(y) "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
11
<PAGE> 15
SECTION 13. EXECUTION.
To record the adoption of the Plan by the Board of Directors, the
Company has caused its authorized officer to execute the same.
SENTIENT NETWORKS, INC.
By:
-----------------------------------------
Title:
--------------------------------------
12
<PAGE> 1
EXHIBIT 99.2
SENTIENT NETWORKS, INC. 1997 STOCK PLAN:
SUMMARY OF STOCK PURCHASE
By your signature and the signature of the Company's representative below, you
and the Company agree that you are purchasing shares subject to the terms and
conditions of the 1997 Stock Plan and the Stock Purchase Agreement, both of
which are attached to and made a part of this document.
Name of Purchaser: [Name]
Total Number of Purchased Shares: [TotalShares]
Purchase Price Per Share: $[PricePerShare]
Date of Purchase: [DatePurchase]
Vesting Commencement Date: [VestComDate]
Vesting Schedule: The Right of Repurchase shall lapse
with respect to the first 20% of
the Purchased Shares upon the
Purchaser's completion of 12 months
of Service from the Vesting
Commencement Date and an additional
1/60 of the Purchased Shares on the
[VestDay] day of each month
thereafter.
PURCHASER: SENTIENT NETWORKS, INC.
By:
- --------------------------------- --------------------------------
Title:
- --------------------------------- -----------------------------
Print Name
<PAGE> 1
EXHIBIT 99.3
SENTIENT NETWORKS, INC. 1997 STOCK PLAN:
STOCK PURCHASE AGREEMENT
SECTION 1. ACQUISITION OF SHARES.
(a) TRANSFER. On the terms and conditions set forth in the Summary of
Stock Purchase and this Agreement, the Company agrees to transfer to the
Purchaser the number of Shares set forth in the Summary of Stock Purchase. The
transfer shall occur at the offices of the Company on the date of purchase set
forth in the Summary of Stock Purchase or at such other place and time as the
parties may agree.
(b) CONSIDERATION. The Purchaser agrees to pay the Purchase Price set
forth in the Summary of Stock Purchase for each Purchased Share. The Purchase
Price is agreed to be at least 100% of the Fair Market Value of the Purchased
Shares. Payment shall be made on the transfer date in cash or cash equivalents.
(c) STOCK PLAN AND DEFINED TERMS. The transfer of the Purchased
Shares is subject to the Plan, a copy of which the Purchaser acknowledges having
received. The provisions of the Plan are incorporated into this Agreement by
this reference. Capitalized terms are defined in Section 12 of this Agreement.
SECTION 2. RIGHT OF REPURCHASE.
(a) SCOPE OF REPURCHASE RIGHT. All Purchased Shares initially shall
be Restricted Shares and shall be subject to a right (but not an obligation) of
repurchase by the Company. The Purchaser shall not transfer, assign, encumber or
otherwise dispose of any Restricted Shares, except as provided in the following
sentence. The Purchaser may transfer Restricted Shares (i) by beneficiary
designation, will or intestate succession or (ii) to the Purchaser's spouse,
children or grandchildren or to a trust established by the Purchaser for the
benefit of the Purchaser or the Purchaser's spouse, children or grandchildren,
provided in either case that the Transferee agrees in writing on a form
prescribed by the Company to be bound by all provisions of this Agreement. If
the Purchaser transfers any Restricted Shares, then this Section 2 shall apply
to the Transferee to the same extent as to the Purchaser.
(b) CONDITION PRECEDENT TO EXERCISE. The Right of Repurchase shall be
exercisable only during the 60-day period next following the date when the
Purchaser's Service terminates for any reason, with or without cause, including
(without limitation) death or disability.
(c) LAPSE OF REPURCHASE RIGHT. The Right of Repurchase shall lapse
with respect to the Purchased Shares in accordance with the vesting schedule set
forth in the Summary of Stock Purchase. The Right of Repurchase shall lapse and
all of the remaining Restricted
<PAGE> 2
Shares shall become vested if (i) the Company is subject to a Change in Control
and (ii) the Right of Repurchase is not assigned to the entity that employs the
Purchaser immediately after the Change in Control or to its parent or
subsidiary.
(d) REPURCHASE COST. If the Company exercises the Right of
Repurchase, it shall pay the Purchaser an amount equal to the Purchase Price for
each of the Restricted Shares being repurchased.
(e) EXERCISE OF REPURCHASE RIGHT. The Right of Repurchase shall be
exercisable only by written notice delivered to the Purchaser prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall set forth the date on which the repurchase is to be effected. Such date
shall not be more than 30 days after the date of the notice. The certificate(s)
representing the Restricted Shares to be repurchased shall, prior to the close
of business on the date specified for the repurchase, be delivered to the
Company properly endorsed for transfer. The Company shall, concurrently with the
receipt of such certificate(s), pay to the Purchaser the purchase price
determined according to Subsection (d) above. Payment shall be made in cash or
cash equivalents or by canceling indebtedness to the Company incurred by the
Purchaser in the purchase of the Restricted Shares. The Right of Repurchase
shall terminate with respect to any Restricted Shares for which it has not been
timely exercised pursuant to this Subsection (e).
(f) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of the
declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as an ordinary cash dividend) which are by reason of such transaction
distributed with respect to any Restricted Shares or into which such Restricted
Shares thereby become convertible shall immediately be subject to the Right of
Repurchase. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the
Restricted Shares. Appropriate adjustments shall also, after each such
transaction, be made to the price per share to be paid upon the exercise of the
Right of Repurchase in order to reflect any change in the Company's outstanding
securities effected without receipt of consideration therefor; provided,
however, that the aggregate purchase price payable for the Restricted Shares
shall remain the same.
(g) TERMINATION OF RIGHTS AS STOCKHOLDER. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Restricted Shares to be repurchased in
accordance with this Section 2, then after such time the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
2
<PAGE> 3
(h) ESCROW. Upon issuance, the certificates for Restricted Shares
shall be deposited in escrow with the Company to be held in accordance with the
provisions of this Agreement. Any new, substituted or additional securities or
other property described in Subsection (f) above shall immediately be delivered
to the Company to be held in escrow, but only to the extent the Purchased Shares
are at the time Restricted Shares. All regular cash dividends on Restricted
Shares (or other securities at the time held in escrow) shall be paid directly
to the Purchaser and shall not be held in escrow. Restricted Shares, together
with any other assets or securities held in escrow hereunder, shall be (i)
surrendered to the Company for repurchase and cancellation upon the Company's
exercise of its Right of Repurchase or Right of First Refusal or (ii) released
to the Purchaser upon the Purchaser's request to the extent the Purchased Shares
are no longer Restricted Shares (but not more frequently than once every six
months). In any event, all Purchased Shares which have vested (and any other
vested assets and securities attributable thereto) shall be released within 60
days after the earlier of (i) the Purchaser's cessation of Service or (ii) the
lapse of the Right of First Refusal.
SECTION 3. RIGHT OF FIRST REFUSAL.
(a) RIGHT OF FIRST REFUSAL. In the event that the Purchaser proposes
to sell, pledge or otherwise transfer to a third party any Purchased Shares, or
any interest in such Purchased Shares, the Company shall have the Right of First
Refusal with respect to all (and not less than all) of such Purchased Shares. If
the Purchaser desires to transfer Purchased Shares, the Purchaser shall give a
written Transfer Notice to the Company describing fully the proposed transfer,
including the number of Purchased Shares proposed to be transferred, the
proposed transfer price, the name and address of the proposed Transferee and
proof satisfactory to the Company that the proposed sale or transfer will not
violate any applicable federal or state securities laws. The Transfer Notice
shall be signed both by the Purchaser and by the proposed Transferee and must
constitute a binding commitment of both parties to the transfer of the Purchased
Shares. The Company shall have the right to purchase all, and not less than all,
of the Purchased Shares on the terms of the proposal described in the Transfer
Notice (subject, however, to any change in such terms permitted under Subsection
(b) below) by delivery of a notice of exercise of the Right of First Refusal
within 30 days after the date when the Transfer Notice was received by the
Company. The Company's rights under this Subsection (a) shall be freely
assignable, in whole or in part.
(b) TRANSFER OF SHARES. If the Company fails to exercise its Right
of First Refusal within 30 days after the date when it received the Transfer
Notice, the Purchaser may, not later than 90 days following receipt of the
Transfer Notice by the Company, conclude a transfer of the Purchased Shares
subject to the Transfer Notice on the terms and conditions described in the
Transfer Notice, provided that any such sale is made in compliance with
applicable federal and state securities laws and not in violation of any other
contractual restrictions to which the Purchaser is bound. Any proposed transfer
on terms and conditions different from those described in the Transfer Notice,
as well as any subsequent proposed transfer by the Purchaser, shall again be
subject to the Right of First Refusal and shall require compliance with the
procedure described in Subsection (a) above. If the Company exercises its
3
<PAGE> 4
Right of First Refusal, the parties shall consummate the sale of the Purchased
Shares on the terms set forth in the Transfer Notice within 60 days after the
date when the Company received the Transfer Notice (or within such longer period
as may have been specified in the Transfer Notice); provided, however, that in
the event the Transfer Notice provided that payment for the Purchased Shares was
to be made in a form other than cash or cash equivalents paid at the time of
transfer, the Company shall have the option of paying for the Purchased Shares
with cash or cash equivalents equal to the present value of the consideration
described in the Transfer Notice.
(c) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of the
declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as an ordinary cash dividend) which are by reason of such transaction
distributed with respect to any Purchased Shares subject to this Section 3 or
into which such Purchased Shares thereby become convertible shall immediately be
subject to this Section 3. Appropriate adjustments to reflect the distribution
of such securities or property shall be made to the number and/or class of
Purchased Shares subject to this Section 3.
(d) TERMINATION OF RIGHT OF FIRST REFUSAL. Any other provision of
this Section 3 notwithstanding, in the event that the Stock is readily tradable
on an established securities market when the Purchaser desires to transfer
Purchased Shares, the Company shall have no Right of First Refusal, and the
Purchaser shall have no obligation to comply with the procedures prescribed by
Subsections (a) and (b) above.
(e) PERMITTED TRANSFERS. This Section 3 shall not apply to (i) a
transfer by beneficiary designation, will or intestate succession or (ii) a
transfer to the Purchaser's spouse, children or grandchildren or to a trust
established by the Purchaser for the benefit of the Purchaser or the Purchaser's
spouse, children or grandchildren, provided in either case that the Transferee
agrees in writing on a form prescribed by the Company to be bound by all
provisions of this Agreement. If the Purchaser transfers any Purchased Shares,
either under this Subsection (e) or after the Company has failed to exercise the
Right of First Refusal, then this Section 3 shall apply to the Transferee to the
same extent as to the Purchaser.
(f) TERMINATION OF RIGHTS AS STOCKHOLDER. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be purchased in
accordance with this Section 3, then after such time the person from whom such
Purchased Shares are to be purchased shall no longer have any rights as a holder
of such Purchased Shares (other than the right to receive payment of such
consideration in accordance with this Agreement). Such Purchased Shares shall be
deemed to have been purchased in accordance with the applicable provisions
hereof, whether or not the certificate(s) therefor have been delivered as
required by this Agreement.
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SECTION 4. OTHER RESTRICTIONS ON TRANSFER.
(a) PURCHASER REPRESENTATIONS. In connection with the issuance and
acquisition of Shares under this Agreement, the Purchaser hereby represents and
warrants to the Company as follows:
(i) The Purchaser is acquiring and will hold the Purchased
Shares for investment for his or her account only and not with a view
to, or for resale in connection with, any "distribution" thereof within
the meaning of the Securities Act.
(ii) The Purchaser understands that the Purchased Shares have
not been registered under the Securities Act by reason of a specific
exemption therefrom and that the Purchased Shares must be held
indefinitely, unless they are subsequently registered under the
Securities Act or the Purchaser obtains an opinion of counsel, in form
and substance satisfactory to the Company and its counsel, that such
registration is not required. The Purchaser further acknowledges and
understands that the Company is under no obligation to register the
Purchased Shares.
(iii) The Purchaser is aware of the adoption of Rule 144 by
the Securities and Exchange Commission under the Securities Act, which
permits limited public resales of securities acquired in a non-public
offering, subject to the satisfaction of certain conditions, including
(without limitation) the availability of certain current public
information about the issuer, the resale occurring only after the
holding period required by Rule 144 has been satisfied, the sale
occurring through an unsolicited "broker's transaction," and the amount
of securities being sold during any three-month period not exceeding
specified limitations. The Purchaser acknowledges and understands that
the conditions for resale set forth in Rule 144 have not been satisfied
and that the Company has no plans to satisfy these conditions in the
foreseeable future.
(iv) The Purchaser will not sell, transfer or otherwise
dispose of the Purchased Shares in violation of the Securities Act, the
Securities Exchange Act of 1934, or the rules promulgated thereunder,
including Rule 144 under the Securities Act. The Purchaser agrees that
he or she will not dispose of the Purchased Shares unless and until he
or she has complied with all requirements of this Agreement applicable
to the disposition of Purchased Shares and he or she has provided the
Company with written assurances, in substance and form satisfactory to
the Company, that (A) the proposed disposition does not require
registration of the Purchased Shares under the Securities Act or all
appropriate action necessary for compliance with the registration
requirements of the Securities Act or with any exemption from
registration available under the Securities Act (including Rule 144) has
been taken and (B) the proposed disposition will not result in the
contravention of any transfer restrictions applicable to the Purchased
Shares under the Rules of the California Corporations Commissioner.
(v) The Purchaser has been furnished with, and has had access
to, such information as he or she considers necessary or appropriate for
deciding whether to invest
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in the Purchased Shares, and the Purchaser has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the issuance of the Purchased Shares.
(vi) The Purchaser is aware that his or her investment in the
Company is a speculative investment which has limited liquidity and is
subject to the risk of complete loss. The Purchaser is able, without
impairing his or her financial condition, to hold the Purchased Shares
for an indefinite period and to suffer a complete loss of his or her
investment in the Purchased Shares.
(b) SECURITIES LAW RESTRICTIONS. Regardless of whether the offering
and sale of Shares under the Plan have been registered under the Securities Act
or have been registered or qualified under the securities laws of any state, the
Company at its discretion may impose restrictions upon the sale, pledge or other
transfer of the Purchased Shares (including the placement of appropriate legends
on stock certificates or the imposition of stop-transfer instructions) if, in
the judgment of the Company, such restrictions are necessary or desirable in
order to achieve compliance with the Securities Act, the securities laws of any
state or any other law.
(c) MARKET STAND-OFF. In connection with any underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act, including the Company's
initial public offering, the Purchaser shall not directly or indirectly sell,
make any short sale of, loan, hypothecate, pledge, offer, grant or sell any
option or other contract for the purchase of, purchase any option or other
contract for the sale of, or otherwise dispose of or transfer for value
(including entering into any swap or similar agreement that transfers, in whole
or in part, the economic risk of ownership of the Company's securities, whether
any such transaction described above is to be settled by delivery of Stock or
other securities, in cash or otherwise) or agree to engage in any of the
foregoing transactions with respect to, any Purchased Shares without the prior
written consent of the Company or its underwriters. Such restriction (the
"Market Stand-Off") shall be in effect for such period of time following the
date of the final prospectus for the offering as may be requested by the Company
or such underwriters. In no event, however, shall such period exceed 180 days.
The Market Stand-Off shall in any event terminate two years after the date of
the Company's initial public offering. In the event of the declaration of a
stock dividend, a spin-off, a stock split, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company's outstanding
securities without receipt of consideration, any new, substituted or additional
securities which are by reason of such transaction distributed with respect to
any Shares subject to the Market Stand-Off, or into which such Shares thereby
become convertible, shall immediately be subject to the Market Stand-Off. In
order to enforce the Market Stand-Off, the Company may impose stop-transfer
instructions with respect to the Purchased Shares until the end of the
applicable stand-off period. The Company's underwriters shall be beneficiaries
of the agreement set forth in this Subsection (c). This Subsection (c) shall not
apply to Shares registered in the public offering under the Securities Act, and
the Purchaser shall be subject to
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this Subsection (c) only if the directors and officers of the Company are
subject to similar arrangements.
(d) RIGHTS OF THE COMPANY. The Company shall not be required to (i)
transfer on its books any Purchased Shares that have been sold or transferred in
contravention of this Agreement or (ii) treat as the owner of Purchased Shares,
or otherwise to accord voting, dividend or liquidation rights to, any transferee
to whom Purchased Shares have been transferred in contravention of this
Agreement.
SECTION 5. SUCCESSORS AND ASSIGNS.
Except as otherwise expressly provided to the contrary, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the Company and its successors and assigns and be binding upon the Purchaser and
the Purchaser's legal representatives, heirs, legatees, distributees, assigns
and transferees by operation of law, whether or not any such person has become a
party to this Agreement or has agreed in writing to join herein and to be bound
by the terms, conditions and restrictions hereof.
SECTION 6. NO RETENTION RIGHTS.
Nothing in this Agreement or in the Plan shall confer upon the
Purchaser any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Company (or
any Parent or Subsidiary employing or retaining the Purchaser) or of the
Purchaser, which rights are hereby expressly reserved by each, to terminate his
or her Service at any time and for any reason, with or without cause.
SECTION 7. TAX ELECTION.
The acquisition of the Purchased Shares may result in adverse tax
consequences that may be avoided or mitigated by filing an election under Code
Section 83(b). Such election may be filed only within 30 days after the date of
purchase set forth in the Summary of Stock Purchase. The form for making the
Code Section 83(b) election is attached to this Agreement as an Exhibit. THE
PURCHASER SHOULD CONSULT WITH HIS OR HER TAX ADVISOR TO DETERMINE THE TAX
CONSEQUENCES OF ACQUIRING THE PURCHASED SHARES AND THE ADVANTAGES AND
DISADVANTAGES OF FILING THE CODE SECTION 83(b) ELECTION. THE PURCHASER
ACKNOWLEDGES THAT IT IS HIS OR HER SOLE RESPONSIBILITY, AND NOT THE COMPANY'S,
TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF THE PURCHASER
REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS OR HER
BEHALF.
SECTION 8. LEGENDS.
LEGENDS. All certificates evidencing Purchased Shares shall bear
the following legends:
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"THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE
TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES).
SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL
UPON AN ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN REPURCHASE RIGHTS
UPON TERMINATION OF SERVICE WITH THE COMPANY. THE SECRETARY OF THE
COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO
THE HOLDER HEREOF WITHOUT CHARGE."
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
If required by the authorities of any state in connection with the issuance of
the Purchased Shares, the legend or legends required by such state authorities
shall also be endorsed on all such certificates.
SECTION 9. NOTICE.
Any notice required by the terms of this Agreement shall be given
in writing and shall be deemed effective upon personal delivery or upon deposit
with the United States Postal Service, by registered or certified mail, with
postage and fees prepaid. Notice shall be addressed to the Company at its
principal executive office and to the Purchaser at the address that he or she
most recently provided to the Company.
SECTION 10. ENTIRE AGREEMENT.
The Summary of Stock Purchase, this Agreement and the Plan
constitute the entire contract between the parties hereto with regard to the
subject matter hereof. They supersede any other agreements, representations or
understandings (whether oral or written and whether express or implied) which
relate to the subject matter hereof.
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SECTION 11. CHOICE OF LAW.
This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California, as such laws are applied to contracts
entered into and performed in such State.
SECTION 12. DEFINITIONS.
(a) "AGREEMENT" shall mean this Stock Purchase Agreement.
(b) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company, as constituted from time to time or, if a Committee has been appointed,
such Committee.
(c) "CHANGE IN CONTROL" shall mean:
(i) The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate
reorganization, if more than 50% of the combined voting power of the
continuing or surviving entity's securities outstanding immediately
after such merger, consolidation or other reorganization is owned by
persons who were not stockholders of the Company immediately prior to
such merger, consolidation or other reorganization; or
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets.
A transaction shall not constitute a Change in Control if its
sole purpose is to change the state of the Company's incorporation or to create
a holding company that will be owned in substantially the same proportions by
the persons who held the Company's securities immediately before such
transaction.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" shall mean a committee of the Board of Directors, as
described in Section 2 of the Plan.
(f) "COMPANY" shall mean Sentient Networks, Inc., a Delaware
corporation.
(g) "CONSULTANT" shall mean an individual who performs bona fide
services for the Company, a Parent or a Subsidiary as a consultant or advisor,
excluding Employees and Outside Directors.
(h) "EMPLOYEE" shall mean any individual who is a common-law employee
of the Company, a Parent or a Subsidiary.
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<PAGE> 10
(i) "FAIR MARKET VALUE" shall mean the fair market value of a Share,
as determined by the Board of Directors in good faith. Such determination shall
be conclusive and binding on all persons.
(j) "OUTSIDE DIRECTOR" shall mean a member of the Board of Directors
who is not an Employee.
(k) "PARENT" shall mean any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
(l) "PLAN" shall mean the Sentient Networks, Inc. 1997 Stock Plan, as
amended.
(m) "PURCHASED SHARES" shall mean the Shares purchased by the
Purchaser pursuant to this Agreement.
(n) "PURCHASE PRICE" shall mean the amount for which one Share may be
purchased pursuant to this Agreement, as specified in the Summary of Stock
Purchase.
(o) "PURCHASER" shall mean the individual named in the Summary of
Stock Purchase.
(p) "RESTRICTED SHARE" shall mean a Purchased Share that is subject
to the Right of Repurchase.
(q) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 3.
(r) "RIGHT OF REPURCHASE" shall mean the Company's right of
repurchase described in Section 2.
(s) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(t) "SERVICE" shall mean service as an Employee, Outside Director or
Consultant.
(u) "SHARE" shall mean one share of Stock, as adjusted in accordance
with Section 8 of the Plan (if applicable).
(v) "STOCK" shall mean the Common Stock of the Company, with a par
value of $.001 per Share.
(w) "SUBSIDIARY" shall mean any corporation (other than the Company)
in an unbroken chain or corporations beginning with the Company, if each of the
corporations other than the last corporation in the unbroken chain owns stock
possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
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(x) "SUMMARY OF STOCK PURCHASE" shall mean the document so entitled
to which this Agreement is attached.
(y) "TRANSFEREE" shall mean any person to whom the Purchaser has
directly or indirectly transferred any Purchased Share.
(z) "TRANSFER NOTICE" shall mean the notice of a proposed transfer of
Purchased Shares described in Section 3.
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EXHIBIT I
SECTION 83(b) ELECTION
This statement is made under Section 83(b) of the Internal Revenue Code of 1986,
as amended, pursuant to Treasury Regulations Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Social Security No.:
(2) The property with respect to which the election is made is ______ shares
of the common stock of Sentient Networks, Inc.
(3) The property was transferred on ________ __, 199__.
(4) The taxable year for which the election is made is the calendar year
199__.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of
installments over a ______-year period ending on ___________,____.
(6) The fair market value of such property at the time of transfer
(determined without regard to any restriction other than a restriction
which by its terms will never lapse) is $___ per share.
(7) The amount paid for such property is $____ per share.
(8) A copy of this statement was furnished to Sentient Networks, Inc., for
whom taxpayer rendered the services underlying the transfer of such
property.
(9) This statement is executed on _______ __, 199___.
- -------------------------------------- ----------------------------------
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
the Purchaser files his or her Federal income tax returns and must be filed
within 30 days after the date of purchase. This filing should be made by
registered or certified mail, return receipt requested. The Purchaser must
retain two copies of the completed form for filing with his or her Federal and
state tax returns for the current tax year and an additional copy for his or her
records.
<PAGE> 1
EXHIBIT 99.4
THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE
EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.
SENTIENT NETWORKS, INC. 1997 STOCK PLAN:
STOCK OPTION AGREEMENT
SECTION 1. GRANT OF OPTION.
(a) OPTION. On the terms and conditions set forth in the Notice of
Stock Option Grant and this Agreement, the Company grants to the Optionee on the
Date of Grant the option to purchase at the Exercise Price the number of Shares
set forth in the Notice of Stock Option Grant. The Exercise Price is agreed to
be at least 100% of the Fair Market Value per Share on the Date of Grant (110%
of Fair Market Value if Section 3(b) of the Plan applies). This option is
intended to be an ISO or a Nonstatutory Option, as provided in the Notice of
Stock Option Grant.
(b) STOCK PLAN AND DEFINED TERMS. This option is granted pursuant to
the Plan, a copy of which the Optionee acknowledges having received. The
provisions of the Plan are incorporated into this Agreement by this reference.
Capitalized terms are defined in Section 14 of this Agreement.
SECTION 2. RIGHT TO EXERCISE.
(a) EXERCISABILITY. Subject to Subsections (b) and (c) below and the
other conditions set forth in this Agreement, all or part of this option may be
exercised prior to its expiration at the time or times set forth in the Notice
of Stock Option Grant. Shares purchased by exercising this option may be subject
to the Right of Repurchase under Section 7.
(b) $100,000 LIMITATION. If this Option is designated as an ISO in
the Notice of Stock Option Grant, then the Optionee's right to exercise this
option shall be deferred to the extent (and only to the extent) that this option
otherwise would not be treated as an ISO by reason of the $100,000 annual
limitation under Section 422(d) of the Code, except that:
(i) The Optionee's right to exercise this option shall not be
deferred with respect to that portion of the Shares subject to this
option whose Fair Market Value as of the Date of Grant exceeds $500,000;
and
(ii) The Optionee's right to exercise this option shall no
longer be deferred in the event that (A) a Change in Control occurs, (B)
this option is not assumed
<PAGE> 2
by the surviving corporation or its parent and (C) the surviving
corporation or its parent does not substitute its own option for this
option.
(c) STOCKHOLDER APPROVAL. Any other provision of this Agreement
notwithstanding, no portion of this option shall be exercisable at any time
prior to the approval of the Plan by the Company's stockholders.
SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.
Except as otherwise provided in this Agreement, this option and
the rights and privileges conferred hereby shall not be sold, pledged or
otherwise transferred (whether by operation of law or otherwise) and shall not
be subject to sale under execution, attachment, levy or similar process.
SECTION 4. EXERCISE PROCEDURES.
(a) NOTICE OF EXERCISE. The Optionee or the Optionee's
representative may exercise this option by giving written notice to the Company
pursuant to Section 13(c). The notice shall specify the election to exercise
this option, the number of Shares for which it is being exercised and the form
of payment. The notice shall be signed by the person exercising this option. In
the event that this option is being exercised by the representative of the
Optionee, the notice shall be accompanied by proof (satisfactory to the Company)
of the representative's right to exercise this option. The Optionee or the
Optionee's representative shall deliver to the Company, at the time of giving
the notice, payment in a form permissible under Section 5 for the full amount of
the Purchase Price.
(b) ISSUANCE OF SHARES. After receiving a proper notice of exercise,
the Company shall cause to be issued a certificate or certificates for the
Shares as to which this option has been exercised, registered in the name of the
person exercising this option (or in the names of such person and his or her
spouse as community property or as joint tenants with right of survivorship).
The Company shall cause such certificate or certificates to be deposited in
escrow or delivered to or upon the order of the person exercising this option.
(c) WITHHOLDING TAXES. In the event that the Company determines that
it is required to withhold any tax as a result of the exercise of this option,
the Optionee, as a condition to the exercise of this option, shall make
arrangements satisfactory to the Company to enable it to satisfy all withholding
requirements. The Optionee shall also make arrangements satisfactory to the
Company to enable it to satisfy any withholding requirements that may arise in
connection with the vesting or disposition of Shares purchased by exercising
this option.
SECTION 5. PAYMENT FOR STOCK.
(a) CASH. All or part of the Purchase Price may be paid in cash or
cash equivalents.
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<PAGE> 3
(b) SURRENDER OF STOCK. All or part of the Purchase Price may be
paid by the surrender of Shares in good form for transfer. Such Shares must have
a fair market value (as determined by the Board of Directors) on the date of
exercise of this option which, together with any amount paid in another form
permissible under this Section 5, is equal to the Purchase Price. The Optionee
shall not surrender Shares in payment of the Exercise Price if such surrender
would cause the Company to recognize compensation expense with respect to the
option for financial reporting purposes.
(c) EXERCISE/SALE. If Stock is publicly traded, all or part of the
Purchase Price and any withholding taxes may be paid by the delivery (on a form
prescribed by the Company) of an irrevocable direction to a securities broker
approved by the Company to sell Shares and to deliver all or part of the sales
proceeds to the Company.
(d) EXERCISE/PLEDGE. If Stock is publicly traded, all or part of the
Purchase Price and any withholding taxes may be paid by the delivery (on a form
prescribed by the Company) of an irrevocable direction to pledge Shares to a
securities broker or lender approved by the Company, as security for a loan, and
to deliver all or part of the loan proceeds to the Company.
SECTION 6. TERM AND EXPIRATION.
(a) BASIC TERM. This option shall in any event expire on the
expiration date set forth in the Notice of Stock Option Grant, which date is 10
years after the Date of Grant (five years after the Date of Grant if this option
is designated as an ISO in the Notice of Stock Option Grant and Section 3(b) of
the Plan applies).
(b) TERMINATION OF SERVICE (EXCEPT BY DEATH). If the Optionee's
Service terminates for any reason other than death, then this option shall
expire on the earliest of the following occasions:
(i) The expiration date determined pursuant to Subsection (a)
above;
(ii) The date three months after the termination of the
Optionee's Service for any reason other than Disability; or
(iii) The date six months after the termination of the
Optionee's Service by reason of Disability.
The Optionee may exercise all or part of this option at any time before its
expiration under the preceding sentence, but only to the extent that this option
had become exercisable before the Optionee's Service terminated. When the
Optionee's Service terminates, this option shall expire immediately with respect
to the number of Shares for which this option is not yet exercisable and with
respect to any Restricted Shares. In the event that the Optionee dies after
termination of Service but before the expiration of this option, all or part of
this option may be exercised (prior to expiration) by the executors or
administrators of the Optionee's estate or by any person who has acquired this
option directly from the Optionee by beneficiary designation, bequest or
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<PAGE> 4
inheritance, but only to the extent that this option had become exercisable
before the Optionee's Service terminated.
(c) DEATH OF THE OPTIONEE. If the Optionee dies while in Service,
then this option shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection (a)
above; or
(ii) The date 12 months after the Optionee's death.
All or part of this option may be exercised at any time before its expiration
under the preceding sentence by the executors or administrators of the
Optionee's estate or by any person who has acquired this option directly from
the Optionee by beneficiary designation, bequest or inheritance, but only to the
extent that this option had become exercisable before the Optionee's death. When
the Optionee dies, this option shall expire immediately with respect to the
number of Shares for which this option is not yet exercisable and with respect
to any Restricted Shares.
(d) LEAVES OF ABSENCE. For any purpose under this Agreement, Service
shall be deemed to continue while the Optionee is on a bona fide leave of
absence, if such leave was approved by the Company in writing and if continued
crediting of Service for such purpose is expressly required by the terms of such
leave or by applicable law (as determined by the Company).
(e) NOTICE CONCERNING ISO TREATMENT. If this option is designated as
an ISO in the Notice of Stock Option Grant, it ceases to qualify for favorable
tax treatment as an ISO to the extent it is exercised (i) more than three months
after the date the Optionee ceases to be an Employee for any reason other than
death or permanent and total disability (as defined in Section 22(e)(3) of the
Code), (ii) more than 12 months after the date the Optionee ceases to be an
Employee by reason of such permanent and total disability or (iii) after the
Optionee has been on a leave of absence for more than 90 days, unless the
Optionee's reemployment rights are guaranteed by statute or by contract.
SECTION 7. RIGHT OF REPURCHASE.
(a) SCOPE OF REPURCHASE RIGHT. Unless they have become vested in
accordance with the Notice of Stock Option Grant and Subsection (c) below, the
Shares acquired under this Agreement initially shall be Restricted Shares and
shall be subject to a right (but not an obligation) of repurchase by the
Company. The Optionee shall not transfer, assign, encumber or otherwise dispose
of any Restricted Shares, except as provided in the following sentence. The
Optionee may transfer Restricted Shares (i) by beneficiary designation, will or
intestate succession or (ii) to the Optionee's spouse, children or grandchildren
or to a trust established by the Optionee for the benefit of the Optionee or the
Optionee's spouse, children or grandchildren, provided in either case that the
Transferee agrees in writing on a form prescribed by the Company to be bound by
all provisions of this Agreement. If the Optionee transfers any Restricted
Shares, then this Section 7 shall apply to the Transferee to the same extent as
to the Optionee.
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(b) CONDITION PRECEDENT TO EXERCISE. The Right of Repurchase shall
be exercisable only during the 60-day period next following the later of:
(i) The date when the Optionee's Service terminates for any
reason, with or without Cause, including (without limitation) death or
disability; or
(ii) The date when this option was exercised by the Optionee,
the executors or administrators of the Optionee's estate or any person
who has acquired this option directly from the Optionee by bequest,
inheritance or beneficiary designation.
(c) LAPSE OF REPURCHASE RIGHT. The Right of Repurchase shall lapse
with respect to the Shares subject to this option in accordance with the vesting
schedule set forth in the Notice of Stock Option Grant. The Right of Repurchase
shall lapse and all of the remaining Restricted Shares shall become vested if
(i) the Company is subject to a Change in Control and (ii) the Right of
Repurchase is not assigned to the entity that employs the Optionee immediately
after the Change in Control or to its parent or subsidiary. Notwithstanding the
foregoing, effective October 1, 1998, in the event that the Right of Repurchase
is assigned to the entity that employs the Optionee immediately after the Change
in Control or to its parent or subsidiary and the Optionee experiences an
Involuntary Termination within twelve months following a Change in Control, the
Right of Repurchase shall lapse and an additional number of Restricted Shares
shall become vested as if the Optionee provided an additional eighteen (18)
months of Service.
(d) REPURCHASE COST. If the Company exercises the Right of
Repurchase, it shall pay the Optionee an amount equal to the Exercise Price for
each of the Restricted Shares being repurchased.
(e) EXERCISE OF REPURCHASE RIGHT. The Right of Repurchase shall be
exercisable only by written notice delivered to the Optionee prior to the
expiration of the 60-day period specified in Subsection (b) above. The notice
shall set forth the date on which the repurchase is to be effected. Such date
shall not be more than 30 days after the date of the notice. The certificate(s)
representing the Restricted Shares to be repurchased shall, prior to the close
of business on the date specified for the repurchase, be delivered to the
Company properly endorsed for transfer. The Company shall, concurrently with the
receipt of such certificate(s), pay to the Optionee the purchase price
determined according to Subsection (d) above. Payment shall be made in cash or
cash equivalents or by canceling indebtedness to the Company incurred by the
Optionee in the purchase of the Restricted Shares. The Right of Repurchase shall
terminate with respect to any Restricted Shares for which it has not been timely
exercised pursuant to this Subsection (e).
(f) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of the
declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as an ordinary cash dividend) which are by reason of such transaction
distributed with respect to any Restricted Shares or into which such Restricted
Shares thereby become convertible shall immediately be subject to the Right of
Repurchase. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the
Restricted Shares. Appropriate adjustments shall also, after each such
transaction, be made to the price per share to be paid upon the exercise of the
Right of Repurchase in order to reflect any change in the Company's outstanding
securities effected without receipt of consideration
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<PAGE> 6
therefor; provided, however, that the aggregate purchase price payable for the
Restricted Shares shall remain the same.
(g) TERMINATION OF RIGHTS AS STOCKHOLDER. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Restricted Shares to be repurchased in
accordance with this Section 7, then after such time the person from whom such
Restricted Shares are to be repurchased shall no longer have any rights as a
holder of such Restricted Shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such Restricted Shares
shall be deemed to have been repurchased in accordance with the applicable
provisions hereof, whether or not the certificate(s) therefor have been
delivered as required by this Agreement.
(h) ESCROW. Upon issuance, the certificates for Restricted Shares
shall be deposited in escrow with the Company to be held in accordance with the
provisions of this Agreement. Any new, substituted or additional securities or
other property described in Subsection (f) above shall immediately be delivered
to the Company to be held in escrow, but only to the extent the Shares are at
the time Restricted Shares. All regular cash dividends on Restricted Shares (or
other securities at the time held in escrow) shall be paid directly to the
Optionee and shall not be held in escrow. Restricted Shares, together with any
other assets or securities held in escrow hereunder, shall be (i) surrendered to
the Company for repurchase and cancellation upon the Company's exercise of its
Right of Repurchase or Right of First Refusal or (ii) released to the Optionee
upon the Optionee's request to the extent the Shares are no longer Restricted
Shares (but not more frequently than once every six months). In any event, all
Shares which have vested (and any other vested assets and securities
attributable thereto) shall be released within 60 days after the earlier of (i)
the Optionee's cessation of Service or (ii) the lapse of the Right of First
Refusal.
SECTION 8. RIGHT OF FIRST REFUSAL.
(a) RIGHT OF FIRST REFUSAL. In the event that the Optionee proposes
to sell, pledge or otherwise transfer to a third party any Shares acquired under
this Agreement, or any interest in such Shares, the Company shall have the Right
of First Refusal with respect to all (and not less than all) of such Shares. If
the Optionee desires to transfer Shares acquired under this Agreement, the
Optionee shall give a written Transfer Notice to the Company describing fully
the proposed transfer, including the number of Shares proposed to be
transferred, the proposed transfer price, the name and address of the proposed
Transferee and proof satisfactory to the Company that the proposed sale or
transfer will not violate any applicable federal or state securities laws. The
Transfer Notice shall be signed both by the Optionee and by the proposed
Transferee and must constitute a binding commitment of both parties to the
transfer of the Shares. The Company shall have the right to purchase all, and
not less than all, of the Shares on the terms of the proposal described in the
Transfer Notice (subject, however, to any change in such terms permitted under
Subsection (b) below) by delivery of a notice of exercise of the Right of First
Refusal within 30 days after the date when the Transfer Notice was received by
the Company. The Company's rights under this Subsection (a) shall be freely
assignable, in whole or in part.
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<PAGE> 7
(b) TRANSFER OF SHARES. If the Company fails to exercise its Right
of First Refusal within 30 days after the date when it received the Transfer
Notice, the Optionee may, not later than 90 days following receipt of the
Transfer Notice by the Company, conclude a transfer of the Shares subject to the
Transfer Notice on the terms and conditions described in the Transfer Notice,
provided that any such sale is made in compliance with applicable federal and
state securities laws and not in violation of any other contractual restrictions
to which the Optionee is bound. Any proposed transfer on terms and conditions
different from those described in the Transfer Notice, as well as any subsequent
proposed transfer by the Optionee, shall again be subject to the Right of First
Refusal and shall require compliance with the procedure described in Subsection
(a) above. If the Company exercises its Right of First Refusal, the parties
shall consummate the sale of the Shares on the terms set forth in the Transfer
Notice within 60 days after the date when the Company received the Transfer
Notice (or within such longer period as may have been specified in the Transfer
Notice); provided, however, that in the event the Transfer Notice provided that
payment for the Shares was to be made in a form other than cash or cash
equivalents paid at the time of transfer, the Company shall have the option of
paying for the Shares with cash or cash equivalents equal to the present value
of the consideration described in the Transfer Notice.
(c) ADDITIONAL SHARES OR SUBSTITUTED SECURITIES. In the event of the
declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities or other property (including money paid
other than as an ordinary cash dividend) which are by reason of such transaction
distributed with respect to any Shares subject to this Section 8 or into which
such Shares thereby become convertible shall immediately be subject to this
Section 8. Appropriate adjustments to reflect the distribution of such
securities or property shall be made to the number and/or class of the Shares
subject to this Section 8.
(d) TERMINATION OF RIGHT OF FIRST REFUSAL. Any other provision of
this Section 8 notwithstanding, in the event that the Stock is readily tradable
on an established securities market when the Optionee desires to transfer
Shares, the Company shall have no Right of First Refusal, and the Optionee shall
have no obligation to comply with the procedures prescribed by Subsections (a)
and (b) above.
(e) PERMITTED TRANSFERS. This Section 8 shall not apply to (i) a
transfer by beneficiary designation, will or intestate succession or (ii) a
transfer to the Optionee's spouse, children or to a trust established by the
Optionee for the benefit of the Optionee or the Optionee's spouse, children or
grandchildren, provided in either case that the Transferee agrees in writing on
a form prescribed by the Company to be bound by all provisions of this
Agreement. If the Optionee transfers any Shares acquired under this Agreement,
either under this Subsection (e) or after the Company has failed to exercise the
Right of First Refusal, then this Section 8 shall apply to the Transferee to the
same extent as to the Optionee.
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<PAGE> 8
(f) TERMINATION OF RIGHTS AS STOCKHOLDER. If the Company makes
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Shares to be purchased in accordance with
this Section 8, then after such time the person from whom such Shares are to be
purchased shall no longer have any rights as a holder of such Shares (other than
the right to receive payment of such consideration in accordance with this
Agreement). Such Shares shall be deemed to have been purchased in accordance
with the applicable provisions hereof, whether or not the certificate(s)
therefor have been delivered as required by this Agreement.
SECTION 9. LEGALITY OF INITIAL ISSUANCE.
No Shares shall be issued upon the exercise of this option unless
and until the Company has determined that:
(a) It and the Optionee have taken any actions required to register
the Shares under the Securities Act or to perfect an exemption from the
registration requirements thereof;
(b) Any applicable listing requirement of any stock exchange on
which Stock is listed has been satisfied; and
(c) Any other applicable provision of state or federal law has been
satisfied.
SECTION 10. NO REGISTRATION RIGHTS.
The Company may, but shall not be obligated to, register or
qualify the sale of Shares under the Securities Act or any other applicable law.
The Company shall not be obligated to take any affirmative action in order to
cause the sale of Shares under this Agreement to comply with any law.
SECTION 11. RESTRICTIONS ON TRANSFER.
(a) SECURITIES LAW RESTRICTIONS. Regardless of whether the offering
and sale of Shares under the Plan have been registered under the Securities Act
or have been registered or qualified under the securities laws of any state, the
Company at its discretion may impose restrictions upon the sale, pledge or other
transfer of such Shares (including the placement of appropriate legends on stock
certificates or the imposition of stop-transfer instructions) if, in the
judgment of the Company, such restrictions are necessary or desirable in order
to achieve compliance with the Securities Act, the securities laws of any state
or any other law.
(b) MARKET STAND-OFF. In connection with any underwritten public
offering by the Company of its equity securities pursuant to an effective
registration statement filed under the Securities Act, including the Company's
initial public offering, the Optionee shall not directly or indirectly sell,
make any short sale of, loan, hypothecate, pledge, offer, grant or sell any
option or other contract for the purchase of, purchase any option or other
contract for the sale of, or otherwise dispose of or transfer for value
(including entering into any swap or similar agreement that transfers, in whole
or in part, the economic risk of ownership of the Company's securities,
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<PAGE> 9
whether any such transaction described above is to be settled by delivery of
Stock or other securities, in cash or otherwise) or agree to engage in any of
the foregoing transactions with respect to, any Shares acquired under this
Agreement without the prior written consent of the Company or its underwriters.
Such restriction (the "Market Stand-Off") shall be in effect for such period of
time following the date of the final prospectus for the offering as may be
requested by the Company or such underwriters. In no event, however, shall such
period exceed 180 days. The Market Stand-Off shall in any event terminate two
years after the date of the Company's initial public offering. In the event of
the declaration of a stock dividend, a spin-off, a stock split, an adjustment in
conversion ratio, a recapitalization or a similar transaction affecting the
Company's outstanding securities without receipt of consideration, any new,
substituted or additional securities which are by reason of such transaction
distributed with respect to any Shares subject to the Market Stand-Off, or into
which such Shares thereby become convertible, shall immediately be subject to
the Market Stand-Off. In order to enforce the Market Stand-Off, the Company may
impose stop-transfer instructions with respect to the Shares acquired under this
Agreement until the end of the applicable stand-off period. The Company's
underwriters shall be beneficiaries of the agreement set forth in this
Subsection (b). This Subsection (b) shall not apply to Shares registered in the
public offering under the Securities Act, and the Optionee shall be subject to
this Subsection (b) only if the directors and officers of the Company are
subject to similar arrangements.
(c) INVESTMENT INTENT AT GRANT. The Optionee represents and agrees
that the Shares to be acquired upon exercising this option will be acquired for
investment, and not with a view to the sale or distribution thereof.
(d) INVESTMENT INTENT AT EXERCISE. In the event that the sale of
Shares under the Plan is not registered under the Securities Act but an
exemption is available which requires an investment representation or other
representation, the Optionee shall represent and agree at the time of exercise
that the Shares being acquired upon exercising this option are being acquired
for investment, and not with a view to the sale or distribution thereof, and
shall make such other representations as are deemed necessary or appropriate by
the Company and its counsel.
(e) LEGENDS. All certificates evidencing Shares purchased under this
Agreement shall bear the following legend:
"THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED,
ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE
TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED
HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES).
SUCH AGREEMENT GRANTS TO THE COMPANY CERTAIN RIGHTS OF FIRST REFUSAL
UPON AN ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN REPURCHASE RIGHTS
UPON TERMINATION OF SERVICE WITH THE COMPANY. THE SECRETARY OF THE
COMPANY WILL UPON WRITTEN REQUEST
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<PAGE> 10
FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE."
All certificates evidencing Shares purchased under this Agreement in an
unregistered transaction shall bear the following legend (and such other
restrictive legends as are required or deemed advisable under the provisions of
any applicable law):
"THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR
OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER
SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS
COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED."
(f) REMOVAL OF LEGENDS. If, in the opinion of the Company and its
counsel, any legend placed on a stock certificate representing Shares sold under
this Agreement is no longer required, the holder of such certificate shall be
entitled to exchange such certificate for a certificate representing the same
number of Shares but without such legend.
(g) ADMINISTRATION. Any determination by the Company and its counsel
in connection with any of the matters set forth in this Section 11 shall be
conclusive and binding on the Optionee and all other persons.
SECTION 12. ADJUSTMENT OF SHARES.
In the event of any transaction described in Section 8(a) of the
Plan, the terms of this option (including, without limitation, the number and
kind of Shares subject to this option and the Exercise Price) shall be adjusted
as set forth in Section 8(a) of the Plan. In the event that the Company is a
party to a merger or consolidation, this option shall be subject to the
agreement of merger or consolidation, as provided in Section 8(b) of the Plan.
SECTION 13. MISCELLANEOUS PROVISIONS.
(a) RIGHTS AS A STOCKHOLDER. Neither the Optionee nor the Optionee's
representative shall have any rights as a stockholder with respect to any Shares
subject to this option until the Optionee or the Optionee's representative
becomes entitled to receive such Shares by filing a notice of exercise and
paying the Purchase Price pursuant to Sections 4 and 5.
(b) NO RETENTION RIGHTS. Nothing in this option or in the Plan shall
confer upon the Optionee any right to continue in Service for any period of
specific duration or interfere with or otherwise restrict in any way the rights
of the Company (or any Parent or Subsidiary employing or retaining the Optionee)
or of the Optionee, which rights are hereby expressly reserved by each, to
terminate his or her Service at any time and for any reason, with or without
Cause.
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(c) NOTICE. Any notice required by the terms of this Agreement shall
be given in writing and shall be deemed effective upon personal delivery or upon
deposit with the United States Postal Service, by registered or certified mail,
with postage and fees prepaid. Notice shall be addressed to the Company at its
principal executive office and to the Optionee at the address that he or she
most recently provided to the Company.
(d) ENTIRE AGREEMENT. The Notice of Stock Option Grant, this
Agreement and the Plan constitute the entire contract between the parties hereto
with regard to the subject matter hereof. They supersede any other agreements,
representations or understandings (whether oral or written and whether express
or implied) which relate to the subject matter hereof.
(e) CHOICE OF LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California, as such laws
are applied to contracts entered into and performed in such State.
SECTION 14. DEFINITIONS.
(a) "AGREEMENT" shall mean this Stock Option Agreement.
(b) "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company, as constituted from time to time or, if a Committee has been appointed,
such Committee.
(c) "CAUSE" shall mean (i) the unauthorized use or disclosure of the
confidential information or trade secrets of the Company, which use causes
material harm to the Company, (ii) conviction of a felony under the laws of the
United States or any state thereof, (iii) gross negligence or (iv) repeated
failure to perform lawful assigned duties for 30 days after receiving written
notification from the Company.
(d) "CHANGE IN CONTROL" shall mean:
(i) The consummation of a merger or consolidation of the
Company with or into another entity or any other corporate
reorganization, if more than 50% of the combined voting power of the
continuing or surviving entity's securities outstanding immediately
after such merger, consolidation or other reorganization is owned by
persons who were not stockholders of the Company immediately prior to
such merger, consolidation or other reorganization; or
(ii) The sale, transfer or other disposition of all or
substantially all of the Company's assets.
A transaction shall not constitute a Change in Control if its
sole purpose is to change the state of the Company's incorporation or to create
a holding company that will be owned in substantially the same proportions by
the persons who held the Company's securities immediately before such
transaction.
(e) "CODE" shall mean the Internal Revenue Code of 1986, as amended.
(f) "COMMITTEE" shall mean a committee of the Board of Directors, as
described in Section 2 of the Plan.
(g) "COMPANY" shall mean Sentient Networks, Inc., a Delaware
corporation.
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(h) "CONSULTANT" shall mean an individual who performs bona fide
services for the Company, a Parent or a Subsidiary as a consultant or advisor,
excluding Employees and Outside Directors.
(i) "DATE OF GRANT" shall mean the date specified in the Notice of
Stock Option Grant, which date shall be the later of (i) the date on which the
Board of Directors resolved to grant this option or (ii) the first day of the
Optionee's Service.
(j) "DISABILITY" shall mean that the Optionee is unable to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment.
(k) "EMPLOYEE" shall mean any individual who is a common-law
employee of the Company, a Parent or a Subsidiary.
(l) "EXERCISE PRICE" shall mean the amount for which one Share may
be purchased upon exercise of this option, as specified in the Notice of Stock
Option Grant.
(m) "FAIR MARKET VALUE" shall mean the fair market value of a Share,
as determined by the Board of Directors in good faith. Such determination shall
be conclusive and binding on all persons.
(n) "INVOLUNTARY TERMINATION" shall mean the termination of the
Optionee's Service which occurs by reason of: (i) an involuntary dismissal or
discharge by the Company for reasons other than for Cause; or (ii) voluntary
resignation following (A) a change in the Optionee's position with the Company
(or Parent or Subsidiary employing the Optionee) which materially reduces the
Optionee's level of responsibility, (B) a reduction in the Optionee's level of
compensation (including base salary, fringe benefits and participation in
corporate-performance based bonus or incentive programs) by more than fifteen
percent (15%) or (C) a relocation of the workplace of the Optionee by more than
50 miles away from the workplace designated by the Company on the Optionee's
initial date of Service.
(o) "ISO" shall mean an employee incentive stock option described in
Section 422(b) of the Code.
(p) "NONSTATUTORY OPTION" shall mean a stock option not described in
Sections 422(b) or 423(b) of the Code.
(q) "NOTICE OF STOCK OPTION GRANT" shall mean the document so
entitled to which this Agreement is attached.
(r) "OPTIONEE" shall mean the individual named in the Notice of
Stock Option Grant.
(s) "OUTSIDE DIRECTOR" shall mean a member of the Board of Directors
who is not an Employee.
(t) "PARENT" shall mean any corporation (other than the Company) in
an unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
(u) "PLAN" shall mean the Sentient Networks, Inc. 1997 Stock Plan,
as in effect on the Date of Grant.
(v) "PURCHASE PRICE" shall mean the Exercise Price multiplied by the
number of Shares with respect to which this option is being exercised.
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(w) "RESTRICTED SHARE" shall mean a Share that is subject to the
Right of Repurchase.
(x) "RIGHT OF FIRST REFUSAL" shall mean the Company's right of first
refusal described in Section 8.
(y) "RIGHT OF REPURCHASE" shall mean the Company's right of
repurchase described in Section 7.
(z) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended.
(aa) "SERVICE" shall mean service as an Employee, Outside Director
or Consultant.
(bb) "SHARE" shall mean one share of Stock, as adjusted in
accordance with Section 8 of the Plan (if applicable).
(cc) "STOCK" shall mean the Common Stock of the Company, with a par
value of $.001 per Share.
(dd) "SUBSIDIARY" shall mean any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company, if
each of the corporations other than the last corporation in the unbroken chain
owns stock possessing 50% or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
(ee) "TRANSFEREE" shall mean any person to whom the Optionee has
directly or indirectly transferred any Share acquired under this Agreement.
(ff) "TRANSFER NOTICE" shall mean the notice of a proposed transfer
of Shares described in Section 8.
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EXHIBIT 99.5
SENTIENT NETWORKS, INC. 1997 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
You have been granted the following option to purchase Common
Stock of Sentient Networks, Inc. (the "Company"):
Name of Optionee: [Name]
Total Number of Shares Granted: [TotalShares]
Type of Option: [ISO] Incentive Stock Option
[NSO] Nonstatutory Stock
Option
Exercise Price Per Share: $[PricePerShare]
Date of Grant: [DateGrant]
Date Exercisable: This option may be
exercised, in whole or in
part, for 100% of the Shares
subject to this option at
any time after the Date of
Grant.
Vesting Commencement Date: [VestComDate]
Vesting Schedule: The Right of Repurchase shall
lapse with respect to the
first 20% of the Shares
subject to this option upon
the Optionee's completion of
12 months of Service from the
Vesting Commencement Date and
an additional 1/60 of the
Shares on the [VestDay]day of
each month thereafter.
Expiration Date: [ExpDate]
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 Plan and the Stock Option Agreement, both
of which are attached to and made a part of this document.
OPTIONEE: SENTIENT NETWORKS, INC.
By:
- ------------------------------ --------------------------------------
Title:
- ------------------------------ -----------------------------------
Print Name
<PAGE> 1
EXHIBIT 99.6
CELLSTREAM NETWORKS INC.
1995 STOCK OPTION PLAN
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option Plan is intended to promote the interests
of CellStream Networks Inc., a Delaware corporation, by providing eligible
persons with the opportunity to acquire a proprietary interest, or otherwise
increase their proprietary interest, in the Corporation as an incentive for them
to remain in the service of the Corporation.
Capitalized terms herein shall have the meanings assigned to such
terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
A. The Plan shall be administered by the Board. However, any or
all administrative functions otherwise exercisable by the Board may be delegated
to the Committee. Members of the Committee shall serve for such period of time
as the Board may determine and shall be subject to removal by the Board at any
time. The Board may also at any time terminate the functions of the Committee
and reassume all powers and authority previously delegated to the Committee.
B. The Plan Administrator shall have full power and authority
(subject to the provisions of the Plan) to establish such rules and regulations
as it may deem appropriate for proper administration of the Plan and to make
such determinations under, and issue such interpretations of, the Plan and any
outstanding options as it may deem necessary or advisable. Decisions of the Plan
Administrator shall be final and binding on all parties who have an interest in
the Plan or any option or shares issued thereunder.
III. ELIGIBILITY
A. The persons eligible to receive option grants under the Plan
are as follows:
(i) Employees,
(ii) non-employee members of the Board or the
non-employee members of the board of directors of any Parent or
Subsidiary, and
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(iii) consultants who provide services to the
Corporation (or any Parent or Subsidiary).
B. The Plan Administrator shall have full authority to determine
which eligible persons are to receive option grants under the Plan, the time or
times when such option grants are to be made, the number of shares to be covered
by each such grant, the status of the granted option as either an Incentive
Option or a Non-Statutory Option, the time or times at which each option is to
become exercisable, the vesting schedule (if any) applicable to the option
shares and the maximum term for which the option is to remain outstanding.
IV. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock. The maximum number of shares
of Common Stock which may be issued over the term of the Plan shall not exceed
1,518,245 shares.
B. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. All shares issued under the Plan, whether or not those shares are
subsequently repurchased by the Corporation pursuant to its repurchase rights
under the Plan, shall reduce on a share-for-share basis the number of shares of
Common Stock available for subsequent issuance under the Plan.
C. Should any change be made to the Common Stock by reason of any
stock split, stock dividend, recapitalization, combination of shares, exchange
of shares or other change affecting the outstanding Common Stock as a class
without the Corporation's receipt of consideration, appropriate adjustments
shall be made to (i) the maximum number and/or class of securities issuable
under the Plan and (ii) the number and/or class of securities and the exercise
price per share in effect under each outstanding option in order to prevent the
dilution or enlargement of benefits thereunder. The adjustments determined by
the Plan Administrator shall be final, binding and conclusive. In no event shall
any such adjustments be made in connection with the conversion of one or more
outstanding shares of the Corporation's preferred stock into shares of Common
Stock.
ARTICLE TWO
OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the
form approved by the Plan Administrator; provided, however, that each such
document shall comply with the terms
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specified below. Each document evidencing an Incentive Option shall, in
addition, be subject to the provisions of the Plan applicable to such options.
A. EXERCISE PRICE.
1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The exercise price per share shall not be less
than eighty-five percent (85%) of the Fair Market Value per share of
Common Stock on the option grant date.
(ii) If the person to whom the option is granted is a
10% Stockholder, then the exercise price per share shall not be less
than one hundred ten percent (110%) of the Fair Market Value per share
of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Three and the documents evidencing the option, be payable in cash or
check made payable to the Corporation. Should the Common Stock be registered
under Section 12(g) of the 1934 Act at the time the option is exercised, then
the exercise price may also be paid as follows:
(i) in shares of Common Stock held for the requisite
period necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(ii) to the extent the option is exercised for vested
shares, through a special sale and remittance procedure pursuant to
which the Optionee shall concurrently provide irrevocable written
instructions (a) to a Corporation-designated brokerage firm to effect
the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the
purchased shares plus all applicable Federal, state and local income
and employment taxes required to be withheld by the Corporation by
reason of such exercise and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage firm
in order to complete the sale.
Except to the extent such sale and remittance procedure is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
B. EXERCISE AND TERM OF OPTIONS. Each option shall be exercisable
at such time or times, during such period and for such number of shares as shall
be determined by the Plan
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<PAGE> 4
Administrator and set forth in the documents evidencing the option. However, no
option shall have a term in excess of ten (10) years measured from the option
grant date.
C. EFFECT OF TERMINATION OF SERVICE. The following provisions
shall govern the exercise of any options held by the Optionee at the time of
cessation of Service or death:
(i) Should the Optionee cease to remain in Service for
any reason other than Disability or death, then the Optionee shall have
a period of three (3) months following the date of such cessation of
Service during which to exercise each outstanding option held by such
Optionee.
(ii) Should such Service terminate by reason of
Disability, then the Optionee shall have a period of six (6) months
following the date of such cessation of Service during which to
exercise each outstanding option held by such Optionee. However, should
such Disability be deemed to constitute Permanent Disability, then the
period during which each outstanding option held by the Optionee is to
remain exercisable shall be extended by an additional six (6) months so
that the exercise period shall be the twelve (12)-month period
following the date of the Optionee's cessation of Service by reason of
such Permanent Disability.
(iii) Should the Optionee die while holding one or more
outstanding options, then the personal representative of the Optionee's
estate or the person or persons to whom the option is transferred
pursuant to the Optionee's will or in accordance with the laws of
descent and distribution shall have a period of twelve (12) months
following the date of the Optionee's death during which to exercise
each such option.
(iv) Under no circumstances, however, shall any such
option be exercisable after the specified expiration of the option
term.
(v) During the applicable post-Service exercise
period, the option may not be exercised in the aggregate for more than
the number of vested shares for which the option is exercisable on the
date of the Optionee's cessation of Service. Upon the expiration of the
applicable exercise period or (if earlier) upon the expiration of the
option term, the option shall terminate and cease to be outstanding for
any vested shares for which the option has not been exercised. However,
the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent it is not
exercisable for vested shares on the date of such cessation of Service.
D. STOCKHOLDER RIGHTS. The holder of an option shall have no
stockholder rights with respect to the shares subject to the option until such
person shall have exercised the option, paid the exercise price and become a
holder of record of the purchased shares.
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<PAGE> 5
E. UNVESTED SHARES. The Plan Administrator shall have the
discretion to grant options which are exercisable for unvested shares of Common
Stock under the Plan. Should the Optionee cease Service while holding such
unvested shares, the Corporation shall have the right to repurchase, at the
exercise price paid per share, all or (at the discretion of the Corporation and
with the consent of the Optionee) any of those unvested shares. The terms upon
which such repurchase right shall be exercisable (including the period and
procedure for exercise and the appropriate vesting schedule for the purchased
shares) shall be established by the Plan Administrator and set forth in the
document evidencing such repurchase right. The Plan Administrator may not impose
a vesting schedule upon any option grant or any shares of Common Stock subject
to the option which is more restrictive than twenty percent (20%) per year
vesting, with the initial vesting to occur one (1) year after the option grant
date. However, this minimum vesting requirement shall not be applicable with
respect to any option granted to a Highly-Compensated Person.
F. FIRST REFUSAL RIGHTS. Until such time as the Common Stock is
first registered under Section 12(g) of the 1934 Act, the Corporation shall have
the right of first refusal with respect to any proposed disposition by the
Optionee (or any successor in interest) of any shares of Common Stock issued
under the Plan. Such right of first refusal shall be exercisable in accordance
with the terms established by the Plan Administrator and set forth in the
document evidencing such right.
G. LIMITED TRANSFERABILITY OF OPTIONS. During the lifetime of the
Optionee, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option may
be assigned in whole or in part during Optionee's lifetime in accordance with
the terms of a Qualified Domestic Relations Order. The assigned portion may only
be exercised by the person or persons who acquire a proprietary interest in the
option pursuant to such Qualified Domestic Relations Order. The terms applicable
to the assigned portion shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
H. WITHHOLDING. The Corporation's obligation to deliver shares of
Common Stock upon the exercise of any options granted under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of the Plan shall be applicable to Incentive Options. Options which
are specifically designated as Non-Statutory Options shall not be subject to the
terms of Section II.
A. ELIGIBILITY. Incentive Options may only be granted to
Employees.
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<PAGE> 6
B. EXERCISE PRICE. The exercise price per share shall not be less
than one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the option grant date.
C. DOLLAR LIMITATION. The aggregate Fair Market Value of the
shares of Common Stock (determined as of the respective date or dates of grant)
for which one or more options granted to any Employee under the Plan (or any
other option plan of the Corporation or any Parent or Subsidiary) may for the
first time become exercisable as Incentive Options during any one (1) calendar
year shall not exceed the sum of One Hundred Thousand Dollars ($100,000). To the
extent the Employee holds two (2) or more such options which become exercisable
for the first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
D. 10% STOCKHOLDER. If any Employee to whom an Incentive Option
is granted is a 10% Stockholder, then the option term shall not exceed five (5)
years measured from the option grant date.
III. CORPORATE TRANSACTION
A. In the event of any Corporate Transaction, each outstanding
option shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof) in connection with such
Corporate Transaction. In addition, all outstanding repurchase rights shall
terminate automatically in the event of any Corporate Transaction, except to the
extent the repurchase rights are assigned to the successor corporation (or
parent thereof) in connection with such Corporate Transaction.
B. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in the consummation of such Corporate Transaction,
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan following the consummation of
such Corporate Transaction and (ii) the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same.
C. The grant of options under the Plan shall in no way affect the
right of the Corporation to adjust, reclassify, reorganize or otherwise change
its capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any
time and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution therefor new options covering the same or
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<PAGE> 7
different number of shares of Common Stock but with an exercise price per share
based on the Fair Market Value per share of Common Stock on the new option grant
date.
ARTICLE THREE
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee to pay the option
exercise price by delivering a promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. Promissory notes may be authorized with or without security
or collateral. In all events, the maximum credit available to the Optionee may
not exceed the sum of (i) the aggregate option exercise price payable for the
purchased shares (less the par value of such shares) plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee in
connection with the option exercise.
II. ADDITIONAL AUTHORITY
A. The Plan Administrator shall have the discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service or death from the
limited period otherwise in effect for that option to such greater period of
time as the Plan Administrator shall deem appropriate, but in no event beyond
the expiration of the option term.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective when adopted by the Board, but
no option granted under the Plan may be exercised until the Plan is approved by
the Corporation's stockholders. If such stockholder approval is not obtained
within twelve (12) months after the date of the Board's adoption of the Plan,
then all options previously granted under the Plan shall terminate and cease to
be outstanding, and no further options shall be granted. Subject to such
limitation, the Plan Administrator may grant options under the Plan at any time
after the effective date of the Plan and before the date fixed herein for
termination of the Plan.
B. The Plan shall terminate upon the earliest of (i) the
expiration of the ten (10)-year period measured from the date the Plan is
adopted by the Board, (ii) the date on which all shares available for issuance
under the Plan shall have been issued or (iii) the termination of all
outstanding options in connection with a Corporate Transaction. Upon such Plan
termination, all options and unvested stock issuances outstanding under the Plan
shall continue to have full force and effect in accordance with the provisions
of the documents evidencing such options or issuances.
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<PAGE> 8
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and
authority to amend or modify the Plan in any or all respects. However, no such
amendment or modification shall, without the consent of the Optionees, adversely
affect their rights and obligations under their outstanding options. In
addition, the Board shall not, without the approval of the Corporation's
stockholders, (i) increase the maximum number of shares issuable under the Plan,
except for permissible adjustments in the event of certain changes in the
Corporation's capitalization, (ii) materially modify the eligibility
requirements for Plan participation or (iii) materially increase the benefits
accruing to Plan participants.
B. Options may be granted under the Plan to purchase shares of
Common Stock in excess of the number of shares then available for issuance under
the Plan, provided any such options actually granted may not be exercised until
there is obtained stockholder approval of an amendment sufficiently increasing
the number of shares of Common Stock available for issuance under the Plan. If
such stockholder approval is not obtained within twelve (12) months after the
date the excess grants are first made, then any options granted on the basis of
such excess shares shall terminate and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of
shares of Common Stock under the Plan shall be used for general corporate
purposes.
VI. REGULATORY APPROVALS
The implementation of the Plan, the granting of any options under
the Plan and the issuance of any shares of Common Stock upon the exercise of any
option shall be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options granted under it and the shares of Common Stock issued pursuant to
it.
VII. NO EMPLOYMENT OR SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of the Optionee, which rights are
hereby expressly reserved by each, to terminate the Optionee's Service at any
time for any reason, with or without cause.
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<PAGE> 9
VIII. FINANCIAL REPORTS
The Corporation shall deliver a balance sheet and an income
statement at least annually to each individual holding an outstanding option
under the Plan, unless such individual is a key Employee whose duties in
connection with the Corporation (or any Parent or Subsidiary) assure such
individual access to equivalent information.
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<PAGE> 10
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. CODE shall mean the Internal Revenue Code of 1986, as amended.
C. COMMITTEE shall mean a committee of two (2) or more Board members
appointed by the Board to exercise one or more administrative functions under
the Plan.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation
or dissolution of the Corporation.
F. CORPORATION shall mean Model Corporation, Inc., a Delaware
corporation.
G. DISABILITY shall mean the inability of the Optionee to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute PERMANENT DISABILITY in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.
H. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
<PAGE> 11
J. EXERCISE DATE shall mean the date on which the Corporation shall
have received written notice of the option exercise.
K. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq
National Market, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question, as
such price is reported by the National Association of Securities
Dealers on the Nasdaq National Market or any successor system. If there
is no closing selling price for the Common Stock on the date in
question, then the Fair Market Value shall be the closing selling price
on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock
Exchange, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question on the Stock Exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape
of transactions on such exchange. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(iii) If the Common Stock is at the time neither listed on any
Stock Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after taking
into account such factors as the Plan Administrator shall deem
appropriate.
L. HIGHLY-COMPENSATED EMPLOYEE shall mean an Optionee (i) whose
compensation per calendar year from the Corporation (or any Parent or
Subsidiary) equals or exceeds Sixty Thousand Dollars ($60,000) in the aggregate
and (ii) who has previously received one or more option grants under the Plan.
M. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
O. NON-STATUTORY OPTION shall mean an option not intended to satisfy
the requirements of Code Section 422.
P. OPTIONEE shall mean any person to whom an option is granted under
the Plan.
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<PAGE> 12
Q. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
R. PLAN shall mean the Corporation's 1995 Stock Option Plan, as set
forth in this document.
S. PLAN ADMINISTRATOR shall mean either the Board or the Committee, to
the extent the Committee is at the time responsible for the administration of
the Plan.
T. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
U. SERVICE shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant, except to the
extent otherwise specifically provided in the documents evidencing the option
grant.
V. STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
W. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
X. 10% STOCKHOLDER shall mean the owner of stock (as determined under
Code Section 424(d)) possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Corporation (or any Parent
or Subsidiary).
<PAGE> 1
EXHIBIT 99.7
Grant No._________
CELLSTREAM NETWORKS INC.
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of CellStream Networks Inc.
(the "Corporation"):
Optionee:
-------------------------------------------------------
Grant Date:
------------------------------------------------------
Vesting Commencement Date:
---------------------------------------
Exercise Price: $ per share
---------------------------------
Number of Option Shares: shares
---------------------------
Expiration Date:
-------------------------------------------------
Type of Option: [ ] Incentive Stock Option
[ ] Non-Statutory Stock Option
Date Exercisable: Immediately Exercisable
Vesting Schedule: The Option Shares shall be unvested and subject
to repurchase by the Corporation at the Exercise Price paid per
share. Optionee shall acquire a vested interest in, and the
Corporation's repurchase right will accordingly lapse with
respect to, (i) twenty percent (20%) of the Option Shares upon
Optionee's completion of one (1) year of Service measured from
the Vesting Commencement Date and (ii) the balance of the Option
Shares in successive equal monthly installments upon Optionee's
completion of each of the next forty-eight (48) months of Service
measured from and after the first anniversary of the Vesting
Commencement Date. In no event shall any additional Option Shares
vest after Optionee's cessation of Service.
Optionee understands and agrees that the Option is granted
subject to and in accordance with the terms of the CellStream Networks Inc. 1995
Stock Option Plan (the "Plan"). Optionee further agrees to be bound by the terms
of the Plan and the terms of the Option as set forth in the Stock Option
Agreement attached hereto as Exhibit A. Optionee understands that any Option
Shares purchased under the Option will be subject to the terms set forth in the
Stock Purchase Agreement attached hereto as Exhibit B.
<PAGE> 2
Optionee hereby acknowledges receipt of a copy of the Plan in the
form attached hereto as Exhibit C.
REPURCHASE RIGHTS. OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN REPURCHASE
RIGHTS AND RIGHTS OF FIRST REFUSAL EXERCISABLE BY THE CORPORATION AND ITS
ASSIGNS. THE TERMS OF SUCH RIGHTS ARE SPECIFIED IN THE ATTACHED STOCK PURCHASE
AGREEMENT.
No Employment or Service Contract. Nothing in this Notice or in
the attached Stock Option Agreement or Plan shall confer upon Optionee any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining Optionee) or of Optionee, which rights are
hereby expressly reserved by each, to terminate Optionee's Service at any time
for any reason, with or without cause.
Definitions. All capitalized terms in this Notice shall have the
meaning assigned to them in this Notice or in the attached Stock Option
Agreement.
, 199
- ---------------
Date
CELLSTREAM NETWORKS INC.
By:
--------------------------
Title:
-----------------------
-----------------------------
OPTIONEE
Address:
--------------------
-----------------------------
ATTACHMENTS
Exhibit A - Stock Option Agreement
Exhibit B - Stock Purchase Agreement
Exhibit C - 1995 Stock Option Plan
2
<PAGE> 1
EXHIBIT 99.8
CELLSTREAM NETWORKS INC.
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this day of 19 , by and among Cellstream
Networks Inc., a Delaware corporation, ________________________________,
Optionee under the Corporation's 1995 Stock Option Plan, and , Optionee's
spouse.
All capitalized terms in this Agreement shall have the meaning
assigned to them in this Agreement or in the attached Appendix.
A. EXERCISE OF OPTION
1. EXERCISE. Optionee hereby purchases shares of Common Stock
(the "Purchased Shares") pursuant to that certain option (the "Option") granted
Optionee on ____________________, 199__ (the "Grant Date") to purchase up to
_______________ shares of Common Stock under the Plan at the exercise price of
$______ per share (the "Exercise Price").
2. PAYMENT. Concurrently with the delivery of this Agreement to
the Corporation, Optionee shall pay the Exercise Price for the Purchased Shares
in accordance with the provisions of the Option Agreement and shall deliver
whatever additional documents may be required by the Option Agreement as a
condition for exercise, together with a duly-executed blank Assignment Separate
from Certificate (in the form attached hereto as Exhibit I) with respect to the
Purchased Shares.
3. DELIVERY OF CERTIFICATES. The certificates representing any
Purchased Shares which are subject to the Repurchase Right shall be held in
escrow in accordance with the provisions of this Agreement.
4. STOCKHOLDER RIGHTS. Until such time as the Corporation
exercises the Repurchase Right, the First Refusal Right or the Special Purchase
Right, Optionee (or any successor in interest) shall have all the rights of a
stockholder (including voting, dividend and liquidation rights) with respect to
the Purchased Shares, including the Purchased Shares held in escrow hereunder,
subject, however, to the transfer restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
1. RESTRICTED SECURITIES. The Purchased Shares have not been
registered under the 1933 Act and are being issued to Optionee in reliance upon
the exemption from such registration provided by SEC Rule 701 for stock
issuances under compensatory benefit plans such as the Plan. Optionee hereby
confirms that Optionee has been informed that the Purchased Shares are
restricted securities under the 1933 Act and may not be resold or transferred
unless the Purchased Shares are first registered under the Federal securities
laws or unless an exemption from such registration is available. Accordingly,
Optionee hereby acknowledges that Optionee is prepared to hold the Purchased
Shares for an indefinite period and that Optionee is aware that SEC
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<PAGE> 2
Rule 144 issued under the 1933 Act which exempts certain resales of unrestricted
securities is not presently available to exempt the resale of the Purchased
Shares from the registration requirements of the 1933 Act.
2. RESTRICTIONS ON DISPOSITION OF PURCHASED SHARES. Optionee
shall make no disposition of the Purchased Shares (other than a Permitted
Transfer) unless and until there is compliance with all of the following
requirements:
(i) Optionee shall have provided the Corporation with a
written summary of the terms and conditions of the proposed disposition.
(ii) Optionee shall have complied with all requirements of
this Agreement applicable to the disposition of the Purchased Shares.
(iii) Optionee shall have provided the Corporation with
written assurances, in form and substance satisfactory to the
Corporation, that (a) the proposed disposition does not require
registration of the Purchased Shares under the 1933 Act or (b) all
appropriate action necessary for compliance with the registration
requirements of the 1933 Act or any exemption from registration
available under the 1933 Act (including Rule 144) has been taken.
(iv) Optionee shall have provided the Corporation with
written assurances, in form and substance satisfactory to the
Corporation, that the proposed disposition will not result in the
contravention of any transfer restrictions applicable to the Purchased
Shares pursuant to the provisions of the Rules of the California
Corporations Commissioner identified in Paragraph B.4.
The Corporation shall not be required (i) to transfer on its
books any Purchased Shares which have been sold or transferred in violation of
the provisions of this Agreement or (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. RESTRICTIVE LEGENDS. The stock certificates for the Purchased
Shares shall be endorsed with one or more of the following restrictive legends:
(i) "The shares represented by this certificate have not
been registered under the Securities Act of 1933. The shares may not be
sold or offered for sale in the absence of (a) an effective registration
statement for the shares under such Act, (b) a `no action' letter of the
Securities and Exchange Commission with respect to such sale or offer or
(c) satisfactory assurances to the Corporation that registration under
such Act is not required with respect to such sale or offer."
(ii) "It is unlawful to consummate a sale or transfer of
this security, or any interest therein, or to receive any consideration
therefor, without the
2
<PAGE> 3
prior written consent of the Commissioner of Corporations of the State
of California, except as permitted in the Commissioner's Rules."
(iii) "The shares represented by this certificate are
subject to certain repurchase rights and rights of first refusal granted
to the Corporation and accordingly may not be sold, assigned,
transferred, encumbered, or in any manner disposed of except in
conformity with the terms of a written agreement dated , 199 between the
Corporation and the registered holder of the shares (or the predecessor
in interest to the shares). A copy of such agreement is maintained at
the Corporation's principal corporate offices."
4. RECEIPT OF COMMISSIONER RULES. Optionee hereby acknowledges
receipt of a copy of Section 260.141.11 of the Rules of the California
Corporations Commissioner, a copy of which is attached as Exhibit II to this
Agreement.
C. TRANSFER RESTRICTIONS
1. RESTRICTION ON TRANSFER. Except for any Permitted Transfer,
Optionee shall not transfer, assign, encumber or otherwise dispose of any of the
Purchased Shares which are subject to the Repurchase Right. In addition,
Purchased Shares which are released from the Repurchase Right shall not be
transferred, assigned, encumbered or otherwise disposed of in contravention of
the First Refusal Right, the Market Stand-Off or the Special Purchase Right.
2. TRANSFEREE OBLIGATIONS. Each person (other than the
Corporation) to whom the Purchased Shares are transferred by means of a
Permitted Transfer must, as a condition precedent to the validity of such
transfer, acknowledge in writing to the Corporation that such person is bound by
the provisions of this Agreement and that the transferred shares are subject to
(i) the Repurchase Right, (ii) the First Refusal Right and (iii) the Market
Stand-Off, to the same extent such shares would be so subject if retained by
Optionee.
3. MARKET STAND-OFF.
(a) In connection with any underwritten public offering
by the Corporation of its equity securities pursuant to an effective
registration statement filed under the 1933 Act, including the Corporation's
initial public offering, Owner shall not sell, make any short sale of, loan,
hypothecate, pledge, grant any option for the purchase of, or otherwise dispose
or transfer for value or otherwise agree to engage in any of the foregoing
transactions with respect to, any Purchased Shares without the prior written
consent of the Corporation or its underwriters. Such restriction (the "Market
Stand-Off") shall be in effect for such period of time from and after the
effective date of the final prospectus for the offering as may be requested by
the Corporation or such underwriters. In no event, however, shall such period
exceed one hundred eighty (180) days and the Market Stand-Off shall in all
events terminate two (2) years after the effective date of the Corporation's
initial public offering.
(b) Owner shall be subject to the Market Stand-Off
provided and only if the officers and directors of the Corporation are also
subject to similar restrictions.
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(c) Any new, substituted or additional securities which
are by reason of any Recapitalization or Reorganization distributed with respect
to the Purchased Shares shall be immediately subject to the Market Stand-Off, to
the same extent the Purchased Shares are at such time covered by such
provisions.
(d) In order to enforce the Market Stand-Off, the
Corporation may impose stop-transfer instructions with respect to the Purchased
Shares until the end of the applicable stand-off period.
D. REPURCHASE RIGHT
1. GRANT. The Corporation is hereby granted the right (the
"Repurchase Right"), exercisable at any time during the sixty (60)-day period
following the date Optionee ceases for any reason to remain in Service or (if
later) during the sixty (60)-day period following the execution date of this
Agreement, to repurchase at the Exercise Price all or (at the discretion of the
Corporation and with the consent of Optionee) any portion of the Purchased
Shares in which Optionee is not, at the time of his or her cessation of Service,
vested in accordance with the Vesting Schedule (such shares to be hereinafter
referred to as the "Unvested Shares").
2. EXERCISE OF THE REPURCHASE RIGHT. The Repurchase Right shall
be exercisable by written notice delivered to each Owner of the Unvested Shares
prior to the expiration of the sixty (60)-day exercise period. The notice shall
indicate the number of Unvested Shares to be repurchased and the date on which
the repurchase is to be effected, such date to be not more than thirty (30) days
after the date of such notice. The certificates representing the Unvested Shares
to be repurchased shall be delivered to the Corporation prior to the close of
business on the date specified for the repurchase. Concurrently with the receipt
of such stock certificates, the Corporation shall pay to Owner, in cash or cash
equivalents (including the cancellation of any purchase-money indebtedness), an
amount equal to the Exercise Price previously paid for the Unvested Shares which
are to be repurchased from Owner.
3. TERMINATION OF THE REPURCHASE RIGHT. The Repurchase Right
shall terminate with respect to any Unvested Shares for which it is not timely
exercised under Paragraph D.2. In addition, the Repurchase Right shall terminate
and cease to be exercisable with respect to any and all Purchased Shares in
which Optionee vests in accordance with the Vesting Schedule. All Purchased
Shares as to which the Repurchase Right lapses shall, however, remain subject to
(i) the First Refusal Right, (ii) the Market Stand-Off and (iii) the Special
Purchase Right.
4. AGGREGATE VESTING LIMITATION. If the Option is exercised in
more than one increment so that Optionee is a party to one or more other Stock
Purchase Agreements (the "Prior Purchase Agreements") which are executed prior
to the date of this Agreement, then the total number of Purchased Shares as to
which Optionee shall be deemed to have a fully-vested interest under this
Agreement and all Prior Purchase Agreements shall not exceed in the aggregate
the number of Purchased Shares in which Optionee would otherwise at the time be
vested, in accordance with the Vesting Schedule, had all the Purchased Shares
(including those acquired under the Prior Purchase Agreements) been acquired
exclusively under this Agreement.
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5. RECAPITALIZATION. Any new, substituted or additional
securities or other property (including cash paid other than as a regular cash
dividend) which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the Repurchase Right, but
only to the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments to reflect such distribution shall be made to the number
and/or class of Purchased Shares subject to this Agreement and to the price per
share to be paid upon the exercise of the Repurchase Right in order to reflect
the effect of any such Recapitalization upon the Corporation's capital
structure; provided, however, that the aggregate purchase price shall remain the
same.
6. CORPORATE TRANSACTION.
(a) Immediately prior to the consummation of any Corporate
Transaction, the Repurchase Right shall automatically lapse in its entirety,
except to the extent the Repurchase Right is to be assigned to the successor
corporation (or parent thereof) in connection with the Corporate Transaction.
(b) To the extent the Repurchase Right remains in effect
following a Corporate Transaction, such right shall apply to the new capital
stock or other property (including any cash payment) received in exchange for
the Purchased Shares in consummation of the Corporate Transaction, but only to
the extent the Purchased Shares are at the time covered by such right.
Appropriate adjustments shall be made to the price per share payable upon
exercise of the Repurchase Right to reflect the effect of the Corporate
Transaction upon the Corporation's capital structure; provided, however, that
the aggregate purchase price shall remain the same.
E. RIGHT OF FIRST REFUSAL
1. GRANT. The Corporation is hereby granted the right of first
refusal (the "First Refusal Right"), exercisable in connection with any proposed
transfer of the Purchased Shares in which Optionee has vested in accordance with
the Vesting Schedule. For purposes of this Article E, the term "transfer" shall
include any sale, assignment, pledge, encumbrance or other disposition of the
Purchased Shares intended to be made by Owner, but shall not include any
Permitted Transfer.
2. NOTICE OF INTENDED DISPOSITION. In the event any Owner of
Purchased Shares in which Optionee has vested desires to accept a bona fide
third-party offer for the transfer of any or all of such shares (the Purchased
Shares subject to such offer to be hereinafter referred to as the "Target
Shares"), Owner shall promptly (i) deliver to the Corporation written notice
(the "Disposition Notice") of the terms of the offer, including the purchase
price and the identity of the third-party offeror, and (ii) provide satisfactory
proof that the disposition of the Target Shares to such third-party offeror
would not be in contravention of the provisions set forth in Articles B and C.
3. EXERCISE OF THE FIRST REFUSAL RIGHT. The Corporation shall,
for a period of twenty-five (25) days following receipt of the Disposition
Notice, have the right to repurchase any
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<PAGE> 6
or all of the Target Shares subject to the Disposition Notice upon the same
terms as those specified therein or upon such other terms (not materially
different from those specified in the Disposition Notice) to which Owner
consents. Such right shall be exercisable by delivery of written notice (the
"Exercise Notice") to Owner prior to the expiration of the twenty-five (25)-day
exercise period. If such right is exercised with respect to all the Target
Shares, then the Corporation shall effect the repurchase of such shares,
including payment of the purchase price, not more than five (5) business days
after delivery of the Exercise Notice; and at such time the certificates
representing the Target Shares shall be delivered to the Corporation.
Should the purchase price specified in the Disposition Notice be
payable in property other than cash or evidences of indebtedness, the
Corporation shall have the right to pay the purchase price in the form of cash
equal in amount to the value of such property. If Owner and the Corporation
cannot agree on such cash value within ten (10) days after the Corporation's
receipt of the Disposition Notice, the valuation shall be made by an appraiser
of recognized standing selected by Owner and the Corporation or, if they cannot
agree on an appraiser within twenty (20) days after the Corporation's receipt of
the Disposition Notice, each shall select an appraiser of recognized standing
and the two (2) appraisers shall designate a third appraiser of recognized
standing, whose appraisal shall be determinative of such value. The cost of such
appraisal shall be shared equally by Owner and the Corporation. The closing
shall then be held on the later of (i) the fifth (5th) business day following
delivery of the Exercise Notice or (ii) the fifth (5th) business day after such
valuation shall have been made.
4. NON-EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Exercise Notice is not given to Owner prior to the expiration of the twenty-five
(25)-day exercise period, Owner shall have a period of thirty (30) days
thereafter in which to sell or otherwise dispose of the Target Shares to the
third-party offeror identified in the Disposition Notice upon terms (including
the purchase price) no more favorable to such third-party offeror than those
specified in the Disposition Notice; provided, however, that any such sale or
disposition must not be effected in contravention of the provisions of Articles
B and C. The third-party offeror shall acquire the Target Shares free and clear
of the Repurchase Right and the First Refusal Right, but the acquired shares
shall remain subject to the provisions of Article B and Paragraph C.3. In the
event Owner does not effect such sale or disposition of the Target Shares within
the specified thirty (30)-day period, the First Refusal Right shall continue to
be applicable to any subsequent disposition of the Target Shares by Owner until
such right lapses.
5. PARTIAL EXERCISE OF THE FIRST REFUSAL RIGHT. In the event the
Corporation makes a timely exercise of the First Refusal Right with respect to a
portion, but not all, of the Target Shares specified in the Disposition Notice,
Owner shall have the option, exercisable by written notice to the Corporation
delivered within five (5) business days after Owner's receipt of the Exercise
Notice, to effect the sale of the Target Shares pursuant to either of the
following alternatives:
(i) sale or other disposition of all the Target Shares to
the third-party offeror identified in the Disposition Notice, but in
full compliance with the requirements of Paragraph E.4, as if the
Corporation did not exercise the First Refusal Right; or
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<PAGE> 7
(ii) sale to the Corporation of the portion of the Target
Shares which the Corporation has elected to purchase, such sale to be
effected in substantial conformity with the provisions of Paragraph E.3.
The First Refusal Right shall continue to be applicable to any
subsequent disposition of the remaining Target Shares until such right
lapses.
Failure of Owner to deliver timely notification to the
Corporation shall be deemed to be an election by Owner to sell the Target Shares
pursuant to alternative (i) above.
6. RECAPITALIZATION/REORGANIZATION.
(a) Any new, substituted or additional securities or other
property which is by reason of any Recapitalization distributed with respect to
the Purchased Shares shall be immediately subject to the First Refusal Right,
but only to the extent the Purchased Shares are at the time covered by such
right.
(b) In the event of a Reorganization, the First Refusal
Right shall remain in full force and effect and shall apply to the new capital
stock or other property received in exchange for the Purchased Shares in
consummation of the Reorganization, but only to the extent the Purchased Shares
are at the time covered by such right.
7. LAPSE. The First Refusal Right shall lapse upon the earliest
to occur of (i) the first date on which shares of the Common Stock are held of
record by more than five hundred (500) persons, (ii) a determination is made by
the Board that a public market exists for the outstanding shares of Common Stock
or (iii) a firm commitment underwritten public offering, pursuant to an
effective registration statement under the 1933 Act, covering the offer and sale
of the Common Stock in the aggregate amount of at least ten million dollars
($10,000,000). However, the Market Stand-Off shall continue to remain in full
force and effect following the lapse of the First Refusal Right.
F.
G. ESCROW
1. DEPOSIT. Upon issuance, the certificates for the Purchased
Shares which are subject to the Repurchase Right shall be deposited in escrow
with the Corporation to be held in accordance with the provisions of this
Article F. Each deposited certificate shall be accompanied by a duly-executed
Assignment Separate from Certificate in the form of Exhibit I. The deposited
certificates, together with any other assets or securities from time to time
deposited with the Corporation pursuant to the requirements of this Agreement,
shall remain in escrow until such time or times as the certificates (or other
assets and securities) are to be released or otherwise surrendered for
cancellation in accordance with Paragraph F.3. Upon delivery of the certificates
(or other assets and securities) to the Corporation, Owner shall be issued a
receipt acknowledging the number of Purchased Shares (or other assets and
securities) delivered in escrow.
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<PAGE> 8
2. RECAPITALIZATION/REORGANIZATION. Any new, substituted or
additional securities or other property which is by reason of any
Recapitalization or Reorganization distributed with respect to the Purchased
Shares shall be immediately delivered to the Corporation to be held in escrow
under this Article F, but only to the extent the Purchased Shares are at the
time subject to the escrow requirements hereunder. However, all regular cash
dividends on the Purchased Shares (or other securities at the time held in
escrow) shall be paid directly to Owner and shall not be held in escrow.
3. RELEASE/SURRENDER. The Purchased Shares, together with any
other assets or securities held in escrow hereunder, shall be subject to the
following terms relating to their release from escrow or their surrender to the
Corporation for repurchase and cancellation:
(i) Should the Corporation elect to exercise the
Repurchase Right with respect to any Unvested Shares, then the escrowed
certificates for those Unvested Shares (together with any other assets
or securities attributable thereto) shall be surrendered to the
Corporation concurrently with the payment to Owner of an amount equal to
the aggregate Exercise Price for such Unvested Shares, and Owner shall
cease to have any further rights or claims with respect to such Unvested
Shares (or other assets or securities attributable thereto).
(ii) Should the Corporation elect to exercise the First
Refusal Right with respect to any Target Shares held at the time in
escrow hereunder, then the escrowed certificates for those Target Shares
(together with any other assets or securities attributable thereto)
shall be surrendered to the Corporation concurrently with the payment of
the Paragraph E.3 purchase price for such Target Shares to Owner, and
Owner shall cease to have any further rights or claims with respect to
such Target Shares (or other assets or securities attributable thereto).
(iii) Should the Corporation elect not to exercise the
Repurchase Right with respect to any Unvested Shares or the First
Refusal Right with respect to any Target Shares held at the time in
escrow hereunder, then the escrowed certificates for those shares
(together with any other assets or securities attributable thereto)
shall be immediately released to Owner.
(iv) As the Purchased Shares (or any other assets or
securities attributable thereto) vest in accordance with the Vesting
Schedule, the certificates for those vested shares (as well as all other
vested assets and securities) shall be released from escrow upon Owner's
request, but not more frequently than once every six (6) months.
(v) All Purchased Shares which vest (and any other vested
assets and securities attributable thereto) shall be released within
thirty (30) days after the earlier to occur of (a) Optionee's cessation
of Service or (b) the lapse of the First Refusal Right.
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(vi) All Purchased Shares (or other assets or securities)
released from escrow shall nevertheless remain subject to (a) the First
Refusal Right, to the extent such right has not otherwise lapsed, (b)
the Market Stand-Off, until such restriction terminates, and (c) the
Special Purchase Right, to the extent such right has not otherwise
lapsed.
H. SPECIAL TAX ELECTION
The acquisition of the Purchased Shares may result in adverse tax
consequences which may be avoided or mitigated by filing an election under Code
Section 83(b). Such election must be filed within thirty (30) days after the
date of this Agreement. A description of the tax consequences applicable to the
acquisition of the Purchased Shares and the form for making the Code Section
83(b) election are set forth in Exhibit II. OPTIONEE SHOULD CONSULT WITH HIS OR
HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED
SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(b)
ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY, AND
NOT THE CORPORATION'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN
IF OPTIONEE REQUESTS THE CORPORATION OR ITS REPRESENTATIVES TO MAKE THIS FILING
ON HIS OR HER BEHALF.
I. GENERAL PROVISIONS
1. ASSIGNMENT. The Corporation may assign the Repurchase Right
and/or the First Refusal Right to any person or entity selected by the Board,
including (without limitation) one or more stockholders of the Corporation.
2. NO EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Agreement
or in the Plan shall confer upon Optionee any right to continue in Service for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Corporation (or any Parent or Subsidiary employing or
retaining Optionee) or of Optionee, which rights are hereby expressly reserved
by each, to terminate Optionee's Service at any time for any reason, with or
without cause.
3. NOTICES. Any notice required to be given under this Agreement
shall be in writing and shall be deemed effective upon personal delivery or upon
deposit in the U.S. mail, registered or certified, postage prepaid and properly
addressed to the party entitled to such notice at the address indicated below
such party's signature line on this Agreement or at such other address as such
party may designate by ten (10) days advance written notice under this paragraph
to all other parties to this Agreement.
4. NO WAIVER. The failure of the Corporation in any instance to
exercise the Repurchase Right or the First Refusal Right shall not constitute a
waiver of any other repurchase rights and/or rights of first refusal that may
subsequently arise under the provisions of this Agreement or any other agreement
between the Corporation and Optionee or Optionee's spouse. No waiver of any
breach or condition of this Agreement shall be deemed to be a waiver of any
other or subsequent breach or condition, whether of like or different nature.
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5. CANCELLATION OF SHARES. If the Corporation shall make
available, at the time and place and in the amount and form provided in this
Agreement, the consideration for the Purchased Shares to be repurchased in
accordance with the provisions of this Agreement, then from and after such time,
the person from whom such shares are to be repurchased shall no longer have any
rights as a holder of such shares (other than the right to receive payment of
such consideration in accordance with this Agreement). Such shares shall be
deemed purchased in accordance with the applicable provisions hereof, and the
Corporation shall be deemed the owner and holder of such shares, whether or not
the certificates therefor have been delivered as required by this Agreement.
J. MISCELLANEOUS PROVISIONS
1. OPTIONEE UNDERTAKING. Optionee hereby agrees to take whatever
additional action and execute whatever additional documents the Corporation may
deem necessary or advisable in order to carry out or effect one or more of the
obligations or restrictions imposed on either Optionee or the Purchased Shares
pursuant to the provisions of this Agreement.
2. AGREEMENT IS ENTIRE CONTRACT. This Agreement constitutes the
entire contract between the parties hereto with regard to the subject matter
hereof. This Agreement is made pursuant to the provisions of the Plan and shall
in all respects be construed in conformity with the terms of the Plan.
3. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware without resort
to that State's conflict-of-laws rules.
4. COUNTERPARTS. This Agreement may be executed in counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
5. SUCCESSORS AND ASSIGNS. The provisions of this Agreement shall
inure to the benefit of, and be binding upon, the Corporation and its successors
and assigns and upon Optionee, Optionee's permitted assigns and the legal
representatives, heirs and legatees of Optionee's estate, whether or not any
such person shall have become a party to this Agreement and have agreed in
writing to join herein and be bound by the terms hereof.
6. POWER OF ATTORNEY. Optionee's spouse hereby appoints Optionee
his or her true and lawful attorney in fact, for him or her and in his or her
name, place and stead, and for his or her use and benefit, to agree to any
amendment or modification of this Agreement and to execute such further
instruments and take such further actions as may reasonably be necessary to
carry out the intent of this Agreement. Optionee's spouse further gives and
grants unto Optionee as his or her attorney in fact full power and authority to
do and perform every act necessary and proper to be done in the exercise of any
of the foregoing powers as fully as he or she might or could do if personally
present, with full power of substitution and revocation, hereby ratifying and
confirming all that Optionee shall lawfully do and cause to be done by virtue of
this power of attorney.
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IN WITNESS WHEREOF, the parties have executed this Agreement on
the day and year first indicated above.
CELLSTREAM NETWORKS INC.
By:
---------------------------------
Title:
------------------------------
Address: 2201 Cantu Court, Suite 205
Sarasota, Florida 34232
-------------------------------------
OPTIONEE
Address:
-----------------------------
-------------------------------------
SPOUSAL ACKNOWLEDGMENT
The undersigned spouse of Optionee has read and hereby approves
the foregoing Stock Purchase Agreement. In consideration of the Corporation's
granting Optionee the right to acquire the Purchased Shares in accordance with
the terms of such Agreement, the undersigned hereby agrees to be irrevocably
bound by all the terms of such Agreement, including (without limitation) the
right of the Corporation (or its assigns) to purchase any Purchased Shares in
which Optionee is not vested and the right of the Corporation (or its assigns)
to purchase any and all interest or right the undersigned may otherwise have in
the Purchased Shares pursuant to community property laws or other marital
property rights.
-----------------------------------
OPTIONEE'S SPOUSE
Address:
---------------------------
-----------------------------------
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EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED __________hereby sell(s), assign(s) and transfer(s)
unto Cellstream Networks Inc. (the "Corporation"),____________________ (_______)
shares of the Common Stock of the Corporation standing in his or her name on the
books of the Corporation represented by Certificate No. _________herewith and
does hereby irrevocably constitute and appoint ____________ Attorney to transfer
the said stock on the books of the Corporation with full power of substitution
in the premises.
Dated: _________
Signature
---------------------------------
INSTRUCTION: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Corporation to
exercise the Repurchase Right without requiring additional signatures on the
part of Optionee.
<PAGE> 13
EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES AND
SECTION 83(b) TAX ELECTION
I. FEDERAL INCOME TAX CONSEQUENCES AND SECTION 83(b) ELECTION FOR
EXERCISE OF NON-STATUTORY OPTION. If the Purchased Shares are acquired pursuant
to the exercise of a Non-Statutory Option, as specified in the Grant Notice,
then under Code Section 83, the excess of the Fair Market Value of the Purchased
Shares on the date any forfeiture restrictions applicable to such shares lapse
over the Exercise Price paid for such shares will be reportable as ordinary
income on the lapse date. For this purpose, the term "forfeiture restrictions"
includes the right of the Corporation to repurchase the Purchased Shares
pursuant to the Repurchase Right. However, Optionee may elect under Code Section
83(b) to be taxed at the time the Purchased Shares are acquired, rather than
when and as such Purchased Shares cease to be subject to such forfeiture
restrictions. Such election must be filed with the Internal Revenue Service
within thirty (30) days after the date of the Agreement. Even if the Fair Market
Value of the Purchased Shares on the date of the Agreement equals the Exercise
Price paid (and thus no tax is payable), the election must be made to avoid
adverse tax consequences in the future. The form for making this election is
attached as part of this exhibit. FAILURE TO MAKE THIS FILING WITHIN THE
APPLICABLE THIRTY (30)-DAY PERIOD WILL RESULT IN THE RECOGNITION OF ORDINARY
INCOME BY OPTIONEE AS THE FORFEITURE RESTRICTIONS LAPSE.
II. FEDERAL INCOME TAX CONSEQUENCES AND CONDITIONAL SECTION 83(b)
ELECTION FOR EXERCISE OF INCENTIVE OPTION. If the Purchased Shares are acquired
pursuant to the exercise of an Incentive Option, as specified in the Grant
Notice, then the following tax principles shall be applicable to the Purchased
Shares:
(i) For regular tax purposes, no taxable income will be
recognized at the time the Option is exercised.
(ii) The excess of (a) the Fair Market Value of the
Purchased Shares on the date the Option is exercised or (if later) on
the date any forfeiture restrictions applicable to the Purchased Shares
lapse over (b) the Exercise Price paid for the Purchased Shares will be
includible in Optionee's taxable income for alternative minimum tax
purposes.
(iii) If Optionee makes a disqualifying disposition of the
Purchased Shares, then Optionee will recognize ordinary income in the
year of such disposition equal in amount to the excess of (a) the Fair
Market Value of the Purchased Shares on the date the Option is exercised
or (if later) on the date any forfeiture restrictions applicable to the
Purchased Shares lapse over (b) the Exercise Price paid for the
Purchased Shares. Any additional gain recognized upon the disqualifying
disposition will be either short-term or long-term capital gain
depending upon the period for which the Purchased Shares are held prior
to the disposition.
<PAGE> 14
(iv) For purposes of the foregoing, the term "forfeiture
restrictions" will include the right of the Corporation to repurchase
the Purchased Shares pursuant to the Repurchase Right. The term
"disqualifying disposition" means any sale or other disposition(1) of
the Purchased Shares within two (2) years after the Grant Date or within
one (1) year after the exercise date of the Option.
(v) In the absence of final Treasury Regulations relating
to Incentive Options, it is not certain whether Optionee may, in
connection with the exercise of the Option for any Purchased Shares at
the time subject to forfeiture restrictions, file a protective election
under Code Section 83(b) which would limit (a) Optionee's alternative
minimum taxable income upon exercise and (b) Optionee's ordinary income
upon a disqualifying disposition to the excess of the Fair Market Value
of the Purchased Shares on the date the Option is exercised over the
Exercise Price paid for the Purchased Shares. Accordingly, such election
if properly filed will only be allowed to the extent the final Treasury
Regulations permit such a protective election. Page 2 of the attached
form for making the election should be filed with any election made in
connection with the exercise of an Incentive Option.
- --------
(1) Generally, a disposition of shares purchased under an Incentive Option
includes any transfer of legal title, including a transfer by sale, exchange or
gift, but does not include a transfer to the Optionee's spouse, a transfer into
joint ownership with right of survivorship if Optionee remains one of the joint
owners, a pledge, a transfer by bequest or inheritance or certain tax free
exchanges permitted under the Code.
<PAGE> 15
SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the Internal
Revenue Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is _______
shares of the common stock of Cellstream Networks Inc.
(3) The property was issued on _________, 199__.
(4) The taxable year in which the election is being made is the calendar
year 199__.
(5) The property is subject to a repurchase right pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of annual
and monthly installments over a five (5)-year period ending on
__________, 199__.
(6) The fair market value at the time of transfer (determined without regard
to any restriction other than a restriction which by its terms will
never lapse) is $_______ per share.
(7) The amount paid for such property is $ _________ per share.
(8) A copy of this statement was furnished to Cellstream Networks Inc. for
whom taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on__________________, 199__.
- ------------------------------ ----------------------------------
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within
thirty (30) days after the execution date of the Stock Purchase Agreement. This
filing should be made by registered or certified mail, return receipt requested.
Optionee must retain two (2) copies of the completed form for filing with his or
her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
<PAGE> 16
The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Internal Revenue Code (the "Code"). Accordingly,
it is the intent of the Taxpayer to utilize this election to achieve the
following tax results:
1. The purpose of this election is to have the alternative
minimum taxable income attributable to the purchased shares measured by the
amount by which the fair market value of such shares at the time of their
transfer to the Taxpayer exceeds the purchase price paid for the shares. In the
absence of this election, such alternative minimum taxable income would be
measured by the spread between the fair market value of the purchased shares and
the purchase price which exists on the various lapse dates in effect for the
forfeiture restrictions applicable to such shares. The election is to be
effective to the full extent permitted under the Code.
2. Section 421(a)(1) of the Code expressly excludes from income
any excess of the fair market value of the purchased shares over the amount paid
for such shares. Accordingly, this election is also intended to be effective in
the event there is a "disqualifying disposition" of the shares, within the
meaning of Section 421(b) of the Code, which would otherwise render the
provisions of Section 83(a) of the Code applicable at that time. Consequently,
the Taxpayer hereby elects to have the amount of disqualifying disposition
income measured by the excess of the fair market value of the purchased shares
on the date of transfer to the Taxpayer over the amount paid for such shares.
Since Section 421(a) presently applies to the shares which are the subject of
this Section 83(b) election, no taxable income is actually recognized for
regular tax purposes at this time, and no income taxes are payable, by the
Taxpayer as a result of this election.
THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN CONNECTION
WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEDERAL TAX LAWS.
<PAGE> 17
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Purchase Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CAUSE shall mean, for purposes of Paragraph D.3, the unauthorized use
or disclosure of the confidential information or trade secrets of the
Corporation, which use causes material harm to the Company, conviction of a
felony under the laws of the United States or any state thereof, gross
negligence or continued failure to perform assigned duties after receiving
written notification from the Board.
D. CODE shall mean the Internal Revenue Code of 1986, as amended.
E. COMMON STOCK shall mean the Corporation's common stock.
F. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions:
(vi) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(vii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution
of the Corporation.
G. CORPORATION shall mean Cellstream Networks Inc., a Delaware
corporation.
H. DISPOSITION NOTICE shall have the meaning assigned to such term in
Paragraph E.2.
I. DISSOLUTION NOTICE shall have the meaning assigned to such term in
Paragraph F.2.
J. EXERCISE NOTICE shall have the meaning assigned to such term in
Paragraph E.3.
K. EXERCISE PRICE shall have the meaning assigned to such term in
Paragraph A.1.
L. FAIR MARKET VALUE of a share of Common Stock on any relevant date,
prior to the initial public offering of the Common Stock, shall be determined by
the Plan Administrator after taking into account such factors as it shall deem
appropriate.
M. FIRST REFUSAL RIGHT shall mean the right granted to the Corporation
in accordance with Article E.
N. GRANT DATE shall have the meaning assigned to such term in Paragraph
A.1.
<PAGE> 18
O. GRANT NOTICE shall mean the Notice of Grant of Stock Option pursuant
to which Optionee has been informed of the basic terms of the Option.
P. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
Q. MARKET STAND-OFF shall mean the market stand-off restriction
specified in Paragraph C.3.
R. ACT shall mean the Securities Act of 1933, as amended.
S. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
T. OPTION shall have the meaning assigned to such term in Paragraph A.1.
U. OPTION AGREEMENT shall mean all agreements and other documents
evidencing the Option.
V. OPTIONEE shall mean the person to whom the Option is granted under
the Plan.
W. OWNER shall mean Optionee and all subsequent holders of the Purchased
Shares who derive their chain of ownership through a Permitted Transfer from
Optionee.
X. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
Y. PERMITTED TRANSFER shall mean (i) a gratuitous transfer of the
Purchased Shares, provided and only if Optionee obtains the Corporation's prior
written consent to such transfer, (ii) a transfer of title to the Purchased
Shares effected pursuant to Optionee's will or the laws of intestate succession
following Optionee's death or (iii) a transfer to the Corporation in pledge as
security for any purchase-money indebtedness incurred by Optionee in connection
with the acquisition of the Purchased Shares.
Z. PLAN shall mean the Corporation's 1995 Stock Option Plan.
AA. PLAN ADMINISTRATOR shall mean either the Board or a committee of
Board members, to the extent the committee is at the time responsible for
administration of the Plan.
BB. PRIOR PURCHASE AGREEMENT shall have the meaning assigned to such
term in Paragraph D.4.
CC. PURCHASE NOTICE shall have the meaning assigned to such term in
Paragraph F.3.
DD. PURCHASED SHARES shall have the meaning assigned to such term in
Paragraph A.1.
<PAGE> 19
EE. RECAPITALIZATION shall mean any stock split, stock dividend,
recapitalization, combination of shares, exchange of shares or other change
affecting the Corporation's outstanding Common Stock as a class without the
Corporation's receipt of consideration.
FF. REORGANIZATION shall mean any of the following transactions:
(viii) a merger or consolidation in which the Corporation is not
the surviving entity,
(ix) a sale, transfer or other disposition of all or
substantially all of the Corporation's assets,
(x) a reverse merger in which the Corporation is the surviving
entity but in which the Corporation's outstanding voting securities are
transferred in whole or in part to a person or persons different from
the persons holding those securities immediately prior to the merger, or
(xi) any transaction effected primarily to change the state in
which the Corporation is incorporated or to create a holding company
structure.
GG. REPURCHASE RIGHT shall mean the right granted to the Corporation in
accordance with Article D.
HH. SEC shall mean the Securities and Exchange Commission.
II. SERVICE shall mean the provision of services to the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an employee, subject to
the control and direction of the employer entity as to both the work to be
performed and the manner and method of performance, a non-employee member of the
board of directors or a consultant.
JJ. SPECIAL PURCHASE RIGHT shall mean the right granted to the
Corporation in accordance with Article F.
KK. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
LL. TARGET SHARES shall have the meaning assigned to such term in
Paragraph E.2.
MM. VESTING SCHEDULE shall mean the vesting schedule specified in the
Grant Notice.
NN. UNVESTED SHARES shall have the meaning assigned to such term in
Paragraph D.1.
<PAGE> 1
EXHIBIT 99.9
CELLSTREAM NETWORKS INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the
services of selected Employees, non-employee members of the Board or the board
of directors of any Parent or Subsidiary and consultants who provide services to
the Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a
Parent or Subsidiary), and this Agreement is executed pursuant to, and is
intended to carry out the purposes of, the Plan in connection with the
Corporation's grant of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning
assigned to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. GRANT OF OPTION. The Corporation hereby grants to Optionee, as
of the Grant Date, an option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. OPTION TERM. This option shall have a term of ten (10) years
measured from the Grant Date and shall accordingly expire at the close of
business on the Expiration Date, unless sooner terminated in accordance with
Paragraph 5, 6 or 17.
3. LIMITED TRANSFERABILITY. This option shall be neither
transferable nor assignable by Optionee other than by will or by the laws of
descent and distribution following Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee. However, if this option is designated a
Non-Statutory Option in the Grant Notice, then this option may also be assigned
in whole or in part during Optionee's lifetime in accordance with the terms of a
Qualified Domestic Relations Order. The assigned portion shall be exercisable
only by the person or persons who acquire a proprietary interest in the option
pursuant to such Qualified Domestic Relations Order. The terms applicable to the
assigned portion shall be the same as those in effect for this option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.
4. DATES OF EXERCISE. This option shall become exercisable for
the Option Shares in one or more installments as specified in the Grant Notice.
As the option becomes exercisable for such installments, those installments
shall accumulate and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5, 6 or 17.
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<PAGE> 2
5. CESSATION OF SERVICE. The option term specified in Paragraph 2
shall terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(i) Should Optionee cease to remain in Service
for any reason (other than death or Disability) while this option is
outstanding, then Optionee shall have a period of three (3) months
(commencing with the date of such cessation of Service) during which to
exercise this option, but in no event shall this option be exercisable
at any time after the Expiration Date.
(ii) Should Optionee die while this option is
outstanding, then the personal representative of Optionee's estate or
the person or persons to whom the option is transferred pursuant to
Optionee's will or in accordance with the laws of descent and
distribution shall have the right to exercise this option. Such right
shall lapse and this option shall cease to be outstanding upon the
earlier of (i) the expiration of the twelve (12)-month period measured
from the date of Optionee's death or (ii) the Expiration Date.
(iii) Should Optionee cease Service by reason of
Disability while this option is outstanding, then Optionee shall have a
period of six (6) months (commencing with the date of such cessation of
Service) during which to exercise this option. However, should such
Disability be deemed to constitute Permanent Disability, then the period
during which this option is to remain exercisable shall be extended by
an additional six (6) months so that the exercise period shall be the
twelve (12)-month period following the date of Optionee's cessation of
Service by reason of such Permanent Disability. In no event shall this
option be exercisable at any time after the Expiration Date.
Note: Exercise of this option on a date later than three (3)
months following cessation of Service due to Disability will
result in loss of favorable Incentive Option treatment, unless
such Disability constitutes Permanent Disability. In the event
that Incentive Option treatment is not available, this option
will be taxed as a Non-Statutory Option upon exercise.
(iv) During the limited period of post-Service
exercisability, this option may not be exercised in the aggregate for
more than the number of vested Option Shares for which the option is
exercisable at the time of Optionee's cessation of Service. Upon the
expiration of such limited exercise period or (if earlier) upon the
Expiration Date, this option shall terminate and cease to be outstanding
for any vested Option Shares for which the option has not been
exercised. To the extent Optionee is not vested in the Option Shares at
the time of Optionee's cessation of Service, this option shall
immediately terminate and cease to be outstanding with respect to those
shares.
2
<PAGE> 3
6. SPECIAL TERMINATION OF OPTION.
(a) In the event of a Corporate Transaction, this option
shall terminate and cease to be outstanding, except to the extent assumed by the
successor corporation or parent thereof in connection with such Corporate
Transaction.
(b) If this option is assumed in connection with a
Corporate Transaction, then this option shall be appropriately adjusted,
immediately after such Corporate Transaction, to apply to the number and class
of securities which would have been issuable to Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such
Corporate Transaction, and appropriate adjustments shall also be made to the
Exercise Price, provided the aggregate Exercise Price shall remain the same.
(c) This Agreement shall not in any way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES. Should any change be made to the
Common Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. STOCKHOLDER RIGHTS. The holder of this option shall not have
any stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all
or any part of the Option Shares for which this option is at the time
exercisable, Optionee (or any other person or persons exercising the option)
must take the following actions:
(i) Execute and deliver to the Corporation a
Purchase Agreement for the Option Shares for which the
option is exercised.
(ii) Pay the aggregate Exercise Price for the
purchased shares in one or more of the following forms:
(A) cash or check made payable to the
Corporation; or
(B) a promissory note payable to the
Corporation, but only to the extent authorized
by the Plan Administrator in accordance with
Paragraph 14.
3
<PAGE> 4
Should the Common Stock be registered under Section 12(g)
of the 1934 Act at the time the option is exercised, then the
Exercise Price may also be paid as follows:
(C) in shares of Common Stock held by
Optionee (or any other person or persons exercising the option)
for the requisite period necessary to avoid a charge to the
Corporation's earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date; or
(D) to the extent the option is exercised
for vested Option Shares, through a special sale and remittance
procedure pursuant to which Optionee (or any other person or
persons exercising the option) shall concurrently provide
irrevocable written instructions (a) to a Corporation-designated
brokerage firm to effect the immediate sale of the purchased
shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the purchased shares plus
all applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of
such exercise and (b) to the Corporation to deliver the
certificates for the purchased shares directly to such brokerage
firm in order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Purchase Agreement delivered to
the Corporation in connection with the option exercise.
(iii) Furnish to the Corporation appropriate
documentation that the person or persons exercising the option (if other
than Optionee) have the right to exercise this option.
(iv) Execute and deliver to the Corporation such
written representations as may be requested by the Corporation in order
for it to comply with the applicable requirements of Federal and state
securities laws.
(v) Make appropriate arrangements with the
Corporation (or Parent or Subsidiary employing or retaining Optionee)
for the satisfaction of all Federal, state and local income and
employment tax withholding requirements applicable to the option
exercise.
(b) As soon as practical after the Exercise Date, the
Corporation shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option Shares,
with the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any
fractional shares.
4
<PAGE> 5
10. REPURCHASE RIGHTS. ALL OPTION SHARES ACQUIRED UPON THE
EXERCISE OF THIS OPTION SHALL BE SUBJECT TO CERTAIN RIGHTS OF THE CORPORATION
AND ITS ASSIGNS TO REPURCHASE THOSE SHARES IN ACCORDANCE WITH THE TERMS
SPECIFIED IN THE PURCHASE AGREEMENT.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of the
Option Shares upon such exercise shall be subject to compliance by the
Corporation and Optionee with all applicable requirements of law relating
thereto and with all applicable regulations of any stock exchange (or the Nasdaq
National Market, if applicable) on which the Common Stock may be listed for
trading at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain approval
from any regulatory body having authority deemed by the Corporation to be
necessary to the lawful issuance and sale of any Common Stock pursuant to this
option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not
have been obtained. The Corporation, however, shall use its best efforts to
obtain all such approvals.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise
provided in Paragraphs 3 and 6, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the Corporation and its successors and
assigns and Optionee, Optionee's assigns and the legal representatives, heirs
and legatees of Optionee's estate.
13. NOTICES. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
14. FINANCING. The Plan Administrator may, in its absolute
discretion and without any obligation to do so, permit Optionee to pay the
Exercise Price for the purchased Option Shares by delivering a promissory note.
The terms of any such promissory note (including the interest rate, the
requirements for collateral and the terms of repayment) shall be established by
the Plan Administrator in its sole discretion.(1)
- --------
(1) Authorization of payment of the Exercise Price by a promissory note may,
under currently proposed Treasury Regulations, result in the loss of incentive
stock option treatment under the Federal tax laws.
5
<PAGE> 6
15. CONSTRUCTION. This Agreement and the option evidenced hereby
are made and granted pursuant to the Plan and are in all respects limited by and
subject to the terms of the Plan. All decisions of the Plan Administrator with
respect to any question or issue arising under the Plan or this Agreement shall
be conclusive and binding on all persons having an interest in this option.
16. GOVERNING LAW. The interpretation, performance and
enforcement of this Agreement shall be governed by the laws of the State of
Delaware without resort to that State's conflict-of-laws rules.
17. STOCKHOLDER APPROVAL.
(a) The grant of this option is subject to approval of the
Plan by the Corporation's stockholders within twelve (12) months after the
adoption of the Plan by the Board. Notwithstanding any provision of this
Agreement to the contrary, this option may not be exercised in whole or in part
until such stockholder approval is obtained. In the event that such stockholder
approval is not obtained, then this option shall terminate in its entirety and
Optionee shall have no further rights to acquire any Option Shares hereunder.
(b) If the Option Shares covered by this Agreement exceed,
as of the Grant Date, the number of shares of Common Stock which may without
stockholder approval be issued under the Plan, then this option shall be void
with respect to such excess shares, unless stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained in accordance with the provisions of the Plan.
18. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE OPTION. In the
event this option is designated an Incentive Option in the Grant Notice, the
following terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax
treatment as an Incentive Option if (and to the extent) this option is exercised
for one or more Option Shares: (i) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or Permanent
Disability or (ii) more than twelve (12) months after the date Optionee ceases
to be an Employee by reason of Permanent Disability.
(b) This option shall not become exercisable in the
calendar year in which granted if (and to the extent) the aggregate Fair Market
Value (determined at the Grant Date) of the Common Stock for which this option
would otherwise first become exercisable in such calendar year would, when added
to the aggregate value (determined as of the respective date or dates of grant)
of the Common Stock and any other securities for which one or more other
Incentive Options granted to Optionee prior to the Grant Date (whether under the
Plan or any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. To the extent the exercisability
of this option is deferred by reason of the foregoing limitation, the deferred
portion shall become exercisable in the first calendar year or years thereafter
in which the One Hundred Thousand Dollar ($100,000) limitation of this Paragraph
18(b) would not be contravened,
6
<PAGE> 7
but such deferral shall in all events end immediately prior to the effective
date of a Corporate Transaction in which this option is not to be assumed,
whereupon the option shall become immediately exercisable as a Non-Statutory
Option for the deferred portion of the Option Shares.
(c) Should Optionee hold, in addition to this option, one
or more other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options shall be
applied on the basis of the order in which such options are granted.
7
<PAGE> 8
APPENDIX
The following definitions shall be in effect under the Agreement:
A. AGREEMENT shall mean this Stock Option Agreement.
B. BOARD shall mean the Corporation's Board of Directors.
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
D. COMMON STOCK shall mean the Corporation's common stock.
E. CORPORATE TRANSACTION shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities immediately
prior to such transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution
of the Corporation.
F. CORPORATION shall mean CellStream Networks Inc., a Delaware
corporation.
G. DISABILITY shall mean the inability of Optionee to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment and shall be determined by the Plan Administrator on the basis
of such medical evidence as the Plan Administrator deems warranted under the
circumstances. Disability shall be deemed to constitute PERMANENT DISABILITY in
the event that such Disability is expected to result in death or has lasted or
can be expected to last for a continuous period of twelve (12) months or more.
H. DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
I. EMPLOYEE shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
J. EXERCISE DATE shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.
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<PAGE> 9
K. EXERCISE PRICE shall mean the exercise price per share as specified
in the Grant Notice.
L. EXPIRATION DATE shall mean the date on which the option expires as
specified in the Grant Notice.
M. FAIR MARKET VALUE per share of Common Stock on any relevant date
shall be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the Nasdaq
National Market or any successor system. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date for
which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the closing selling price per share
of Common Stock on the date in question on the Stock Exchange determined
by the Plan Administrator to be the primary market for the Common Stock,
as such price is officially quoted in the composite tape of transactions
on such exchange. If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such
quotation exists.
(iii) If the Common Stock is at the time neither listed on any Stock
Exchange nor traded on the Nasdaq National Market, then the Fair Market
Value shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
N. GRANT DATE shall mean the date of grant of the option as specified in
the Grant Notice.
O. GRANT NOTICE shall mean the Notice of Grant of Stock Option
accompanying the Agreement, pursuant to which Optionee has been informed of the
basic terms of the option evidenced hereby.
P. INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
Q. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
R. NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
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<PAGE> 10
S. OPTION SHARES shall mean the number of shares of Common Stock subject
to the option.
T. OPTIONEE shall mean the person to whom the option is granted as
specified in the Grant Notice.
U. PARENT shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
V. PLAN shall mean the Corporation's 1995 Stock Option Plan.
W. PLAN ADMINISTRATOR shall mean either the Board or a committee of
Board members, to the extent the committee is at the time responsible for the
administration of the Plan.
X. PURCHASE AGREEMENT shall mean the stock purchase agreement in
substantially the form of Exhibit B to the Grant Notice.
Y. QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
Z. SERVICE shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant.
AA. STOCK EXCHANGE shall mean the American Stock Exchange or the New
York Stock Exchange.
BB. SUBSIDIARY shall mean any corporation (other than the Corporation)
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
3
<PAGE> 1
Exhibit 99.10
CISCO SYSTEMS, INC.
STOCK OPTION ASSUMPTION AGREEMENT
SENTIENT NETWORKS, INC.
1997 STOCK PLAN
1995 STOCK OPTION PLAN
OPTIONEE: [A]
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 18th day of June,
1999 by Cisco Systems, Inc., a California corporation ("Cisco").
WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase shares of the common stock of Sentient Networks,
Inc. (formerly Cellstream Networks, Inc.), a Delaware corporation ("Sentient"),
which were granted to Optionee under the Sentient 1997 Stock Plan or 1995 Stock
Option Plan (the "Plans") and are each evidenced by a Stock Option Agreement
(the "Option Agreement").
WHEREAS, Sentient has been acquired by Cisco through the merger of Sentient
with and into Cisco (the "Merger") pursuant to the Agreement and Plan of Merger
and Reorganization, by and between Cisco and Sentient (the "Merger Agreement").
WHEREAS, the provisions of the Merger Agreement require Cisco to assume all
obligations of Sentient under all outstanding options under the Plans at the
consummation of the Merger and to issue to the holder of each outstanding option
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 0.06555 shares of Cisco
common stock ("Cisco Stock") for each outstanding share of Sentient common stock
("Sentient Stock").
WHEREAS, this Agreement became effective immediately upon the consummation
of the Merger (the "Effective Time") in order to reflect certain adjustments to
Optionee's outstanding options which have become necessary by reason of the
assumption of those options by Cisco in connection with the Merger.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Sentient Stock subject to the options held by
Optionee immediately prior to the Effective Time (the "Sentient Options") and
the exercise price payable per share are set forth in Exhibit(s) A hereto. Cisco
hereby assumes, as of the Effective Time, all the duties and obligations of
Sentient under each of the Sentient Options. In connection with such assumption,
the number of shares of Cisco Stock purchasable under each Sentient
<PAGE> 2
Option hereby assumed and the exercise price payable thereunder have been
adjusted to reflect the Exchange Ratio. Accordingly, the number of shares of
Cisco Stock subject to each Sentient Option hereby assumed shall be as specified
for that option in attached Exhibit(s) A, and the adjusted exercise price
payable per share of Cisco Stock under the assumed Sentient Option shall also be
as indicated for that option in attached Exhibit(s) A.
2. The intent of the foregoing adjustments to each assumed Sentient
Option is to assure that the spread between the aggregate fair market value of
the shares of Cisco 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 Sentient Stock subject to the Sentient 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 Sentient Option immediately prior to the Merger.
3. The following provisions shall govern each Sentient Option hereby
assumed by Cisco:
(a) Unless the context otherwise requires, all references in each
Option Agreement and in the Plans (i) to the "Company" or the "Corporation"
shall mean Cisco, (ii) to "Shares," "Stock" or "Common Stock" shall mean shares
of Cisco Stock, (iii) to the "Board of Directors" or "Board" shall mean the
Board of Directors of Cisco and (iv) to the "Committee" shall mean the
Compensation Committee of the Cisco Board of Directors.
(b) The grant date and the expiration date of each assumed Sentient
Option and all other provisions which govern either the exercise or the
termination of the assumed Sentient Option shall remain the same as set forth in
the Option Agreement and the Plan, applicable to that option, and the provisions
of the Option Agreement and the Plan shall accordingly govern and control
Optionee's rights under this Agreement to purchase Cisco Stock.
(c) Pursuant to the terms of the Option Agreement, none of your
options assumed by Cisco in connection with the transaction will vest and become
exercisable on an accelerated basis upon the consummation of the Merger. Each
Sentient Option shall be assumed by Cisco as of the Effective Time. Each such
assumed Sentient Option shall thereafter continue to vest for any remaining
unvested shares of Cisco 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.
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(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 Sentient, 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 Cisco or any present or future Cisco subsidiary.
Accordingly, the provisions of the Option Agreement governing the termination of
the assumed Sentient Options upon Optionee's cessation of service as an employee
or a consultant of Sentient shall hereafter be applied on the basis of
Optionee's cessation of employee or consultant status with Cisco and its
subsidiaries, and each assumed Sentient Option shall accordingly terminate,
within the designated time period in effect under the Option Agreement for that
option, following such cessation of service as an employee or a consultant of
Cisco and its subsidiaries.
(e) The adjusted exercise price payable for the Cisco Stock subject
to each assumed Sentient 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 Cisco Stock delivered in payment
of such adjusted exercise price, the period for which such shares were held as
Sentient Stock prior to the Merger shall be taken into account.
(f) In order to exercise each assumed Sentient Option, Optionee must
deliver to Cisco a written notice of exercise in which the number of shares of
Cisco 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 Cisco Stock and should be delivered to Cisco at the
following address:
Cisco Systems, Inc.
255 West Tasman Drive, Building J
San Jose, CA 95134
Attention: Option Plan Administrator
4. 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.
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IN WITNESS WHEREOF, Cisco Systems, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
effective as of the 18th day of June, 1999.
CISCO SYSTEMS, INC.
By:
----------------------------
Larry R. Carter
Corporate Secretary
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 Sentient Options hereby assumed by Cisco are as
set forth in the Option Agreement, the Plan, as applicable, and such Stock
Option Assumption Agreement.
--------------------------------
[A], OPTIONEE
DATED: , 1999
-----------------
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