<PAGE> 1
As filed with the Securities and Exchange Commission on October 23, 1996.
Registration No. 333-__________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM S-8
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
-------------------------
PEOPLESOFT, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 68-0137069
(State of Incorporation) (I.R.S. Employee Identification No.)
4440 Rosewood Drive
Pleasanton, California 94588
(510) 225-3000
-------------------------
RED PEPPER SOFTWARE COMPANY
1993 STOCK OPTION PLAN
(Full title of the Plan)
-------------------------
David A. Duffield
Chairman, President and Chief Executive Officer
PEOPLESOFT, INC.
4440 Rosewood Drive
Pleasanton, California 94588
(510) 225-3000
(Name, address and telephone number of agent for service)
-------------------------
Copies to:
HENRY P. MASSEY, JR. ESQ.
PETER S. HEINECKE, ESQ.
BRADLEY A. BUGDANOWITZ
Wilson, Sonsini, Goodrich & Rosati
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
(415) 493-9300
<PAGE> 2
- --------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Per Offering Registration
Registered Registered Share Price Fee
---------- ---------- ----- ----- ---
<S> <C> <C> <C> <C>
Common Stock, $.01 par 299,441 shares(1) $ 1.6669(2) $ 499,139(3) $ 152
value, to be issued under
Red Pepper Software
Company 1993 Stock
Option Plan
- ----- -------------- -------- --------- ------
Total 299,441 shares(1) $ 1.6669(2) $ 499,139(3) $ 152
===== ============== ======== ========= ======
</TABLE>
(1) Shares issuable upon exercise of outstanding options assumed as of
October 16, 1996 under the Red Pepper Software Company 1993 Stock
Option Plan.
(2) Weighted average exercise price of outstanding options set forth above,
rounded to four decimal points.
(3) Aggregate Offering Price based on the number and exercise prices of all
outstanding options.
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<PAGE> 3
PART II: INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3 INFORMATION INCORPORATED BY REFERENCE
The following documents and information heretofore filed with the
Securities and Exchange Commission are hereby incorporated by reference:
ITEM 3(a)
The Registrant's Annual Report on Form 10-K, file no. 0-20710
filed on April 1, 1996, which contains audited financial statements for
the Registrant's fiscal year ended December 31, 1995, the latest fiscal
year for which such statements have been filed.
The Unaudited Pro Forma Combined Condensed Financial
Statements included in Amendment No. 1 to Registrant's Registration
Statement on Form S-4, file no. 333-12815 filed on October 2, 1996.
ITEM 3(b)
The Registrant's Quarterly Report on Form 10-Q, file no.
0-20710, filed on August 13, 1996, which contains the Registrant's
unaudited financial statements as of June 30, 1996.
ITEM 3(c)
Items 1 and 2 of the Registrant's Registration Statement on
Form 8-A filed on October 7, 1992, as amended by Amendment No. 1 to
Form 8-A filed on November 6, 1992, pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
All documents subsequently filed by the Registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference in this Registration Statement and to be part
hereof from the date of filing of such documents.
ITEM 4 DESCRIPTION OF SECURITIES
Not Applicable.
ITEM 5 INTERESTS OF NAMED EXPERTS AND COUNSEL
Not Applicable.
ITEM 6 INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by the Delaware General Corporation Law, the Registrant
has included in its Certificate of Incorporation a provision to eliminate the
personal liability of its directors for monetary damages for breach or alleged
breach of their fiduciary duties as directors, subject to certain exceptions. In
addition, the Bylaws of the Registrant provide that the Registrant is required
to indemnify its officers and directors under certain circumstances, including
those circumstances in which indemnification would otherwise be discretionary,
and the Registrant is required to advance expenses to its officers and directors
as incurred in connection with proceedings against them for which they may be
indemnified. The Registrant has entered into indemnification agreements with its
officers and directors containing provisions that are in some respects broader
than the specific indemnification provisions contained in the
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<PAGE> 4
Delaware General Corporation Law. The indemnification agreements may require the
Registrant, among other things, to indemnify such officers and directors against
certain liabilities that may arise by reason of their status or service as
directors or officers (other than liabilities arising from willful misconduct of
a culpable nature), to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified, and to obtain
directors' and officers' insurance if available on reasonable terms. At present,
the Registrant is not aware of any pending or threatened litigation or
proceeding involving a director, officer, employee or agent of the Registrant in
which indemnification would be required or permitted. The Registrant believes
that its charter provisions and indemnification agreements are necessary to
attract and retain qualified persons as directors and officers.
ITEM 7 EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8 EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Document
------ --------
<S> <C>
4.1 Restated Certificate of Incorporation of Registrant, (filed with the Secretary of State of
Delaware on May 25, 1995) (Incorporated by reference to Exhibit No. 4.1, filed with the
Registrant's Registration Statement on Form S-8 (No. 333-08575 filed on July 22, 1996)).
4.2 Certificate of Amendment to Certificate of Incorporation of Registrant (filed with the
Secretary of State of Delaware on June 17, 1996) (Incorporated by reference to Exhibit No.
4.2, filed with the Registrant's Registration Statement on Form S-8 (No. 333-08575 filed
on July 22, 1996)).
4.3 By-laws of Registrant, as amended. (Incorporated by reference to Exhibit No. 3.3, filed
with the Registrant's Form 10-K/A (filed on October 21, 1996).
4.4 Red Pepper Software Company 1993 Stock Option Plan, including Immediately
Exercisable Nonqualified Stock Option Agreement, Immediately Exercisable Incentive
Stock Option Agreement, Nonqualified Stock Option Exercise Form, Incentive Stock
Option Exercise Form, Immediately Exercisable Incentive Stock Option Agreement
(Evergreen Option) and Immediately Exercisable Nonqualified Stock Option Agreement
(Evergreen Option).
4.5 Preferred Shares Rights Agreement dated as of February 15, 1995, between PeopleSoft, Inc.
and the First National Bank of Boston, Canton, MA, including the form of Certificate of
Designation, the form of Rights Certificate and the Summary of Rights Attached thereto as
Exhibits A, B and C, respectively (Incorporated by reference to Exhibit No. 1, filed with
the Registrant's Form 8-A (filed on February 16, 1995).
5.1 Opinion of Counsel as to Legality of Securities Being Registered.
24.1 Consent of Independent Auditors (see page 7).
24.2 Consent of Counsel (contained in Exhibit 5.1 hereto).
25.1 Power of Attorney (see page 6).
</TABLE>
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<PAGE> 5
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 to include
any material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under
the 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.
(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 offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Act may
be permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the 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 Act and will be governed by the final adjudication of
such issue.
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<PAGE> 6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, PeopleSoft, Inc., a corporation organized and existing under the
laws of the State of Delaware, 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 Walnut Creek, State of
California, on October 23, 1996.
PEOPLESOFT, INC.
By: /s/Ronald E.F. Codd
---------------------------------------
Ronald E.F. Codd,
Senior Vice President, Finance and
Administration, Chief Financial Officer
and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints David A. Duffield and Ronald E.F. Codd,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Registration Statement on Form S-8, and to file the same, with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his substitute or substitutes, may do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------------------------- ---------------------------------------------- ---------------------------
<S> <C> <C>
/s/ David A. Duffield President, Chief Executive Officer (Principal October 23, 1996
- ----------------------------------------- Executive Officer), and Director
(David A. Duffield)
/s/ Ronald E.F. Codd Senior Vice President of Finance and October 23, 1996
- ----------------------------------------- Administration (Principal Financial and
(Ronald E.F. Codd) Accounting Officer)
/s/ A. George Battle Director October 23, 1996
- -----------------------------------------
(A. George "Skip" Battle)
Director
- -----------------------------------------
(Albert W. Duffield)
/s/ George J. Still, Jr. Director October 23, 1996
- -----------------------------------------
(George J. Still, Jr.)
/s/ Edgar F. Codd Director October 23, 1996
- -----------------------------------------
(Edgar F. Codd)
/s/ Cyril J. Yansouni Director October 23, 1996
- -----------------------------------------
(Cyril J. Yansouni)
</TABLE>
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<PAGE> 7
EXHIBIT 24.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8) pertaining to the Red Pepper Software Company 1993 Stock
Option Plan, of our report dated January 30, 1996 with respect to the
consolidated financial statements of PeopleSoft, Inc. included in the Annual
Report on Form 10-K for the year ended December 31, 1995, filed with the
Securities and Exchange Commission.
/s/ERNST & YOUNG
- ------------------------
Walnut Creek, California
October 23, 1996
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<PAGE> 1
EXHIBIT 4.4
RED PEPPER SOFTWARE COMPANY
1993 STOCK OPTION PLAN
1. Purpose. The Red Pepper Software Company 1993 Stock Option Plan (the
"Plan") is established to attract, retain and reward persons providing services
to Red Pepper Software Company and any successor corporation thereto
(collectively referred to as the "Company"), and any future parent and/or
subsidiary corporations of such corporation (all of whom along with the Company
being individually referred to as a "Participating Company" and collectively
referred to as the "Participating Company Group"), and to motivate such persons
to contribute to the growth and profits of the Participating Company Group in
the future. For purposes of the Plan, a parent corporation and a subsidiary
corporation shall be as defined in sections 424(e) and 424(f) of the Internal
Revenue Code of 1986, as amended (the "Code").
2. Administration. The Plan shall be administered by the Board of
Directors of the Company (the "Board") and/or by a duly appointed committee of
the Board having such powers as shall be specified by the Board. Any subsequent
references herein to the Board shall also mean the committee if such committee
has been appointed and, unless the powers of the committee have been
specifically limited, the committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to terminate or amend
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law. All questions of interpretation of the Plan or of
any options granted under the Plan (an "Option") shall be determined by the
Board, and such determinations shall be final and binding upon all persons
having an interest in the Plan and/or any Option. Options may be either
incentive stock options as defined in section 422 of the Code ("Incentive Stock
Options") or nonqualified stock options. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, or election which is the responsibility of or which
is allocated to the Company herein, provided the officer has apparent authority
with respect to such matter, right, obligation, or election.
3. Eligibility.
(a) General. Options may be granted only to employees
(including officers) and directors of the Participating Company Group or to
individuals who are rendering services as consultants or other independent
contractors to the Participating Company Group. The Board shall, in the Board's
sole discretion, determine which persons shall be granted Options (an
"Optionee"). A director of the Company shall be eligible to be granted only a
nonqualified stock option unless the director is also an employee of the
Company. An individual who is rendering services as a consultant or other
independent contractor shall be eligible to be granted only a nonqualified stock
option. Eligible persons may be granted more than one (1) Option.
(b) Evergreen Options. The Board may grant Options (an
"Evergreen Option") under which vesting commences upon or following the
completion of vesting of another Option held by the Optionee, as a result of
which the Evergreen Option does not vest at a rate of at least twenty percent
(20%) per year over a period not greater than five (5) years from the date of
grant of such Evergreen
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Option. An Evergreen Option may only be granted to an individual who has
previously been granted an Option under the Plan (other than an Evergreen
Option) and who is (i) an employee of the Participating Company Group whose
annual compensation is at least sixty thousand dollars ($60,000), (ii) an
officer or director of a Participating Company, or (iii) rendering services as a
consultant to the Participating Company Group. The Board shall, in its sole
discretion, determine which persons shall be granted Evergreen Options.
4. Shares Subject to Option. Options shall be options for the purchase
of the authorized but unissued common stock of the Company (the "Stock"),
subject to adjustment as provided in paragraph 10 below. The maximum number of
shares of Stock which may be issued under the Plan shall be Three Million Four
Hundred Thousand (3,400,000) shares. In the event that any outstanding Option
for any reason expires or is terminated or canceled, the share allocable to the
unexercised portion of such Option may again be subjected to an Option grant.
5. Time for Granting Options. All Options shall be granted, if at all,
within ten (10) years from the earlier of the date the Plan is adopted by the
Board or the date the Plan is duly approved by the shareholders of the Company.
6. Terms, Conditions and Form of Options. Subject to the provisions of
the Plan, the Board shall determine for each Option (which need not be
identical) the number of shares of Stock for which the Option shall be granted,
the option price of the Option, the exercisability of the Option, whether the
Option is to be treated as an Incentive Stock Option or as a nonqualified stock
option and all other terms and conditions of the Option not inconsistent with
the Plan. Options granted pursuant to the Plan shall be evidenced by written
agreements specifying the number of shares of Stock covered thereby, in such
form as the Board shall from time to time establish, and shall comply with and
be subject to the following terms and conditions:
(a) Option Exercise Price. The option exercise price for each
Option shall be established in the sole discretion of the Board; provided,
however, that (i) the option exercise price per share for an Incentive Stock
Option shall be not less than the fair market value, as determined by the Board,
of a share of Stock on the date of the granting of the Option, (ii) the option
exercise price per share for a nonqualified stock option shall not be less than
eighty-five percent (85%) of the fair market value, as determined by the Board,
of a share of Stock on the date of the granting of the Option and (iii) no
Option granted to an Optionee who at the time the Option is granted owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of a Participating Company within the meaning of section
422(b)(6) of the Code and/or ten percent (10%) of the total combined value of
all classes of stock of a Participating Company (a "Ten Percent Owner Optionee")
shall have an option exercise price per share less than one hundred ten percent
(110%) of the fair market value of a share of Stock on the date the Option is
granted. Notwithstanding the foregoing, an Option (whether an Incentive Stock
Option or a nonqualified stock option) may be granted with an option exercise
price lower than the minimum option exercise price set forth above if such
Option is granted pursuant to an assumption or substitution for another option
in a manner qualifying with the provisions of section 424(a) of the Code.
(b) Exercise Period of Options. The Board shall have the power
to set the time or times within which each Option shall be exercisable or the
event or events upon the occurrence of which
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all or a portion of each Option shall be exercisable and the term of each
Option; provided, however, that (i) no Option shall be exercisable after the
expiration of ten (10) years after the date such Option is granted, and (ii) no
Incentive Stock Option granted to a Ten Percent Owner Optionee shall be
exercisable after the expiration of five (5) years after the date such Option is
granted.
(c) Payment of Option Price. Payment of the option exercise
price for the number of shares of Stock being purchased pursuant to any Option
shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the
Company of shares of the Company's stock owned by the Optionee having a value,
as determined by the Board (but without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company), not less
than the option exercise price, (iii) by the Optionee's recourse promissory
note, (iv) by the assignment of the proceeds of a sale of some or all of the
shares being acquired upon the exercise of an Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System, or (v) by any combination thereof. The Board may at any time or from
time to time, by adoption of or by amendment to either of the standard forms of
stock option agreement described in paragraph 7 below, or by other means, grant
Options which do not permit all of the foregoing forms of consideration to be
used in payment of the option exercise price and/or which otherwise restrict one
(1) or more forms of consideration. Notwithstanding the foregoing, an Option may
not be exercised by tender to the Company of shares of the Company's stock to
the extent such tender of stock would constitute a violation of the provisions
of any law, regulation and/or agreement restricting the redemption of the
Company's stock. Furthermore, no promissory note shall be permitted if an
exercise using a promissory note would be a violation of any law. Any permitted
promissory note shall be due and payable not more than five (5) years after the
Option is exercised, and interest shall be payable at least annually and be at
least equal to the minimum interest rate necessary to avoid imputed interest
pursuant to all applicable sections of the Code. The Board shall have the
authority to permit or require the Optionee to secure any promissory note used
to exercise an Option with the shares of Stock acquired on exercise of the
Option and/or with other collateral acceptable to the Company.
(y) Unless otherwise provided by the Board, in the
event the Company at any time becomes subject to the regulations promulgated by
the Board of Governors of the Federal Reserve System or any other governmental
entity affecting the extension of credit in connection with the Company's
securities, any promissory note shall comply with such applicable regulations,
and the Optionee shall pay the unpaid principal and accrued interest, if any, to
the extent necessary to comply with such applicable regulations.
(z) The Company reserves, at any and all times, the
right, in the Company's sole and absolute discretion, to establish, decline to
approve and/or terminate any program and/or procedures for the exercise of
Options by means of an assignment of the proceeds of a sale of some or all of
the shares of Stock to be acquired upon such exercise.
7. Standard Forms of Stock Option Agreement.
(a) Incentive Stock Options. Unless otherwise provided for by
the Board at the time an Option is granted, an Option designated as an
"Incentive Stock Option" shall comply with and be subject to the terms and
conditions set forth in the form of incentive stock option agreement attached
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hereto as Exhibit A and incorporated herein by reference; provided, however,
that an Evergreen Option designated as an "Incentive Stock Option" shall comply
with and be subject to the terms and conditions set forth in the form of
"Immediately Exercisable Incentive Stock Option Agreement (Evergreen Option)"
approved by the Board and as amended from time to time.
(b) Nonqualified Stock Options. Unless otherwise provided for
by the Board at the time an Option is granted, an Option designated as a
"Nonqualified Stock Option" shall comply with and be subject to the terms and
conditions set forth in the form of nonqualified stock option agreement attached
hereto as Exhibit B and incorporated herein by reference; provided, however,
that an Evergreen Option designated as a "Nonqualified Stock Option" shall
comply with and be subject to the terms and conditions set forth in the form of
"Immediately Exercisable Nonqualified Stock Option Agreement (Evergreen Option)"
approved by the Board and as amended from time to time.
(c) Standard Term for Options. Unless otherwise provided for
by the Board in the grant of an Option, any Option granted hereunder shall be
exercisable for a term of ten (10) years.
8. Authority to Vary Terms. The Board shall have the authority from
time to time to vary the terms of either of the standard forms of stock option
agreement described in paragraph 7 above either in connection with the grant of
an individual Option or in connection with the authorization of a new standard
form or forms; provided, however, that the terms and conditions of such revised
or amended standard form or forms of agreement shall be in accordance with the
terms of the Plan. Such authority shall include, but not by way of limitation,
the authority to grant Options which are not immediately exercisable.
9. Fair Market Value Limitation. The aggregate fair market value of the
stock for which Incentive Stock Options held by an Optionee may become
exercisable for the first time during any calendar year (under the Plan and any
other stock option plan of the Participating Company Group) shall not be at a
rate in excess of One Hundred Thousand Dollars ($100,000).
10. Effect of Change in Stock Subject to Plan. Appropriate adjustments
shall be made in the number and class of shares of Stock subject to the Plan and
to any outstanding Options and in the option price of any outstanding Options in
the event of a stock dividend, stock split, reverse stock split, combination,
reclassification, or like change in the capital structure of the Company.
11. Transfer of Control. A "Transfer of Control" shall be deemed to
have occurred in the event any of the following occurs with respect to the
Company:
(a) the direct or indirect sale or exchange by the
shareholders of the Control Company of all or substantially all of the stock of
the Company where the shareholders of the Company before such sale or exchange
do not retain, directly or indirectly, at least a majority of the beneficial
interest in the voting stock of the Company after such sale or exchange;
(b) a merger or consolidation in which the Company is not the
surviving corporation;
(c) a merger or consolidation in which the Company is the
surviving corporation where the shareholders of the Company before such merger
or consolidation do not retain, directly or
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indirectly, at least a majority of the beneficial interest in the voting stock
of the Company after such merger or consolidation;
(d) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one (1) or more subsidiary corporations of the Company); or
(e) a liquidation or dissolution of the Company.
In the event of a Transfer of Control, the Board, in its sole
discretion, may arrange with the surviving, continuing, successor, or purchasing
corporation, as the case may be (the "Acquiring Corporation"), for the Acquiring
Corporation to either assume the Company's rights and obligations under
outstanding stock option agreements or substitute options for the Acquiring
Corporation's stock for such outstanding Options. Any Options which are neither
assumed by the Acquiring Corporation nor exercised as of the date of the
Transfer of Control shall terminate effective as of the date of the Transfer of
Control.
12. Provision of Information. Each Optionee shall be provided with
copies of financial statements of the Company at least annually equivalent to
the financial information generally made available to the Company's common
shareholders. The Company shall not be required to deliver such information to
persons whose duties in connection with the Company assure their access to
equivalent information.
13. Options Non-Transferable. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee. No Option shall be assignable
or transferable by the Optionee, except by will or by the laws of descent and
distribution.
14. Transfer of Company's Rights. In the event any Participating
Company assigns, other than by operation of law, to a third person, other than
another Participating Company, any of the Participating Company's rights to
repurchase any shares of Stock acquired on the exercise of an Option, the
assignee shall pay to the assigning Participating Company the value of such
right as determined by the Company in the Company's sole discretion. Such
consideration shall be paid in cash. In the event such repurchase right is
exercisable at the time of such assignment, the value of such right shall be not
less than the fair market value of the shares of Stock which may be repurchased
under such right (as determined by the Company) minus the repurchase price of
such shares. The requirements of this paragraph 14 regarding the minimum
consideration to be received by the assigning Participating Company shall not
inure to the benefit of the Optionee whose shares of Stock are being
repurchased. Failure of a Participating Company to comply with the provisions of
this paragraph 14 shall not constitute a defense or otherwise prevent the
exercise of the repurchase right by the assignee of such right.
15. Termination or Amendment of Plan. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan at any time;
provided, however, that without the approval of the Company's shareholders,
there shall be (a) no increase in the total number of shares of Stock covered by
the Plan (except by operation of the provisions of paragraph 10 above), (b) no
change in the class of persons eligible to receive Incentive Stock Options and
(c) no expansion in the class of persons eligible to receive nonqualified stock
options. In any event, no amendment may adversely affect any then
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outstanding Option or any unexercised portion thereof, without the consent of
the Optionee, unless such amendment is required to enable an Option designated
as an Incentive Stock Option to qualify as an Incentive Stock Option.
6
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PLAN HISTORY
------------
<TABLE>
<S> <C>
February 10, 1993 Board of Directors adopted the Plan with a share reserve of
852,000 shares
March 18, 1993 Shareholders approved the adoption of the Plan
July 11, 1994 Board of Directors approved an increase in the Plan's share
reserve from 852,000 to 1,500,000 shares
April 7, 1995 Shareholders approve share reserve increase from 852,000
to 2,100,000 shares
April 28, 1995 Board of Directors approved increase in the Plan's share
reserve from 1,500,000 to 2,100,000 shares
September 13, 1995 Board of Directors approved increase in the Plan's
reserve from 2,100,000 to 2,600,000 shares
September 6, 1996 Shareholders approve share reserve increase from
2,100,000 to 2,600,000 shares.
March 5, 1996 Board of Directors approved increase in the Plan's reserve
2,600,000 to 3,400,000 shares.
September 6, 1996 Shareholders approve share reserve increase from
2,600,000 to 3,400,000 shares.
July 10, 1996 Board of Directors approved amendment of Plan to permit the
grant of Evergreen Options.
</TABLE>
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IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
RED PEPPER SOFTWARE COMPANY
IMMEDIATELY EXERCISABLE
NONQUALIFIED STOCK OPTION AGREEMENT
Red Pepper Software Company (the "Company"), granted to the individual
named below an option to purchase certain shares of common stock of the Company,
in the manner and subject to the provisions of this Option Agreement.
1. Definitions:
(a) "Optionee" shall mean _____________________________ .
(b) "Date of Option Grant" shall mean _________________ .
(c) "Number of Option Shares" shall mean _______________
shares of common stock of the Company as adjusted from time to time pursuant to
paragraph 9 below.
(d) "Exercise Price" shall mean $ per share
as adjusted from time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the Date of Option
Grant.
(f) "Initial Vesting Date" shall be the Date of Option
Grant.
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<PAGE> 9
(g) Determination of "Vested Ratio":
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee 1/1
is continuously employed by a Participating
Company from the Date of Option Grant until
the Initial Vesting Date
</TABLE>
In no event shall the Vested Ratio exceed 1/1.
(h) "Option Term Date" shall mean the date ten (10) years
after the Date of Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(j "Company" shall mean Red Pepper Software Company, a
California corporation, and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and
(ii) any future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Code.
(l) "Participating Company Group" shall mean at any point in
time all corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Red Pepper Software Company 1993
Stock Option Plan.
2. Status of the Option. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option as described
in section 422(b) of the Code.
3. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all persons
having an interest in the Option. Any officer of a Participating Company shall
have the authority to act on behalf of the Company with respect to any matter,
right, obligation, or election which is the responsibility of or which is
allocated to the Company herein, provided the officer has apparent authority
with respect to such matter, right, obligation, or election.
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<PAGE> 10
4. Exercise of the Option.
(a) Right to Exercise. Except as otherwise provided herein,
the Option shall be immediately exercisable in its entirety on and after the
Initial Exercise Date and prior to the termination of the Option (as provided in
paragraph 6) in an amount not to exceed the Number of Option Shares less the
number of shares previously acquired upon exercise of the Option, subject to the
Optionee's agreement that any shares purchased upon exercise are subject to the
Company's repurchase rights set forth in paragraph 11 and paragraph 12 below.
Notwithstanding the foregoing, the Option may not be exercised more frequently
than twice in any continuous twelve (12) month period; provided, however, that
the foregoing restriction shall not apply so as to prevent an exercise (i)
following the Optionee's termination of employment as set forth in paragraph 7
below or (ii) during the thirty (30) day periods immediately preceding and
following an Ownership Change as defined in paragraph 8 below. In addition to
the foregoing, in the event that the adoption of the Plan or any amendment of
the Plan is subject to the approval of the Company's shareholders in order for
the Plan to comply with the requirements of Rule 16b-3, promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Option
shall not be exercisable prior to such shareholder approval if the Optionee is
subject to Section 16(b) of the Exchange Act, unless the Board, in its sole
discretion, approves the exercise of the Option prior to such shareholder
approval.
(b) Method of Exercise. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment of
the aggregate Exercise Price for the number of shares being purchased and (ii)
an executed copy, if required herein, of the then current form of escrow
agreement referenced below.
(c) Form of Payment of Option Exercise Price. Payment of the
aggregate Exercise Price for the number of shares for which the Option is being
exercised shall be made (i) in cash, by check, or cash equivalent, (ii) by
tender to the Company of shares of the Company's common stock owned by the
Optionee having a value not less than the option price, which either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company, (iii) by Immediate Sales Proceeds, as
defined below, or (iv) by any combination of the foregoing. Notwithstanding the
foregoing, the Option may not be exercised by tender to the Company of shares of
the Company's common stock to the extent such tender of stock would constitute a
violation of the provisions of any law, regulation and/or agreement restricting
the redemption of the Company's common stock. "Immediate Sales Proceeds" shall
mean the assignment in form acceptable to the Company of the proceeds of a sale
of some or all of the shares acquired upon the exercise of the Option pursuant
to a program and/or procedure approved by the Company (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System). The Company reserves, at any and all times, the right, in the Company's
sole and absolute discretion, to decline to approve any such program and/or
procedure.
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<PAGE> 11
(d) Withholding. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes payroll withholding and otherwise agrees to make adequate
provision for foreign, federal and state tax withholding obligations of the
Company, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of
the Option, (ii) the transfer, in whole or in part, of any shares acquired on
exercise of the Option, (iii) the operation of any law or regulation providing
for the imputation of interest, or (iv) the lapsing of any restriction with
respect to any shares acquired upon exercise of the Option.
(e) Certificate Registration. Except in the event the Exercise
Price is paid by means of Immediate Sales Proceeds, the certificate or
certificates for the shares as to which the Option shall be exercised shall be
registered in the name of the Optionee, or, if applicable, the heirs of the
Optionee.
(f) Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of the shares upon exercise of
the Option shall be subject to compliance with all applicable requirements of
federal or state law with respect to such securities. The Option may not be
exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other law or
regulations. In addition, no Option may be exercised unless (i) a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. As a condition to the exercise of the Option,
the Company may require the Optionee to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
(g) Fractional Shares. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
5. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative as provided under section 422(b)(5) of the Code
and may not be assigned or transferred in any manner except by will or by the
laws of descent and distribution. Following the death of the Optionee, the
Option, to the extent unexercised and exercisable by the Optionee on the date of
death, may be exercised by the Optionee's legal representative or by any person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
6. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) a Transfer of Control to
the extent provided in paragraph 8 below.
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<PAGE> 12
7. Termination of Employment.
(a) Termination of the Option. If the Optionee ceases to be an
employee of the Participating Company Group for any reason, except death or
disability within the meaning of section 422(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within three
(3) months after the date on which the Optionee's employment terminated, but in
any event no later than the Option Term Date. If the Optionee's employment with
the Company is terminated because of the death or disability of the Optionee
within the meaning of section 422(c) of the Code, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee
ceased to be an employee, may be exercised by the Optionee (or the Optionee's
legal representative) at any time prior to the expiration of twelve (12) months
from the date on which the Optionee's employment terminated, but in any event no
later than the Option Term Date. The Optionee's employment shall be deemed to
have terminated on account of death if the Optionee dies within three (3) months
after the Optionee's termination of employment. Notwithstanding the provisions
of this paragraph 7(a), the Option may not be exercised after the Optionee's
termination of employment if the shares to be acquired on exercise of the Option
would be subject to the Unvested Share Repurchase Option as provided in
paragraph 11 below.
(b) Termination of Employment Defined. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company. The Optionee's employment shall not be deemed to
have terminated merely because of a change in the capacity in which the Optionee
serves as an employee, provided that there is no interruption or termination of
the Optionee's serving as an employee.
(c) Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented by the provisions of paragraph 4(f) above, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date. The Company makes no representation as
to the tax consequences of any such delayed exercise. The Optionee should
consult with the Optionee's own tax advisors as to the tax consequences to the
Optionee of any such delayed exercise. The Option shall be immediately
exercisable in its entirety on and after the Initial Exercise Date subject to
the Optionee's agreement that any shares purchased upon exercise are subject to
the Company's repurchase rights set forth in paragraph 11 and paragraph 12
below.
(d) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit under
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which the Optionee would
no longer be subject to such suit, (ii) the one hundred and ninetieth (190th)
day after the Optionee's termination of employment, or (iii) the Option Term
Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisors as to the tax consequences to the Optionee of any such delayed
exercise.
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<PAGE> 13
(e) Leave of Absence. For purposes hereof, the Optionee's
employment with the Participating Company Group shall not be deemed to terminate
if the Optionee takes any military leave, sick leave, or other bona fide leave
of absence approved by the Company of ninety (90) days or less. In the event of
a leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
(f) Application to Directors, Consultants and Advisors. For
purposes of this Option Agreement, in the event the Optionee is a director or
consultant or advisor but not an employee of a Participating Company at the time
the Option is granted, termination of the Optionee's status as a director or
consultant or advisor of the Participating Company shall be deemed to be
termination of the Optionee's employment.
8. Ownership Change and Transfer of Control. An "Ownership Change"
shall be deemed to have occurred in the event any of the following occurs with
respect to the Company:
(a) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company;
(b) a merger or consolidation in which the Company is a party;
(c) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one (1) or more subsidiary corporations as defined in paragraph 1(k) above of
the Company); or
(d) a liquidation or dissolution of the Company.
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Company before such Ownership Change do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such transaction or in which the Company is not the
surviving corporation.
In the event of a Transfer of Control, the Board, in its sole
discretion, may arrange with the surviving, continuing, successor, or purchasing
corporation, as the case may be (the "Acquiring Corporation"), for the Acquiring
Corporation to assume the Company's rights and obligations under this Option
Agreement or substitute an option for the Acquiring Corporation's stock of the
Option. The Option shall terminate and cease to be effective as of the date of
the Transfer of Control to the extent that the Option is neither assumed or
substituted for by the Acquiring Corporation in connection with the Transfer of
Control nor exercised as of the date of Transfer of Control.
9. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in
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<PAGE> 14
the capital structure of the Company. In the event a majority of the shares
which are of the same class as the shares that are subject to the Option are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change) shares of another corporation (the "New Shares"), the
Company may unilaterally amend the Option to provide that the Option is
exercisable for New Shares. In the event of any such amendment, the number of
shares and the exercise price shall be adjusted in a fair and equitable manner.
In the event of (a) the direct or indirect sale or exchange by the shareholders
of the Company of all or substantially all of the stock of the Company where the
shareholders of the Company before such sale or exchange do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such sale or exchange, (b) the sale, exchange, or
transfer of all or substantially all of the assets of the Company (other than a
sale, exchange, or transfer to one (1) or more subsidiary corporations as
defined in paragraph 1(k) above of the Company), or (c) a liquidation or
dissolution of the Company, the Company may unilaterally arrange with the
surviving, continuing, successor, or purchasing corporation, as the case may be,
that such corporation either assume the Company's rights and obligations under
this Option Agreement or substitute an option for such corporation's stock for
the Option.
10. Rights as a Shareholder or Employee. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
11. Unvested Share Repurchase Option.
(a) Unvested Share Repurchase Option. In the event the
Optionee's employment with the Participating Company Group is terminated for any
reason, with or without cause, or if the Optionee or the Optionee's legal
representative attempts to sell, exchange, transfer, pledge, or otherwise
dispose of (other than pursuant to an Ownership Change) any shares acquired upon
exercise of the Option which exceed the Optionee's Vested Shares as defined in
paragraph 11(b) below (the "Unvested Shares"), the Company shall have the right
to repurchase the Unvested Shares under the terms and subject to the conditions
set forth in this paragraph 11 (the "Unvested Share Repurchase Option").
(b) Vested Shares and Unvested Shares Defined. The total
Number of Option Shares multiplied by the Vested Ratio as set forth in paragraph
1 above are Vested Shares. For purposes of this paragraph 11, the Unvested
Shares are the number of shares acquired upon exercise of the Option in excess
of the Vested Shares.
(c) Exercise of Unvested Share Repurchase Option. The Company
may exercise the Unvested Share Repurchase Option by written notice to the
Optionee within sixty (60) days after (i) such termination of employment (or
exercise of the Option, if later) or (ii) the Company has received notice of the
attempted disposition. If the Company fails to give notice within such sixty
(60) day period, the Unvested Share Repurchase Option shall terminate unless the
Company and the Optionee have extended the time for the exercise of the Unvested
Share Repurchase Option. The Unvested Share Repurchase
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<PAGE> 15
Option must be exercised, if at all, for all of the Unvested Shares, except as
the Company and the Optionee otherwise agree.
(d) Payment for Shares and Return of Shares. Payment by the
Company to the Optionee shall be made in cash within thirty (30) days after the
date of the mailing of the written notice of exercise of the Unvested Share
Repurchase Option. For purposes of the foregoing, cancellation of any
indebtedness of the Optionee to any Participating Company shall be treated as
payment to the Optionee in cash to the extent of the unpaid principal and any
accrued interest canceled. The purchase price per share being repurchased by the
Company shall be an amount equal to the Optionee's original cost per share, as
adjusted pursuant to paragraph 9 above (the "Repurchase Price"). The shares
being repurchased shall be delivered to the Company by the Optionee at the same
time as the delivery of the Repurchase Price to the Optionee.
(e) Assignment of Unvested Share Repurchase Option. The
Company shall have the right to assign the Unvested Share Repurchase Option at
any time, whether or not such option is then exercisable, to one (1) or more
persons as may be selected by the Company.
(f) Ownership Change. Upon the occurrence of an Ownership
Change, any and all new, substituted or additional securities or other property
to which the Optionee is entitled by reason of the Optionee's ownership of
Unvested Shares shall be immediately subject to the Unvested Share Repurchase
Option and included in the term "Unvested Shares" for all purposes of the
Unvested Share Repurchase Option with the same force and effect as the Unvested
Shares immediately prior to the Ownership Change. While the aggregate Repurchase
Price shall remain the same after such Ownership Change, the Repurchase Price
per Unvested Share upon exercise of the Unvested Share Repurchase Option
following such Ownership Change shall be adjusted as appropriate. For purposes
of determining the Vested Ratio following an Ownership Change, credited
employment shall include all employment with any corporation which is a
Participating Company at the time such service is rendered, whether or not such
corporation is a Participating Company both before and after the Ownership
Change.
12. Right of First Refusal.
(a) Right of First Refusal. In the event the Optionee proposes
to sell, pledge, or otherwise transfer any Vested Shares acquired upon the
exercise of the Option (the "Transfer Shares") to any person or entity,
including, without limitation, any shareholder of the Participating Company
Group, the Company shall have the right to repurchase the Transfer Shares under
the terms and subject to the conditions set forth in this paragraph 12 (the
"Right of First Refusal").
(b) Notice of Proposed Transfer. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall give a written notice (the
"Transfer Notice") to the Company describing fully the proposed transfer,
including the number of Transfer Shares, the name and address of the proposed
transferee (the "Proposed Transferee") and, if the transfer is voluntary, the
proposed transfer price and containing such information necessary to show the
bona fide nature of the proposed transfer. In the event of a bona fide gift or
involuntary transfer, the proposed transfer price shall be deemed to be the fair
market value of the Transfer Shares as determined by the Company in good faith.
In the event the Optionee proposes to transfer any Transfer Shares to more than
one (1) Proposed Transferee, the Optionee shall provide a separate Transfer
Notice for the proposed transfer to each Proposed Transferee.
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<PAGE> 16
The Transfer Notice shall be signed by both the Optionee and the Proposed
Transferee and must constitute a binding commitment of the Optionee and the
Proposed Transferee for the transfer of the Transfer Shares to the Proposed
Transferee subject only to the Right of First Refusal.
(c) Bona Fide Transfer. In the event that the Company shall
determine that the information provided by the Optionee in the Transfer Notice
is insufficient to establish the bona fide nature of a proposed voluntary
transfer, the Company shall give the Optionee written notice of the Optionee's
failure to comply with the procedure described in this paragraph 12 and the
Optionee shall have no right to transfer the Transfer Shares without first
complying with the procedure described in this paragraph 12. The Optionee shall
not be permitted to transfer the Transfer Shares if the proposed transfer is not
bona fide.
(d) Exercise of the Right of First Refusal. In the event the
proposed transfer is deemed to be bona fide, the Company shall have the right to
purchase all, but not less than all, of the Transfer Shares (except as the
Company and the Optionee otherwise agree) at the purchase price and on the terms
set forth in the Transfer Notice by delivery to the Optionee of a notice of
exercise of the Right of First Refusal within thirty (30) days after the date
the Transfer Notice is delivered to the Company. The Company's exercise or
failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's ability
to exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the Optionee or issued by a person other than the Optionee
with respect to a proposed transfer to the same Proposed Transferee. If the
Company exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the terms
set forth in the Transfer Notice within sixty (60) days after the date of the
Transfer Notice is delivered to the Company (unless a longer period is offered
by the Proposed Transferee); provided, however, that in the event the Transfer
Notice provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the
discounted cash equivalent of the consideration described in the Transfer Notice
as reasonably determined by the Company. For purposes of the foregoing,
cancellation of any indebtedness of the Optionee to any Participating Company
shall be treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled.
(e) Failure to Exercise the Right of First Refusal. If the
Company fails to exercise the Right of First Refusal in full within the period
specified in paragraph 12(d) above, the Optionee may conclude a transfer to the
Proposed Transferee of the Transfer Shares on the terms and conditions described
in the Transfer Notice, provided such transfer occurs not later than one hundred
twenty (120) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona fide.
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 by the Optionee with the procedure described in this paragraph 12.
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<PAGE> 17
(f) Transferees of the Transfer Shares. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interests subject to the provisions of this paragraph 12
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any shares acquired upon exercise of the
Option shall be void unless the provisions of this paragraph 12 are met.
(g) Transfers Not Subject to the Right of First Refusal. The
Right of First Refusal shall not apply to any transfer or exchange of the shares
acquired pursuant to the exercise of the Option if such transfer is in
connection with an Ownership Change. If the consideration received pursuant to
such transfer or exchange consists of stock of a Participating Company, such
consideration shall remain subject to the Right of First Refusal unless the
provisions of paragraph 12(i) below result in a termination of the Right of
First Refusal.
(h) Assignment of the Right of First Refusal. The Company
shall have the right to assign the Right of First Refusal at any time, whether
or not the Optionee has attempted a transfer, to one (1) or more persons as may
be selected by the Company.
(i) Early Termination of the Right of First Refusal. The other
provisions of this paragraph 12 notwithstanding, the Right of First Refusal
shall terminate, and be of no further force and effect, upon (i) the occurrence
of a Transfer of Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Plan, or (ii) the existence of a public market
for the class of shares subject to the Right of First Refusal. A "public market"
shall be deemed to exist if (x) such stock is listed on a national securities
exchange (as that term is used in the Exchange Act) or (y) such stock is traded
on the over-the-counter market and prices therefor are published daily on
business days in a recognized financial journal.
13. Escrow.
(a) Establishment of Escrow. To insure shares subject to the
Unvested Share Repurchase Option or the Right of First Refusal will be available
for repurchase, the Company may require the Optionee to deposit the certificate
or certificates evidencing the shares which the Optionee purchases upon exercise
of the Option with an escrow agent designated by the Company under the terms and
conditions of an escrow agreement approved by the Company. If the Company does
not require such deposit as a condition of exercise of the Option, the Company
reserves the right at any time to require the Optionee to so deposit the
certificate or certificates in escrow. The Company shall bear the expenses of
the escrow.
(b) Delivery of Shares to Optionee. As soon as practicable
after the expiration of the Unvested Share Repurchase Option and the Right of
First Refusal, the escrow agent shall deliver to the Optionee the shares no
longer subject to such restriction.
(c) Notices and Payments. In the event the shares held in
escrow are subject to the Company's exercise of the Unvested Share Repurchase
Option or the Right of First Refusal, the notices required to be given to the
Optionee shall be given to the escrow agent and any payment required to be given
to the Optionee shall be given to the escrow agent. Within thirty (30) days
after payment by the
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<PAGE> 18
Company, the escrow agent shall deliver the shares which the Company has
purchased to the Company and shall deliver the payment received from the Company
to the Optionee.
14. Stock Dividends Subject to Option Agreement. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Unvested Share Repurchase Option
and the Right of First Refusal with the same force and effect as the shares
subject to the Unvested Share Repurchase Option and the Right of First Refusal
immediately before such event.
15. Rules of the Commissioner of Corporations. The Optionee is hereby
delivered a copy of Section 260.141.11 of the Rules of the Commissioner of
Corporations of the State of California, adopted pursuant to the California
Corporate Securities Act of 1968. References to the "Code" in the following text
are references to the California Corporations Code.
260.141.11. Restriction on Transfer.
(a) The issuer of any security upon which a restriction on
transfer has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534
shall cause a copy of this section to be delivered to each issuee or transferee
of such security at the time the certificate evidencing the security is
delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest therein, without
the prior written consent of the Commissioner (until this condition is removed
pursuant to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in subdivision (i) of
Section 25102 of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants, or
spouse, or any custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse; or to a transferee by a trustee
or custodian for the account of the transferee or the transferee's ancestors,
descendants, or spouse;
(5) to holders of securities of the same class of the
same issuer;
(6) by way of gift or donation inter vivos or on
death;
(7) by or through a broker-dealer licensed under the
Code (either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this
18
<PAGE> 19
state to the knowledge of the broker-dealer, nor actually present in this state
if the sale of such securities is not in violation of any securities law of the
foreign state, territory or country concerned;
(8) to a broker-dealer licensed under the Code in a
principal transaction, or as an underwriter or member of an underwriting
syndicate or selling group;
(9) if the interest sold or transferred is a pledge
or other lien given by the purchaser to the seller upon a sale of the security
for which the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111,
25112, 25113, or 25121 of the Code, of the securities to be transferred,
provided that no order under Section 25140 or subdivision (a) of Section 25143
is in effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of
such corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section
25111, 25112 or 25113 of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories
or countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the
Unclaimed Property Law or to the administrator of the unclaimed property law of
another state;
(15) by the State Controller pursuant to the
Unclaimed Property Law or by the administrator of the unclaimed property law of
another state if, in either such case, such person (i) discloses to potential
purchasers at the sale that transfer of the securities is restricted under this
rule, (ii) delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such
transfer does not involve a change in the beneficial ownership of the
securities;
(17) by way of an offer and sale of outstanding
securities in an issuer transaction that is subject to the qualification
requirement of Section 25110 of the Code but exempt from that qualification
requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject
to such a restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend prominently stamped or
printed thereon in capital letters of not less than 10-point size reading as
follows:
19
<PAGE> 20
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
16. Legends. The Company may at any time place legends referencing the
Unvested Share Repurchase Option set forth in paragraph 11 above, the Right of
First Refusal set forth in paragraph 12 above and any applicable federal or
state securities law restrictions on all certificates representing shares of
stock subject to the provisions of this Option Agreement. The Optionee shall, at
the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to effectuate the provisions of this
paragraph. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by the
Commissioner of Corporations of the State of California.
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE
SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR
SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS CORPORATION."
(d) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
17. Initial Public Offering. The Optionee hereby agrees that in the
event of an initial public offering of stock , made by the Company pursuant to
an effective registration statement filed under the Securities Act, the Optionee
shall not offer, sell, contract to sell, pledge, hypothecate, grant any option
to purchase or make any short sale of, or otherwise dispose of any shares of
stock of the Company or any rights to acquire stock of the Company for such
period of time from and after the effective date of such registration statement
as may be established by the underwriter for such initial public offering;
provided, however, that such period of time shall not exceed one hundred eighty
(180) days from the effective date
20
<PAGE> 21
of the registration statement to be filed in connection with such initial public
offering. The foregoing limitation shall not apply to shares registered in the
initial public offering under the Securities Act.
18. Binding Effect. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
19. Termination or Amendment. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee.
20. Integrated Agreement. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
21. Applicable Law. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
RED PEPPER SOFTWARE COMPANY
By:________________________________
Title:_____________________________
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in paragraph 11 and the Right of First Refusal set forth in
paragraph 12, and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement.
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<PAGE> 22
The undersigned acknowledges receipt of a copy of the Plan and a copy
of Section 260.141.11 of the Rules of the Commissioner of Corporations of the
State of California regarding restriction on transfer (included in paragraph 15
above).
OPTIONEE:
Date:_________________________________ _____________________________________
22
<PAGE> 23
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
RED PEPPER SOFTWARE COMPANY
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
Red Pepper Software Company (the "Company"), granted to the individual
named below an option to purchase certain shares of common stock of the Company,
in the manner and subject to the provisions of this Option Agreement.
22. Definitions:
(a) "Optionee" shall mean .
(b) "Date of Option Grant" shall mean .
(c) "Number of Option Shares" shall mean
shares of common stock of the Company as adjusted from time to time pursuant to
paragraph 9 below.
(d) "Exercise Price" shall mean $ per share
as adjusted from time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the Date of Option
Grant.
(f) "Initial Vesting Date" shall be the date occurring
forty-nine months after the Date of Option Grant.
(g) Determination of "Vested Ratio":
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
</TABLE>
23
<PAGE> 24
<TABLE>
<S> <C>
On Initial Vesting Date, provided the 1/5
Optionee is continuously employed by a
Participating Company from the Date of
Option Grant until the Initial Vesting
Date
Plus
For each full month of the Optionee's 1/60
continuous employment by a Participating
Company from the Initial Vesting Date.
</TABLE>
In no event shall the Vested Ratio exceed 1/1.
(h) "Option Term Date" shall mean the date ten (10) years
after the Date of Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(j) "Company" shall mean Red Pepper Software Company, a
California corporation, and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and
(ii) any future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Code.
(l) "Participating Company Group" shall mean at any point in
time all corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Red Pepper Software Company 1993
Stock Option Plan.
23. Status of the Option. This Option is intended to be an incentive
stock option as described in section 422 of the Code, but the Company does not
represent or warrant that this Option qualifies as such. The Optionee should
consult with the Optionee's own tax advisors regarding the tax effects of this
Option and the requirements necessary to obtain favorable income tax treatment
under section 422 of the Code, including, but not limited to, holding period
requirements.
24. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all persons
having an interest in the Option. Any officer of a Participating Company shall
have the authority to act on behalf of the Company with
24
<PAGE> 25
respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
25. Exercise of the Option.
(a) Right to Exercise. Except as otherwise provided herein,
the Option shall be immediately exercisable in its entirety on and after the
Initial Exercise Date and prior to the termination of the Option (as provided in
paragraph 6) in an amount not to exceed the Number of Option Shares less the
number of shares previously acquired upon exercise of the Option, subject to the
Optionee's agreement that any shares purchased upon exercise are subject to the
Company's repurchase rights set forth in paragraph 11 and paragraph 12 below.
Notwithstanding the foregoing, except as provided in paragraph 4(b) below, the
aggregate fair market value of the stock with respect to which the Optionee may
exercise the Option for the first time during any calendar year, together with
any other incentive stock options which are exercisable for the first time
during any such year, as determined in accordance with section 422(d) of the
Code, shall not exceed One Hundred Thousand Dollars ($100,000). For purposes of
the preceding sentence, options designated as incentive stock options shall be
taken into account in the order in which they were granted, and the fair market
value of shares of stock shall be determined as of the time the option with
respect to such shares is granted. Such limitation on exercise shall be referred
to in this Option Agreement as the "ISO Exercise Limitation." If section 422 of
the Code is amended to provide for a different limitation from that set forth in
this paragraph 4(a) the ISO Exercise Limitation shall be deemed amended
effective as of the date required or permitted by such amendment to the Code.
The ISO Exercise Limitation shall terminate upon the earlier of (i) the
Optionee's termination of employment, (ii) the day immediately prior to the
effective date of a Transfer of Control in which the Option is not assumed or
substituted for by the Acquiring Corporation as provided in paragraph 8, or
(iii) the day ten (10) days prior to the Option Term Date. Upon such termination
of the ISO Exercise Limitation, the Option shall be deemed a nonqualified stock
option to the extent of the number of shares subject to the Option which would
otherwise exceed the ISO Exercise Limitation.
(b) Notwithstanding any other provision of this Option
Agreement, if compliance with the ISO Exercise Limitation as set forth in
paragraph 4(a) will result in the exercisability of any Vested Shares (as
defined in paragraph 11(b)) being delayed more than thirty (30) days beyond the
date such shares become Vested Shares (the "Vesting Date"), the Option shall be
deemed to be two (2) options. The first option shall be for the maximum portion
of the Number of Option Shares that can comply with the ISO Exercise Limitation
without causing the Option to be unexercisable in the aggregate as to Vested
Shares on the Vesting Date for such shares. The second option, which shall not
be treated as an incentive stock option as described in section 422(b) of the
Code, shall be for the balance of the Number of Option Shares; that is, those
such shares which, on the respective Vesting Date for such shares, would be
unexercisable if included in the first option and thereby made subject to the
ISO Exercise Limitation. Shares treated as subject to the second option shall be
exercisable on the same terms and at the same time as set forth in this Option
Agreement; provided, however, that (i) the second sentence of paragraph 4(a)
shall not apply to the second option and (ii) each such share shall become a
Vested Share on the Vesting Date on which such share must first be allocated to
the second option pursuant to the preceding sentence. Unless the Optionee
specifically elects to the contrary in the Optionee's written notice of
exercise, the first
25
<PAGE> 26
option shall be deemed to be exercised first to the maximum possible extent and
then the second option shall be deemed to be exercised.
(c) In addition to the foregoing, the Option may not be
exercised more frequently than twice in any continuous twelve (12) month period;
provided, however, that the foregoing restriction shall not apply so as to
prevent an exercise (i) following the Optionee's termination of employment as
set forth in paragraph 7 below or (ii) during the thirty (30) day periods
immediately preceding and following an Ownership Change as defined in paragraph
8 below. In addition to the foregoing, in the event that the adoption of the
Plan or any amendment of the Plan is subject to the approval of the Company's
shareholders in order for the Plan to comply with the requirements of Rule
16b-3, promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Option shall not be exercisable prior to such shareholder
approval if the Optionee is subject to Section 16(b) of the Exchange Act, unless
the Board, in its sole discretion, approves the exercise of the Option prior to
such shareholder approval.
(d) Method of Exercise. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment of
the aggregate Exercise Price for the number of shares being purchased and (ii)
an executed copy, if required herein, of the then current form of escrow
agreement referenced below.
(e) Form of Payment of Option Exercise Price. Payment of the
aggregate Exercise Price for the number of shares for which the Option is being
exercised shall be made (i) in cash, by check, or cash equivalent, (ii) by
tender to the Company of shares of the Company's common stock owned by the
Optionee having a value not less than the option price, which either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company, (iii) by Immediate Sales Proceeds, as
defined below, or (iv) by any combination of the foregoing. Notwithstanding the
foregoing, the Option may not be exercised by tender to the Company of shares of
the Company's common stock to the extent such tender of stock would constitute a
violation of the provisions of any law, regulation and/or agreement restricting
the redemption of the Company's common stock. "Immediate Sales Proceeds" shall
mean the assignment in form acceptable to the Company of the proceeds of a sale
of some or all of the shares acquired upon the exercise of the Option pursuant
to a program and/or procedure approved by the Company (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System). The Company reserves, at any and all times, the right, in the Company's
sole and absolute discretion, to decline to approve any such program and/or
procedure.
(f) Withholding. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes payroll withholding and otherwise agrees to make adequate
provision for foreign, federal and state tax withholding obligations of the
Company, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of
the Option, (ii) the transfer, in whole or
26
<PAGE> 27
in part, of any shares acquired on exercise of the Option, (iii) the operation
of any law or regulation providing for the imputation of interest, or (iv) the
lapsing of any restriction with respect to any shares acquired upon exercise of
the Option.
(g) Certificate Registration. Except in the event the Exercise
Price is paid by means of Immediate Sales Proceeds, the certificate or
certificates for the shares as to which the Option shall be exercised shall be
registered in the name of the Optionee, or, if applicable, the heirs of the
Optionee.
(h) Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of the shares upon exercise of
the Option shall be subject to compliance with all applicable requirements of
federal or state law with respect to such securities. The Option may not be
exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other law or
regulations. In addition, no Option may be exercised unless (i) a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. As a condition to the exercise of the Option,
the Company may require the Optionee to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
(i) Fractional Shares. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
26. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative as provided under section 422(b)(5) of the Code
and may not be assigned or transferred in any manner except by will or by the
laws of descent and distribution. Following the death of the Optionee, the
Option, to the extent unexercised and exercisable by the Optionee on the date of
death, may be exercised by the Optionee's legal representative or by any person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
27. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) a Transfer of Control to
the extent provided in paragraph 8 below.
28. Termination of Employment.
(a) Termination of the Option. If the Optionee ceases to be an
employee of the Participating Company Group for any reason, except death or
disability within the meaning of section 422(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date
27
<PAGE> 28
on which the Optionee ceased to be an employee, may be exercised by the Optionee
within three (3) months after the date on which the Optionee's employment
terminated, but in any event no later than the Option Term Date. If the
Optionee's employment with the Company is terminated because of the death or
disability of the Optionee within the meaning of section 422(c) of the Code, the
Option, to the extent unexercised and exercisable by the Optionee on the date on
which the Optionee ceased to be an employee, may be exercised by the Optionee
(or the Optionee's legal representative) at any time prior to the expiration of
twelve (12) months from the date on which the Optionee's employment terminated,
but in any event no later than the Option Term Date. The Optionee's employment
shall be deemed to have terminated on account of death if the Optionee dies
within three (3) months after the Optionee's termination of employment.
Notwithstanding the provisions of this paragraph 7(a), the Option may not be
exercised after the Optionee's termination of employment if the shares to be
acquired on exercise of the Option would be subject to the Unvested Share
Repurchase Option as provided in paragraph 11 below.
(b) Termination of Employment Defined. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company.
(c) Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented by the provisions of paragraph 4(f) above, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date. The Company makes no representation as
to the tax consequences of any such delayed exercise. The Optionee should
consult with the Optionee's own tax advisors as to the tax consequences to the
Optionee of any such delayed exercise.
(d) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit under
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which the Optionee would
no longer be subject to such suit, (ii) the one hundred and ninetieth (190th)
day after the Optionee's termination of employment, or (iii) the Option Term
Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisors as to the tax consequences to the Optionee of any such delayed
exercise.
(e) Leave of Absence. For purposes hereof, the Optionee's
employment with the Participating Company Group shall not be deemed to terminate
if the Optionee takes any military leave, sick leave, or other bona fide leave
of absence approved by the Company of ninety (90) days or less. In the event of
a leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
28
<PAGE> 29
29. Ownership Change and Transfer of Control. An "Ownership Change"
shall be deemed to have occurred in the event any of the following occurs with
respect to the Company:
(a) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company;
(b) a merger or consolidation in which the Company is a party;
(c) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one (1) or more subsidiary corporations as defined in paragraph 1(k) above of
the Company); or
(d) a liquidation or dissolution of the Company.
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Company before such Ownership Change do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such transaction or in which the Company is not the
surviving corporation.
In the event of a Transfer of Control, the Board, in its sole
discretion, may arrange with the surviving, continuing, successor, or purchasing
corporation, as the case may be (the "Acquiring Corporation"), for the Acquiring
Corporation to assume the Company's rights and obligations under this Option
Agreement or substitute an option for the Acquiring Corporation's stock of the
Option. The Option shall terminate and cease to be effective as of the date of
the Transfer of Control to the extent that the Option is neither assumed or
substituted for by the Acquiring Corporation in connection with the Transfer of
Control nor exercised as of the date of Transfer of Control.
30. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become (whether or not pursuant
to an Ownership Change) shares of another corporation (the "New Shares"), the
Company may unilaterally amend the Option to provide that the Option is
exercisable for New Shares. In the event of any such amendment, the number of
shares and the exercise price shall be adjusted in a fair and equitable manner.
In the event of (a) the direct or indirect sale or exchange by the shareholders
of the Company of all or substantially all of the stock of the Company where the
shareholders of the Company before such sale or exchange do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such sale or exchange, (b) the sale, exchange, or
transfer of all or substantially all of the assets of the Company (other than a
sale, exchange, or transfer to one (1) or more subsidiary corporations as
defined in paragraph 1(k) above of the Company), or (c) a liquidation or
dissolution of the Company, the Company may unilaterally arrange with the
surviving, continuing, successor, or purchasing corporation, as the case may be,
that such corporation either assume the Company's rights and obligations under
this Option Agreement or substitute an option for such corporation's stock for
the Option.
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<PAGE> 30
31. Rights as a Shareholder or Employee. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
32. Unvested Share Repurchase Option.
(a) Unvested Share Repurchase Option. In the event the
Optionee's employment with the Participating Company Group is terminated for any
reason, with or without cause, or if the Optionee or the Optionee's legal
representative attempts to sell, exchange, transfer, pledge, or otherwise
dispose of (other than pursuant to an Ownership Change) any shares acquired upon
exercise of the Option which exceed the Optionee's Vested Shares as defined in
paragraph 11(b) below (the "Unvested Shares"), the Company shall have the right
to repurchase the Unvested Shares under the terms and subject to the conditions
set forth in this paragraph 11 (the "Unvested Share Repurchase Option").
(b) Vested Shares and Unvested Shares Defined. The total
Number of Option Shares multiplied by the Vested Ratio as set forth in paragraph
1 above are Vested Shares. For purposes of this paragraph 11, the Unvested
Shares are the number of shares acquired upon exercise of the Option in excess
of the Vested Shares.
(c) Exercise of Unvested Share Repurchase Option. The Company
may exercise the Unvested Share Repurchase Option by written notice to the
Optionee within sixty (60) days after (i) such termination of employment (or
exercise of the Option, if later) or (ii) the Company has received notice of the
attempted disposition. If the Company fails to give notice within such sixty
(60) day period, the Unvested Share Repurchase Option shall terminate unless the
Company and the Optionee have extended the time for the exercise of the Unvested
Share Repurchase Option. The Unvested Share Repurchase Option must be exercised,
if at all, for all of the Unvested Shares, except as the Company and the
Optionee otherwise agree.
(d) Payment for Shares and Return of Shares. Payment by the
Company to the Optionee shall be made in cash within thirty (30) days after the
date of the mailing of the written notice of exercise of the Unvested Share
Repurchase Option. For purposes of the foregoing, cancellation of any
indebtedness of the Optionee to any Participating Company shall be treated as
payment to the Optionee in cash to the extent of the unpaid principal and any
accrued interest canceled. The purchase price per share being repurchased by the
Company shall be an amount equal to the Optionee's original cost per share, as
adjusted pursuant to paragraph 9 above (the "Repurchase Price"). The shares
being repurchased shall be delivered to the Company by the Optionee at the same
time as the delivery of the Repurchase Price to the Optionee.
(e) Assignment of Unvested Share Repurchase Option. The
Company shall have the right to assign the Unvested Share Repurchase Option at
any time, whether or not such option is then exercisable, to one (1) or more
persons as may be selected by the Company.
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<PAGE> 31
(f) Ownership Change. Upon the occurrence of an Ownership
Change, any and all new, substituted or additional securities or other property
to which the Optionee is entitled by reason of the Optionee's ownership of
Unvested Shares shall be immediately subject to the Unvested Share Repurchase
Option and included in the term "Unvested Shares" for all purposes of the
Unvested Share Repurchase Option with the same force and effect as the Unvested
Shares immediately prior to the Ownership Change. While the aggregate Repurchase
Price shall remain the same after such Ownership Change, the Repurchase Price
per Unvested Share upon exercise of the Unvested Share Repurchase Option
following such Ownership Change shall be adjusted as appropriate. For purposes
of determining the Vested Ratio following an Ownership Change, credited
employment shall include all employment with any corporation which is a
Participating Company at the time such service is rendered, whether or not such
corporation is a Participating Company both before and after the Ownership
Change.
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33. Right of First Refusal.
(a) Right of First Refusal. In the event the Optionee proposes
to sell, pledge, or otherwise transfer any Vested Shares acquired upon the
exercise of the Option (the "Transfer Shares") to any person or entity,
including, without limitation, any shareholder of the Participating Company
Group, the Company shall have the right to repurchase the Transfer Shares under
the terms and subject to the conditions set forth in this paragraph 12 (the
"Right of First Refusal").
(b) Notice of Proposed Transfer. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall give a written notice (the
"Transfer Notice") to the Company describing fully the proposed transfer,
including the number of Transfer Shares, the name and address of the proposed
transferee (the "Proposed Transferee") and, if the transfer is voluntary, the
proposed transfer price and containing such information necessary to show the
bona fide nature of the proposed transfer. In the event of a bona fide gift or
involuntary transfer, the proposed transfer price shall be deemed to be the fair
market value of the Transfer Shares as determined by the Company in good faith.
In the event the Optionee proposes to transfer any Transfer Shares to more than
one (1) Proposed Transferee, the Optionee shall provide a separate Transfer
Notice for the proposed transfer to each Proposed Transferee. The Transfer
Notice shall be signed by both the Optionee and the Proposed Transferee and must
constitute a binding commitment of the Optionee and the Proposed Transferee for
the transfer of the Transfer Shares to the Proposed Transferee subject only to
the Right of First Refusal.
(c) Bona Fide Transfer. In the event that the Company shall
determine that the information provided by the Optionee in the Transfer Notice
is insufficient to establish the bona fide nature of a proposed voluntary
transfer, the Company shall give the Optionee written notice of the Optionee's
failure to comply with the procedure described in this paragraph 12 and the
Optionee shall have no right to transfer the Transfer Shares without first
complying with the procedure described in this paragraph 12. The Optionee shall
not be permitted to transfer the Transfer Shares if the proposed transfer is not
bona fide.
(d) Exercise of the Right of First Refusal. In the event the
proposed transfer is deemed to be bona fide, the Company shall have the right to
purchase all, but not less than all, of the Transfer Shares (except as the
Company and the Optionee otherwise agree) at the purchase price and on the terms
set forth in the Transfer Notice by delivery to the Optionee of a notice of
exercise of the Right of First Refusal within thirty (30) days after the date
the Transfer Notice is delivered to the Company. The Company's exercise or
failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's ability
to exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the Optionee or issued by a person other than the Optionee
with respect to a proposed transfer to the same Proposed Transferee. If the
Company exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the terms
set forth in the Transfer Notice within sixty (60) days after the date of the
Transfer Notice is delivered to the Company (unless a longer period is offered
by the Proposed Transferee); provided, however, that in the event the Transfer
Notice provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the
discounted cash equivalent of the consideration described in the Transfer Notice
as reasonably determined by the Company. For purposes of the foregoing,
cancellation of any indebtedness of the
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<PAGE> 33
Optionee to any Participating Company shall be treated as payment to the
Optionee in cash to the extent of the unpaid principal and any accrued interest
canceled.
(e) Failure to Exercise the Right of First Refusal. If the
Company fails to exercise the Right of First Refusal in full within the period
specified in paragraph 12(d) above, the Optionee may conclude a transfer to the
Proposed Transferee of the Transfer Shares on the terms and conditions described
in the Transfer Notice, provided such transfer occurs not later than one hundred
twenty (120) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona fide.
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 by the Optionee with the procedure described in this paragraph 12.
(f) Transferees of the Transfer Shares. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interests subject to the provisions of this paragraph 12
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any shares acquired upon exercise of the
Option shall be void unless the provisions of this paragraph 12 are met.
(g) Transfers Not Subject to the Right of First Refusal. The
Right of First Refusal shall not apply to any transfer or exchange of the shares
acquired pursuant to the exercise of the Option if such transfer is in
connection with an Ownership Change. If the consideration received pursuant to
such transfer or exchange consists of stock of a Participating Company, such
consideration shall remain subject to the Right of First Refusal unless the
provisions of paragraph 12(i) below result in a termination of the Right of
First Refusal.
(h) Assignment of the Right of First Refusal. The Company
shall have the right to assign the Right of First Refusal at any time, whether
or not the Optionee has attempted a transfer, to one (1) or more persons as may
be selected by the Company.
(i) Early Termination of the Right of First Refusal. The other
provisions of this paragraph 12 notwithstanding, the Right of First Refusal
shall terminate, and be of no further force and effect, upon (i) the occurrence
of a Transfer of Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Plan, or (ii) the existence of a public market
for the class of shares subject to the Right of First Refusal. A "public market"
shall be deemed to exist if (x) such stock is listed on a national securities
exchange (as that term is used in the Exchange Act) or (y) such stock is traded
on the over-the-counter market and prices therefor are published daily on
business days in a recognized financial journal.
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<PAGE> 34
34. Escrow.
(a) Establishment of Escrow. To insure shares subject to the
Unvested Share Repurchase Option or the Right of First Refusal will be available
for repurchase, the Company may require the Optionee to deposit the certificate
or certificates evidencing the shares which the Optionee purchases upon exercise
of the Option with an escrow agent designated by the Company under the terms and
conditions of an escrow agreement approved by the Company. If the Company does
not require such deposit as a condition of exercise of the Option, the Company
reserves the right at any time to require the Optionee to so deposit the
certificate or certificates in escrow. The Company shall bear the expenses of
the escrow.
(b) Delivery of Shares to Optionee. As soon as practicable
after the expiration of the Unvested Share Repurchase Option and the Right of
First Refusal, the escrow agent shall deliver to the Optionee the shares no
longer subject to such restriction.
(c) Notices and Payments. In the event the shares held in
escrow are subject to the Company's exercise of the Unvested Share Repurchase
Option or the Right of First Refusal, the notices required to be given to the
Optionee shall be given to the escrow agent and any payment required to be given
to the Optionee shall be given to the escrow agent. Within thirty (30) days
after payment by the Company, the escrow agent shall deliver the shares which
the Company has purchased to the Company and shall deliver the payment received
from the Company to the Optionee.
35. Stock Dividends Subject to Option Agreement. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Unvested Share Repurchase Option
and the Right of First Refusal with the same force and effect as the shares
subject to the Unvested Share Repurchase Option and the Right of First Refusal
immediately before such event.
36. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year from the date the Optionee exercises all or part of the Option or within
two (2) years of the date of grant of the Option. Until such time as the
Optionee disposes of such shares in a manner consistent with the provisions of
this Option Agreement, the Optionee shall hold all shares acquired pursuant to
the Option in the Optionee's name (and not in the name of any nominee) for the
one-year period immediately after exercise of the Option and the two-year period
immediately after grant of the Option. At any time during the one-year or
two-year periods set forth above, the Company may place a legend or legends on
any certificate or certificates representing shares acquired pursuant to the
Option requesting the transfer agent for the Company's stock to notify the
Company of any such transfers. The obligation of the Optionee to notify the
Company of any such transfer shall continue notwithstanding that a legend has
been placed on the certificate or certificates pursuant to the preceding
sentence.
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37. Rules of the Commissioner of Corporations. The Optionee is hereby
delivered a copy of Section 260.141.11 of the Rules of the Commissioner of
Corporations of the State of California, adopted pursuant to the California
Corporate Securities Act of 1968. References to the "Code" in the following text
are references to the California Corporations Code.
260.141.11. Restriction on Transfer.
(a) The issuer of any security upon which a restriction on
transfer has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534
shall cause a copy of this section to be delivered to each issuee or transferee
of such security at the time the certificate evidencing the security is
delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest therein, without
the prior written consent of the Commissioner (until this condition is removed
pursuant to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in subdivision (i) of
Section 25102 of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants, or
spouse, or any custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse; or to a transferee by a trustee
or custodian for the account of the transferee or the transferee's ancestors,
descendants, or spouse;
(5) to holders of securities of the same class of the
same issuer;
(6) by way of gift or donation inter vivos or on
death;
(7) by or through a broker-dealer licensed under the
Code (either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a
principal transaction, or as an underwriter or member of an underwriting
syndicate or selling group;
(9) if the interest sold or transferred is a pledge
or other lien given by the purchaser to the seller upon a sale of the security
for which the Commissioner's written consent is obtained or under this rule not
required;
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<PAGE> 36
(10) by way of a sale qualified under Sections 25111,
25112, 25113, or 25121 of the Code, of the securities to be transferred,
provided that no order under Section 25140 or subdivision (a) of Section 25143
is in effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of
such corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section
25111, 25112 or 25113 of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories
or countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the
Unclaimed Property Law or to the administrator of the unclaimed property law of
another state;
(15) by the State Controller pursuant to the
Unclaimed Property Law or by the administrator of the unclaimed property law of
another state if, in either such case, such person (i) discloses to potential
purchasers at the sale that transfer of the securities is restricted under this
rule, (ii) delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such
transfer does not involve a change in the beneficial ownership of the
securities;
(17) by way of an offer and sale of outstanding
securities in an issuer transaction that is subject to the qualification
requirement of Section 25110 of the Code but exempt from that qualification
requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject
to such a restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend prominently stamped or
printed thereon in capital letters of not less than 10-point size reading as
follows: "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
38. Legends. The Company may at any time place legends referencing the
Unvested Share Repurchase Option set forth in paragraph 11 above, the Right of
First Refusal set forth in paragraph 12 above and any applicable federal or
state securities law restrictions on all certificates representing shares of
stock subject to the provisions of this Option Agreement. The Optionee shall, at
the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant
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<PAGE> 37
to the Option in the possession of the Optionee in order to effectuate the
provisions of this paragraph. Unless otherwise specified by the Company, legends
placed on such certificates may include, but shall not be limited to, the
following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by the
Commissioner of Corporations of the State of California.
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE
SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR
SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS CORPORATION."
(d) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
(e) "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY
THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE
CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER
HEREOF MADE ON OR BEFORE . THE REGISTERED HOLDER SHALL HOLD ALL
SHARES PURCHASED UNDER THE OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN
THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE."
39. Initial Public Offering. The Optionee hereby agrees that in the
event of an initial public offering of stock , made by the Company pursuant to
an effective registration statement filed under the Securities Act, the Optionee
shall not offer, sell, contract to sell, pledge, hypothecate, grant any option
to purchase or make any short sale of, or otherwise dispose of any shares of
stock of the Company or any rights to acquire stock of the Company for such
period of time from and after the effective date of such registration statement
as may be established by the underwriter for such initial public offering;
provided, however, that such period of time shall not exceed one hundred eighty
(180) days from the effective date
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<PAGE> 38
of the registration statement to be filed in connection with such initial public
offering. The foregoing limitation shall not apply to shares registered in the
initial public offering under the Securities Act.
40. Binding Effect. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
41. Termination or Amendment. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee unless such amendment is required to enable the Option to qualify as an
Incentive Stock Option.
42. Integrated Agreement. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
43. Applicable Law. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
RED PEPPER SOFTWARE COMPANY
By:
-----------------------------
Title:
---------------------------
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in paragraph 11 and the Right of First Refusal set forth in
paragraph 12, and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement.
The undersigned acknowledges receipt of a copy of the Plan and a copy
of Section 260.141.11 of the Rules of the Commissioner of Corporations of the
State of California regarding restriction on transfer (included in paragraph 16
above).
OPTIONEE:
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Date: ------------------------------- ----------------------------------
39
<PAGE> 40
Date:
RED PEPPER SOFTWARE COMPANY
NONQUALIFIED STOCK OPTION
EXERCISE FORM
Red Pepper Software Company
1810 Gateway Drive, Suite 150
San Mateo, Ca 94404
Attention: Chief Financial Officer
Gentlemen:
The undersigned optionee (the "Optionee") was granted an immediately
exercisable nonqualified stock option (the "Option") to purchase shares of the
common stock of Red Pepper Software Company (the "Company") on , 19 ,
pursuant to the Company's 1993 Stock Option Plan (the "Plan") and pursuant to
the Nonqualified Stock Option Agreement dated , 19 (the "Option
Agreement"). The Optionee hereby elects to exercise the Option as to shares of
the common stock of the Company (the "Shares").
Enclosed herewith is full payment for the Shares in the manner set
forth in the Option Agreement. The Optionee authorizes payroll withholding and
otherwise will make adequate provision for foreign, federal and state tax
withholding obligations of the Company, if any, as more fully set forth in the
Plan Option Agreement.
The Optionee represents and warrants that the Optionee is over eighteen
(18) years of age and that the Optionee is purchasing the Shares solely for the
Optionee's own account, and not on behalf of any other person or as a nominee,
for investment and not with a view to, or for sale in connection with, any
distribution of the Shares.
The Optionee further represents that the Optionee does not have any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Shares or any portion thereof; and that the entire legal and
beneficial interest in the Shares the Optionee is purchasing is being purchased
for, and will be held for the account of, the Optionee only and neither in whole
nor in part for any other person.
The Optionee acknowledges and understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and that consequently the Shares must be held indefinitely unless they are
subsequently registered under the Securities Act, an exemption from such
registration is available, or they are sold in accordance with Rule 144 or Rule
701. The Optionee further acknowledges and understands that the Company is under
no obligation to register the Shares and that,
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<PAGE> 41
in the absence of registration, the Shares may not be transferred. The Optionee
understands that the certificate or certificates evidencing the Shares will be
imprinted with legends which prohibit the transfer of the Shares unless they are
registered or such registration is not required in the opinion of legal counsel
satisfactory to the Company. The Optionee does not have any contract,
undertaking, agreement, or arrangement with any person to sell, transfer, or
grant participations to such person or to any third person with respect to any
of the Shares.
The Optionee is aware that Rule 144, promulgated under the Securities
Act, which permits limited public resale of securities acquired in a nonpublic
offering, is not currently available with respect to the Shares and, in any
event, is available only if certain conditions are satisfied. The Optionee
understands that any sale of the Shares that might be made in reliance upon Rule
144 may only be made in limited amounts in accordance with the terms and
conditions of such rule and that a copy of Rule 144 will be delivered to the
Optionee upon request.
The Optionee agrees that the Shares are being acquired by the Optionee
in accordance with and subject to the terms, provisions and conditions of the
Option Agreement, including the Unvested Share Repurchase Option, and the Right
of First Refusal set forth therein, to all of which the Optionee hereby
expressly assents. These agreements shall inure to the benefit of and be binding
upon the Optionee's heirs, executors, administrators, successors and assigns.
[The Optionee agrees to deposit the certificate or certificates evidencing the
Shares, along with a blank stock assignment separate from certificate executed
by the Optionee, with an escrow agent designated by the Company, to be held by
such escrow agent pursuant to the Company's standard Joint Escrow Instructions,
an executed copy of which the Optionee has delivered herewith.
The Optionee's address of record is:
-----------------------------
-----------------------------
and the Optionee's Social Security Number is:
-----------------------
Very truly yours,
-------------------------------
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Receipt of the above is hereby acknowledged.
Red Pepper Software Company
By:
------------------------------------------------
Title:
------------------------------------------------
Dated:
------------------------------------------------
42
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Date:
RED PEPPER SOFTWARE COMPANY
INCENTIVE STOCK OPTION
EXERCISE FORM
Red Pepper Software Company
1810 Gateway Drive, Suite 150
San Mateo, CA 94404
Attention: Chief Financial Officer
Gentlemen:
The undersigned optionee (the "Optionee") was granted an immediately
exercisable incentive stock option (the "Option") to purchase shares of the
common stock of Red Pepper Software Company (the "Company") on , 19 ,
pursuant to the Company's 1993 Stock Option Plan (the "Plan") and pursuant to
the Incentive Stock Option Agreement dated , 19 (the "Option
Agreement"). The Optionee hereby elects to exercise the Option as to shares of
the common stock of the Company (the "Shares").
Enclosed herewith is full payment for the Shares in the manner set
forth in the Option Agreement. The Optionee authorizes payroll withholding and
otherwise will make adequate provision for foreign, federal and state tax
withholding obligations of the Company, if any, as more fully set forth in the
Option Agreement.
The Optionee represents and warrants that the Optionee is over eighteen
(18) years of age and that the Optionee is purchasing the Shares solely for the
Optionee's own account, and not on behalf of any other person or as a nominee,
for investment and not with a view to, or for sale in connection with, any
distribution of the Shares.
The Optionee further represents that the Optionee does not have any
present intention of selling, offering to sell, or otherwise disposing of or
distributing the Shares or any portion thereof; and that the entire legal and
beneficial interest in the Shares the Optionee is purchasing is being purchased
for, and will be held for the account of, the Optionee only and neither in whole
nor in part for any other person.
The Optionee acknowledges and understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the
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"Securities Act"), and that consequently the Shares must be held indefinitely
unless they are subsequently registered under the Securities Act, an exemption
from such registration is available, or they are sold in accordance with Rule
144 or Rule 701. The Optionee further acknowledges and understands that the
Company is under no obligation to register the Shares and that, in the absence
of registration, the Shares may not be transferred. The Optionee understands
that the certificate or certificates evidencing the Shares will be imprinted
with legends which prohibit the transfer of the Shares unless they are
registered or such registration is not required in the opinion of legal counsel
satisfactory to the Company. The Optionee does not have any contract,
undertaking, agreement, or arrangement with any person to sell, transfer, or
grant participations to such person or to any third person with respect to any
of the Shares.
The Optionee is aware that Rule 144, promulgated under the Securities
Act, which permits limited public resale of securities acquired in a nonpublic
offering, is not currently available with respect to the Shares and, in any
event, is available only if certain conditions are satisfied. The Optionee
understands that any sale of the Shares that might be made in reliance upon Rule
144 may only be made in limited amounts in accordance with the terms and
conditions of such rule and that a copy of Rule 144 will be delivered to the
Optionee upon request.
The Optionee agrees that the Shares are being acquired by the Optionee
in accordance with and subject to the terms, provisions and conditions of the
Option Agreement, including the Unvested Share Repurchase Option, and the Right
of First Refusal set forth therein, to all of which the Optionee hereby
expressly assents. These agreements shall inure to the benefit of and be binding
upon the Optionee's heirs, executors, administrators, successors and assigns.
The Optionee agrees to deposit the certificate or certificates evidencing the
Shares, along with a blank stock assignment separate from certificate executed
by the Optionee, with an escrow agent designated by the Company, to be held by
such escrow agent pursuant to the Company's standard Joint Escrow Instructions,
an executed copy of which the Optionee has delivered herewith.
The Optionee agrees that the Optionee will promptly notify the Chief
Financial Officer of the Company if the Optionee transfers any of the Shares
acquired pursuant to the Option within one (1) year from the date the Optionee
exercises all or part of the Option or within two (2) years of the date of grant
of the Option.
The Optionee's address of record is:
------------------------------------
------------------------------------
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and the Optionee's Social Security Number is: ____________________
Very truly yours,
---------------------------
Receipt of the above is hereby acknowledged.
Red Pepper Software Company
By:
------------------------------------------------
Title:
---------------------------------------------
Dated:
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IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
RED PEPPER SOFTWARE COMPANY
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
(EVERGREEN OPTION)
Red Pepper Software Company granted to the individual named below an
option to purchase certain shares of common stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
44. Definitions:
(a) "Optionee" shall mean ________________________________ .
(b) "Date of Option Grant" shall mean ____________________ .
(c) "Number of Option Shares" shall mean __________ shares of
common stock of the Company as adjusted from time to time pursuant to paragraph
9 below.
(d) "Exercise Price" shall mean $________ per share as
adjusted from time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the Date of Option Grant.
(f) "Initial Vesting Date" shall be the date occurring _______
(___) months after the Date of Option Grant.
(g) Determination of "Vested Ratio":
Vested Ratio
------------
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<TABLE>
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee 1/12
is continuously employed by a Participating
Company from the Date of Option Grant until
the Initial Vesting Date
Plus
For each full month of the Optionee's 1/12
continuous employment by a Participating
Company from the Initial Vesting Date.
In no event shall the Vested Ratio exceed 1/1.
</TABLE>
(h) "Option Term Date" shall mean the date ten (10) years
after the Date of Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(j) "Company" shall mean Red Pepper Software Company, a
California corporation, and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and
(ii) any future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Code.
(l) "Participating Company Group" shall mean at any point in
time all corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Red Pepper Software Company 1993
Stock Option Plan.
45. Status of the Option. This Option is intended to be an incentive
stock option as described in section 422 of the Code, but the Company does not
represent or warrant that this Option qualifies as such. The Optionee should
consult with the Optionee's own tax advisors regarding the tax effects of this
Option and the requirements necessary to obtain favorable income tax treatment
under section 422 of the Code, including, but not limited to, holding period
requirements.
46. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All
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<PAGE> 48
determinations by the Board shall be final and binding upon all persons having
an interest in the Option. Any officer of a Participating Company shall have the
authority to act on behalf of the Company with respect to any matter, right,
obligation, or election which is the responsibility of or which is allocated to
the Company herein, provided the officer has apparent authority with respect to
such matter, right, obligation, or election.
47. Exercise of the Option.
(a) Right to Exercise. Except as otherwise provided herein,
the Option shall be immediately exercisable in its entirety on and after the
Initial Exercise Date and prior to the termination of the Option (as provided in
paragraph 6) in an amount not to exceed the Number of Option Shares less the
number of shares previously acquired upon exercise of the Option, subject to the
Optionee's agreement that any shares purchased upon exercise are subject to the
Company's repurchase rights set forth in paragraph 11 and paragraph 12 below.
Notwithstanding the foregoing, except as provided in paragraph 4(b) below, the
aggregate fair market value of the stock with respect to which the Optionee may
exercise the Option for the first time during any calendar year, together with
any other incentive stock options which are exercisable for the first time
during any such year, as determined in accordance with section 422(d) of the
Code, shall not exceed One Hundred Thousand Dollars ($100,000). For purposes of
the preceding sentence, options designated as incentive stock options shall be
taken into account in the order in which they were granted, and the fair market
value of shares of stock shall be determined as of the time the option with
respect to such shares is granted. Such limitation on exercise shall be referred
to in this Option Agreement as the "ISO Exercise Limitation." If section 422 of
the Code is amended to provide for a different limitation from that set forth in
this paragraph 4(a) the ISO Exercise Limitation shall be deemed amended
effective as of the date required or permitted by such amendment to the Code.
The ISO Exercise Limitation shall terminate upon the earlier of (i) the
Optionee's termination of employment, (ii) the day immediately prior to the
effective date of a Transfer of Control in which the Option is not assumed or
substituted for by the Acquiring Corporation as provided in paragraph 8, or
(iii) the day ten (10) days prior to the Option Term Date. Upon such termination
of the ISO Exercise Limitation, the Option shall be deemed a nonqualified stock
option to the extent of the number of shares subject to the Option which would
otherwise exceed the ISO Exercise Limitation.
(b) Notwithstanding any other provision of this Option
Agreement, if compliance with the ISO Exercise Limitation as set forth in
paragraph 4(a) will result in the exercisability of any Vested Shares (as
defined in paragraph 11(b)) being delayed more than thirty (30) days beyond the
date such shares become Vested Shares (the "Vesting Date"), the Option shall be
deemed to be two (2) options. The first option shall be for the maximum portion
of the Number of Option Shares that can comply with the ISO Exercise Limitation
without causing the Option to be unexercisable in the aggregate as to Vested
Shares on the Vesting Date for such shares. The second option, which shall not
be treated as an incentive stock option as described in section 422(b) of the
Code, shall be for the balance of the Number of Option Shares; that is, those
such shares which, on the respective Vesting Date for such shares, would be
unexercisable if included in the first option and thereby made subject to the
ISO Exercise Limitation. Shares treated as subject to the second option shall be
exercisable on the same terms and at the same time as set forth in this Option
Agreement; provided, however, that (i) the second sentence of paragraph 4(a)
shall not apply to the second option and (ii) each such share shall become a
Vested Share on the Vesting Date on which such share must first be allocated to
the second option pursuant to the preceding sentence.
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<PAGE> 49
Unless the Optionee specifically elects to the contrary in the Optionee's
written notice of exercise, the first option shall be deemed to be exercised
first to the maximum possible extent and then the second option shall be deemed
to be exercised.
(c) In addition to the foregoing, the Option may not be
exercised more frequently than twice in any continuous twelve (12) month period;
provided, however, that the foregoing restriction shall not apply so as to
prevent an exercise (i) following the Optionee's termination of employment as
set forth in paragraph 7 below or (ii) during the thirty (30) day periods
immediately preceding and following an Ownership Change as defined in paragraph
8 below. In addition to the foregoing, in the event that the adoption of the
Plan or any amendment of the Plan is subject to the approval of the Company's
shareholders in order for the Plan to comply with the requirements of Rule
16b-3, promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the Option shall not be exercisable prior to such shareholder
approval if the Optionee is subject to Section 16(b) of the Exchange Act, unless
the Board, in its sole discretion, approves the exercise of the Option prior to
such shareholder approval.
(d) Method of Exercise. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment of
the aggregate Exercise Price for the number of shares being purchased and (ii)
an executed copy, if required herein, of the then current form of escrow
agreement referenced below.
(e) Form of Payment of Option Exercise Price. Payment of the
aggregate Exercise Price for the number of shares for which the Option is being
exercised shall be made (i) in cash, by check, or cash equivalent, (ii) by
tender to the Company of shares of the Company's common stock owned by the
Optionee having a value not less than the option price, which either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company, (iii) by Immediate Sales Proceeds, as
defined below, or (iv) by any combination of the foregoing. Notwithstanding the
foregoing, the Option may not be exercised by tender to the Company of shares of
the Company's common stock to the extent such tender of stock would constitute a
violation of the provisions of any law, regulation and/or agreement restricting
the redemption of the Company's common stock. "Immediate Sales Proceeds" shall
mean the assignment in form acceptable to the Company of the proceeds of a sale
of some or all of the shares acquired upon the exercise of the Option pursuant
to a program and/or procedure approved by the Company (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System). The Company reserves, at any and all times, the right, in the Company's
sole and absolute discretion, to decline to approve any such program and/or
procedure.
(f) Withholding. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes payroll withholding and otherwise agrees to make adequate
provision for foreign, federal and state tax withholding obligations of the
Company, if any, which arise in connection with the Option, including, without
limitation,
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<PAGE> 50
obligations arising upon (i) the exercise, in whole or in part, of the Option,
(ii) the transfer, in whole or in part, of any shares acquired on exercise of
the Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired upon exercise of the Option.
(g) Certificate Registration. Except in the event the Exercise
Price is paid by means of Immediate Sales Proceeds, the certificate or
certificates for the shares as to which the Option shall be exercised shall be
registered in the name of the Optionee, or, if applicable, the heirs of the
Optionee.
(h) Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of the shares upon exercise of
the Option shall be subject to compliance with all applicable requirements of
federal or state law with respect to such securities. The Option may not be
exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other law or
regulations. In addition, no Option may be exercised unless (i) a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. As a condition to the exercise of the Option,
the Company may require the Optionee to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
(i) Fractional Shares. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
48. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative as provided under section 422(b)(5) of the Code
and may not be assigned or transferred in any manner except by will or by the
laws of descent and distribution. Following the death of the Optionee, the
Option, to the extent unexercised and exercisable by the Optionee on the date of
death, may be exercised by the Optionee's legal representative or by any person
empowered to do so under the deceased Optionee's will or under the then
applicable laws of descent and distribution.
49. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) a Transfer of Control to
the extent provided in paragraph 8 below.
50. Termination of Employment.
(a) Termination of the Option. If the Optionee ceases to be an
employee of the Participating Company Group for any reason, except death or
disability within the meaning of section
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422(c) of the Code, the Option, to the extent unexercised and exercisable by the
Optionee on the date on which the Optionee ceased to be an employee, may be
exercised by the Optionee within three (3) months after the date on which the
Optionee's employment terminated, but in any event no later than the Option Term
Date. If the Optionee's employment with the Company is terminated because of the
death or disability of the Optionee within the meaning of section 422(c) of the
Code, the Option, to the extent unexercised and exercisable by the Optionee on
the date on which the Optionee ceased to be an employee, may be exercised by the
Optionee (or the Optionee's legal representative) at any time prior to the
expiration of twelve (12) months from the date on which the Optionee's
employment terminated, but in any event no later than the Option Term Date. The
Optionee's employment shall be deemed to have terminated on account of death if
the Optionee dies within three (3) months after the Optionee's termination of
employment. Notwithstanding the provisions of this paragraph 7(a), the Option
may not be exercised after the Optionee's termination of employment if the
shares to be acquired on exercise of the Option would be subject to the Unvested
Share Repurchase Option as provided in paragraph 11 below.
(b) Termination of Employment Defined. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company.
(c) Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented by the provisions of paragraph 4(f) above, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date. The Company makes no representation as
to the tax consequences of any such delayed exercise. The Optionee should
consult with the Optionee's own tax advisors as to the tax consequences to the
Optionee of any such delayed exercise.
(d) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit under
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which the Optionee would
no longer be subject to such suit, (ii) the one hundred and ninetieth (190th)
day after the Optionee's termination of employment, or (iii) the Option Term
Date. The Company makes no representation as to the tax consequences of any such
delayed exercise. The Optionee should consult with the Optionee's own tax
advisors as to the tax consequences to the Optionee of any such delayed
exercise.
(e) Leave of Absence. For purposes hereof, the Optionee's
employment with the Participating Company Group shall not be deemed to terminate
if the Optionee takes any military leave, sick leave, or other bona fide leave
of absence approved by the Company of ninety (90) days or less. In the event of
a leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
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51. Ownership Change and Transfer of Control. An "Ownership Change"
shall be deemed to have occurred in the event any of the following occurs with
respect to the Company:
(a) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company;
(b) a merger or consolidation in which the Company is a party;
(c) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one (1) or more subsidiary corporations as defined in paragraph 1(k) above of
the Company); or
(d) a liquidation or dissolution of the Company.
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Company before such Ownership Change do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such transaction or in which the Company is not the
surviving corporation.
In the event of a Transfer of Control, the Board, in its sole
discretion, may arrange with the surviving, continuing, successor, or purchasing
corporation, as the case may be (the "Acquiring Corporation"), for the Acquiring
Corporation to assume the Company's rights and obligations under this Option
Agreement or substitute an option for the Acquiring Corporation's stock of the
Option. The Option shall terminate and cease to be effective as of the date of
the Transfer of Control to the extent that the Option is neither assumed or
substituted for by the Acquiring Corporation in connection with the Transfer of
Control nor exercised as of the date of Transfer of Control.
52. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become (whether or not pursuant
to an Ownership Change) shares of another corporation (the "New Shares"), the
Company may unilaterally amend the Option to provide that the Option is
exercisable for New Shares. In the event of any such amendment, the number of
shares and the exercise price shall be adjusted in a fair and equitable manner.
In the event of (a) the direct or indirect sale or exchange by the shareholders
of the Company of all or substantially all of the stock of the Company where the
shareholders of the Company before such sale or exchange do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such sale or exchange, (b) the sale, exchange, or
transfer of all or substantially all of the assets of the Company (other than a
sale, exchange, or transfer to one (1) or more subsidiary corporations as
defined in paragraph 1(k) above of the Company), or (c) a liquidation or
dissolution of the Company, the Company may unilaterally arrange with the
surviving, continuing, successor, or purchasing corporation, as the case may be,
that such corporation either assume the Company's rights and obligations under
this Option Agreement or substitute an option for such corporation's stock for
the Option.
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53. Rights as a Shareholder or Employee. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
54. Unvested Share Repurchase Option.
(a) Unvested Share Repurchase Option. In the event the
Optionee's employment with the Participating Company Group is terminated for any
reason, with or without cause, or if the Optionee or the Optionee's legal
representative attempts to sell, exchange, transfer, pledge, or otherwise
dispose of (other than pursuant to an Ownership Change) any shares acquired upon
exercise of the Option which exceed the Optionee's Vested Shares as defined in
paragraph 11(b) below (the "Unvested Shares"), the Company shall have the right
to repurchase the Unvested Shares under the terms and subject to the conditions
set forth in this paragraph 11 (the "Unvested Share Repurchase Option").
(b) Vested Shares and Unvested Shares Defined. The total
Number of Option Shares multiplied by the Vested Ratio as set forth in paragraph
1 above are Vested Shares. For purposes of this paragraph 11, the Unvested
Shares are the number of shares acquired upon exercise of the Option in excess
of the Vested Shares.
(c) Exercise of Unvested Share Repurchase Option. The Company
may exercise the Unvested Share Repurchase Option by written notice to the
Optionee within sixty (60) days after (i) such termination of employment (or
exercise of the Option, if later) or (ii) the Company has received notice of the
attempted disposition. If the Company fails to give notice within such sixty
(60) day period, the Unvested Share Repurchase Option shall terminate unless the
Company and the Optionee have extended the time for the exercise of the Unvested
Share Repurchase Option. The Unvested Share Repurchase Option must be exercised,
if at all, for all of the Unvested Shares, except as the Company and the
Optionee otherwise agree.
(d) Payment for Shares and Return of Shares. Payment by the
Company to the Optionee shall be made in cash within thirty (30) days after the
date of the mailing of the written notice of exercise of the Unvested Share
Repurchase Option. For purposes of the foregoing, cancellation of any
indebtedness of the Optionee to any Participating Company shall be treated as
payment to the Optionee in cash to the extent of the unpaid principal and any
accrued interest canceled. The purchase price per share being repurchased by the
Company shall be an amount equal to the Optionee's original cost per share, as
adjusted pursuant to paragraph 9 above (the "Repurchase Price"). The shares
being repurchased shall be delivered to the Company by the Optionee at the same
time as the delivery of the Repurchase Price to the Optionee.
(e) Assignment of Unvested Share Repurchase Option. The
Company shall have the right to assign the Unvested Share Repurchase Option at
any time, whether or not such option is then exercisable, to one (1) person as
may be selected by the Company.
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(f) Ownership Change. Upon the occurrence of an Ownership
Change, any and all new, substituted or additional securities or other property
to which the Optionee is entitled by reason of the Optionee's ownership of
Unvested Shares shall be immediately subject to the Unvested Share Repurchase
Option and included in the term "Unvested Shares" for all purposes of the
Unvested Share Repurchase Option with the same force and effect as the Unvested
Shares immediately prior to the Ownership Change. While the aggregate Repurchase
Price shall remain the same after such Ownership Change, the Repurchase Price
per Unvested Share upon exercise of the Unvested Share Repurchase Option
following such Ownership Change shall be adjusted as appropriate. For purposes
of determining the Vested Ratio following an Ownership Change, credited
employment shall include all employment with any corporation which is a
Participating Company at the time such service is rendered, whether or not such
corporation is a Participating Company both before and after the Ownership
Change.
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55. Right of First Refusal.
(a) Right of First Refusal. In the event the Optionee proposes
to sell, pledge, or otherwise transfer any Vested Shares acquired upon the
exercise of the Option (the "Transfer Shares") to any person or entity,
including, without limitation, any shareholder of the Participating Company
Group, the Company shall have the right to repurchase the Transfer Shares under
the terms and subject to the conditions set forth in this paragraph 12 (the
"Right of First Refusal").
(b) Notice of Proposed Transfer. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall give a written notice (the
"Transfer Notice") to the Company describing fully the proposed transfer,
including the number of Transfer Shares, the name and address of the proposed
transferee (the "Proposed Transferee") and, if the transfer is voluntary, the
proposed transfer price and containing such information necessary to show the
bona fide nature of the proposed transfer. In the event of a bona fide gift or
involuntary transfer, the proposed transfer price shall be deemed to be the fair
market value of the Transfer Shares as determined by the Company in good faith.
In the event the Optionee proposes to transfer any Transfer Shares to more than
one (1) Proposed Transferee, the Optionee shall provide a separate Transfer
Notice for the proposed transfer to each Proposed Transferee. The Transfer
Notice shall be signed by both the Optionee and the Proposed Transferee and must
constitute a binding commitment of the Optionee and the Proposed Transferee for
the transfer of the Transfer Shares to the Proposed Transferee subject only to
the Right of First Refusal.
(c) Bona Fide Transfer. In the event that the Company shall
determine that the information provided by the Optionee in the Transfer Notice
is insufficient to establish the bona fide nature of a proposed voluntary
transfer, the Company shall give the Optionee written notice of the Optionee's
failure to comply with the procedure described in this paragraph 12 and the
Optionee shall have no right to transfer the Transfer Shares without first
complying with the procedure described in this paragraph 12. The Optionee shall
not be permitted to transfer the Transfer Shares if the proposed transfer is not
bona fide.
(d) Exercise of the Right of First Refusal. In the event the
proposed transfer is deemed to be bona fide, the Company shall have the right to
purchase all, but not less than all, of the Transfer Shares (except as the
Company and the Optionee otherwise agree) at the purchase price and on the terms
set forth in the Transfer Notice by delivery to the Optionee of a notice of
exercise of the Right of First Refusal within thirty (30) days after the date
the Transfer Notice is delivered to the Company. The Company's exercise or
failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's ability
to exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the Optionee or issued by a person other than the Optionee
with respect to a proposed transfer to the same Proposed Transferee. If the
Company exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the terms
set forth in the Transfer Notice within sixty (60) days after the date of the
Transfer Notice is delivered to the Company (unless a longer period is offered
by the Proposed Transferee); provided, however, that in the event the Transfer
Notice provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the
discounted cash equivalent of the consideration described in the Transfer Notice
as reasonably determined by the Company. For purposes of the foregoing,
cancellation of any indebtedness of the
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<PAGE> 56
Optionee to any Participating Company shall be treated as payment to the
Optionee in cash to the extent of the unpaid principal and any accrued interest
canceled.
(e) Failure to Exercise the Right of First Refusal. If the
Company fails to exercise the Right of First Refusal in full within the period
specified in paragraph 12(d) above, the Optionee may conclude a transfer to the
Proposed Transferee of the Transfer Shares on the terms and conditions described
in the Transfer Notice, provided such transfer occurs not later than one hundred
twenty (120) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona fide.
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 by the Optionee with the procedure described in this paragraph 12.
(f) Transferees of the Transfer Shares. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interests subject to the provisions of this paragraph 12
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any shares acquired upon exercise of the
Option shall be void unless the provisions of this paragraph 12 are met.
(g) Transfers Not Subject to the Right of First Refusal. The
Right of First Refusal shall not apply to any transfer or exchange of the shares
acquired pursuant to the exercise of the Option if such transfer is in
connection with an Ownership Change. If the consideration received pursuant to
such transfer or exchange consists of stock of a Participating Company, such
consideration shall remain subject to the Right of First Refusal unless the
provisions of paragraph 12(i) below result in a termination of the Right of
First Refusal.
(h) Assignment of the Right of First Refusal. The Company
shall have the right to assign the Right of First Refusal at any time, whether
or not the Optionee has attempted a transfer, to one (1) or more persons as may
be selected by the Company.
(i) Early Termination of the Right of First Refusal. The other
provisions of this paragraph 12 notwithstanding, the Right of First Refusal
shall terminate, and be of no further force and effect, upon (i) the occurrence
of a Transfer of Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Plan, or (ii) the existence of a public market
for the class of shares subject to the Right of First Refusal. A "public market"
shall be deemed to exist if (x) such stock is listed on a national securities
exchange (as that term is used in the Exchange Act) or (y) such stock is traded
on the over-the-counter market and prices therefor are published daily on
business days in a recognized financial journal.
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<PAGE> 57
56. Escrow.
(a) Establishment of Escrow. To insure shares subject to the
Unvested Share Repurchase Option will be available for repurchase, the Company
may require the Optionee to deposit the certificate or certificates evidencing
the shares which the Optionee purchases upon exercise of the Option with an
escrow agent designated by the Company under the terms and conditions of an
escrow agreement approved by the Company. If the Company does not require such
deposit as a condition of exercise of the Option, the Company reserves the right
at any time to require the Optionee to so deposit the certificate or
certificates in escrow. The Company shall bear the expenses of the escrow.
(b) Delivery of Shares to Optionee. As soon as practicable
after the expiration of the Unvested Share Repurchase Option, the escrow agent
shall deliver to the Optionee the shares no longer subject to such restriction.
(c) Notices and Payments. In the event the shares held in
escrow are subject to the Company's exercise of the Unvested Share Repurchase
Option, the notices required to be given to the Optionee shall be given to the
escrow agent and any payment required to be given to the Optionee shall be given
to the escrow agent. Within thirty (30) days after payment by the Company, the
escrow agent shall deliver the shares which the Company has purchased to the
Company and shall deliver the payment received from the Company to the Optionee.
57. Stock Dividends Subject to Option Agreement. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Unvested Share Repurchase Option
and the Right of First Refusal with the same force and effect as the shares
subject to the Unvested Share Repurchase Option and the Right of First Refusal
immediately before such event.
58. Notice of Sales Upon Disqualifying Disposition. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year from the date the Optionee exercises all or part of the Option or within
two (2) years of the date of grant of the Option. Until such time as the
Optionee disposes of such shares in a manner consistent with the provisions of
this Option Agreement, the Optionee shall hold all shares acquired pursuant to
the Option in the Optionee's name (and not in the name of any nominee) for the
one-year period immediately after exercise of the Option and the two-year period
immediately after grant of the Option. At any time during the one-year or
two-year periods set forth above, the Company may place a legend or legends on
any certificate or certificates representing shares acquired pursuant to the
Option requesting the transfer agent for the Company's stock to notify the
Company of any such transfers. The obligation of the Optionee to notify the
Company of any such transfer shall continue notwithstanding that a legend has
been placed on the certificate or certificates pursuant to the preceding
sentence.
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<PAGE> 58
59. Rules of the Commissioner of Corporations. The Optionee is hereby
delivered a copy of Section 260.141.11 of the Rules of the Commissioner of
Corporations of the State of California, adopted pursuant to the California
Corporate Securities Act of 1968. References to the "Code" in the following text
are references to the California Corporations Code.
260.141.11. Restriction on Transfer.
(a) The issuer of any security upon which a restriction on
transfer has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534
shall cause a copy of this section to be delivered to each issuee or transferee
of such security at the time the certificate evidencing the security is
delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest therein, without
the prior written consent of the Commissioner (until this condition is removed
pursuant to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in subdivision (i) of
Section 25102 of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants, or
spouse, or any custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse; or to a transferee by a trustee
or custodian for the account of the transferee or the transferee's ancestors,
descendants, or spouse;
(5) to holders of securities of the same class of the
same issuer;
(6) by way of gift or donation inter vivos or on
death;
(7) by or through a broker-dealer licensed under the
Code (either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a
principal transaction, or as an underwriter or member of an underwriting
syndicate or selling group;
(9) if the interest sold or transferred is a pledge
or other lien given by the purchaser to the seller upon a sale of the security
for which the Commissioner's written consent is obtained or under this rule not
required;
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(10) by way of a sale qualified under Sections 25111,
25112, 25113, or 25121 of the Code, of the securities to be transferred,
provided that no order under Section 25140 or subdivision (a) of Section 25143
is in effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of
such corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section
25111, 25112 or 25113 of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories
or countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the
Unclaimed Property Law or to the administrator of the unclaimed property law of
another state;
(15) by the State Controller pursuant to the
Unclaimed Property Law or by the administrator of the unclaimed property law of
another state if, in either such case, such person (i) discloses to potential
purchasers at the sale that transfer of the securities is restricted under this
rule, (ii) delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such
transfer does not involve a change in the beneficial ownership of the
securities;
(17) by way of an offer and sale of outstanding
securities in an issuer transaction that is subject to the qualification
requirement of Section 25110 of the Code but exempt from that qualification
requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject
to such a restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend prominently stamped or
printed thereon in capital letters of not less than 10-point size reading as
follows: "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
60. Legends. The Company may at any time place legends referencing the
Unvested Share Repurchase Option set forth in paragraph 11 above, the Right of
First Refusal set forth in paragraph 12 above and any applicable federal or
state securities law restrictions on all certificates representing shares of
stock subject to the provisions of this Option Agreement. The Optionee shall, at
the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant
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<PAGE> 60
to the Option in the possession of the Optionee in order to effectuate the
provisions of this paragraph. Unless otherwise specified by the Company, legends
placed on such certificates may include, but shall not be limited to, the
following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by the
Commissioner of Corporations of the State of California.
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE
SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR
SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS CORPORATION."
(d) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
(e) "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY
THE CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK
OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED. THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE
CORPORATION IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER
HEREOF MADE ON OR BEFORE . THE REGISTERED HOLDER SHALL HOLD
ALL SHARES PURCHASED UNDER THE OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT
IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE."
61. Initial Public Offering. The Optionee hereby agrees that in the
event of an initial public offering of stock , made by the Company pursuant to
an effective registration statement filed under the Securities Act, the Optionee
shall not offer, sell, contract to sell, pledge, hypothecate, grant any option
to purchase or make any short sale of, or otherwise dispose of any shares of
stock of the Company or any rights to acquire stock of the Company for such
period of time from and after the effective date of such registration statement
as may be established by the underwriter for such initial public offering;
provided, however, that such period of time shall not exceed one hundred eighty
(180) days from the effective date
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<PAGE> 61
of the registration statement to be filed in connection with such initial public
offering. The foregoing limitation shall not apply to shares registered in the
initial public offering under the Securities Act.
62. Binding Effect. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
63. Termination or Amendment. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee unless such amendment is required to enable the Option to qualify as an
Incentive Stock Option.
64. Integrated Agreement. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
65. Applicable Law. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
RED PEPPER SOFTWARE COMPANY
By:
------------------------------
Title:
--------------------------
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in paragraph 11 and the Right of First Refusal set forth in
paragraph 12, and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement.
The undersigned acknowledges receipt of a copy of the Plan and a copy
of Section 260.141.11 of the Rules of the Commissioner of Corporations of the
State of California regarding restriction on transfer (included in paragraph 16
above).
OPTIONEE:
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Date: --------------------------- --------------------------------
62
<PAGE> 63
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
RED PEPPER SOFTWARE COMPANY
IMMEDIATELY EXERCISABLE
NONQUALIFIED STOCK OPTION AGREEMENT
(EVERGREEN OPTION)
Red Pepper Software Company granted to the individual named below an
option to purchase certain shares of common stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
66. Definitions:
(a) "Optionee" shall mean _______________________________ .
(b) "Date of Option Grant" shall mean ___________________ .
(c) "Number of Option Shares" shall mean __________ shares of
common stock of the Company as adjusted from time to time pursuant to paragraph
9 below.
(d) "Exercise Price" shall mean $_____________ per share as
adjusted from time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the Date of Option Grant.
(f) "Initial Vesting Date" shall be the date occurring _______
(___) months after the Date of Option Grant.
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(g) Determination of "Vested Ratio":
<TABLE>
<CAPTION>
Vested Ratio
------------
<S> <C>
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee 1/12
is continuously employed by a Participating
Company from the Date of Option Grant until
the Initial Vesting Date
Plus
For each full month of the Optionee's continuous 1/12
employment by a Participating
Company from the Initial Vesting Date.
In no event shall the Vested Ratio exceed 1/1.
</TABLE>
(h) "Option Term Date" shall mean the date ten (10) years
after the Date of Option Grant.
(i) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(j) "Company" shall mean Red Pepper Software Company, a
California corporation, and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and
(ii) any future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Code.
(l) "Participating Company Group" shall mean at any point in
time all corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Red Pepper Software Company 1993
Stock Option Plan.
67. Status of the Option. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option as described
in section 422(b) of the Code.
68. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend
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<PAGE> 65
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law. All determinations by the Board shall be final and
binding upon all persons having an interest in the Option. Any officer of a
Participating Company shall have the authority to act on behalf of the Company
with respect to any matter, right, obligation, or election which is the
responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
69. Exercise of the Option.
(a) Right to Exercise. Except as otherwise provided herein,
the Option shall be immediately exercisable in its entirety on and after the
Initial Exercise Date and prior to the termination of the Option (as provided in
paragraph 6) in an amount not to exceed the Number of Option Shares less the
number of shares previously acquired upon exercise of the Option, subject to the
Optionee's agreement that any shares purchased upon exercise are subject to the
Company's repurchase rights set forth in paragraph 11 and paragraph 12 below.
Notwithstanding the foregoing, the Option may not be exercised more frequently
than twice in any continuous twelve (12) month period; provided, however, that
the foregoing restriction shall not apply so as to prevent an exercise (i)
following the Optionee's termination of employment as set forth in paragraph 7
below or (ii) during the thirty (30) day periods immediately preceding and
following an Ownership Change as defined in paragraph 8 below. In addition to
the foregoing, in the event that the adoption of the Plan or any amendment of
the Plan is subject to the approval of the Company's shareholders in order for
the Plan to comply with the requirements of Rule 16b-3, promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Option
shall not be exercisable prior to such shareholder approval if the Optionee is
subject to Section 16(b) of the Exchange Act, unless the Board, in its sole
discretion, approves the exercise of the Option prior to such shareholder
approval.
(b) Method of Exercise. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment of
the aggregate Exercise Price for the number of shares being purchased and (ii)
an executed copy, if required herein, of the then current form of escrow
agreement referenced below.
(c) Form of Payment of Option Exercise Price. Payment of the
aggregate Exercise Price for the number of shares for which the Option is being
exercised shall be made (i) in cash, by check, or cash equivalent, (ii) by
tender to the Company of shares of the Company's common stock owned by the
Optionee having a value not less than the option price, which either have been
owned by the Optionee for more than six (6) months or were not acquired,
directly or indirectly, from the Company, (iii) by Immediate Sales Proceeds, as
defined below, or (iv) by any combination of the foregoing. Notwithstanding the
foregoing, the Option may not be exercised by tender to the Company of shares of
the Company's common stock to the extent such tender of stock would constitute a
violation of the provisions of any law, regulation and/or agreement restricting
the redemption of the Company's common
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<PAGE> 66
stock. "Immediate Sales Proceeds" shall mean the assignment in form acceptable
to the Company of the proceeds of a sale of some or all of the shares acquired
upon the exercise of the Option pursuant to a program and/or procedure approved
by the Company (including, without limitation, through an exercise complying
with the provisions of Regulation T as promulgated from time to time by the
Board of Governors of the Federal Reserve System). The Company reserves, at any
and all times, the right, in the Company's sole and absolute discretion, to
decline to approve any such program and/or procedure.
(d) Withholding. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby authorizes payroll withholding and otherwise agrees to make adequate
provision for foreign, federal and state tax withholding obligations of the
Company, if any, which arise in connection with the Option, including, without
limitation, obligations arising upon (i) the exercise, in whole or in part, of
the Option, (ii) the transfer, in whole or in part, of any shares acquired on
exercise of the Option, (iii) the operation of any law or regulation providing
for the imputation of interest, or (iv) the lapsing of any restriction with
respect to any shares acquired upon exercise of the Option.
(e) Certificate Registration. Except in the event the Exercise
Price is paid by means of Immediate Sales Proceeds, the certificate or
certificates for the shares as to which the Option shall be exercised shall be
registered in the name of the Optionee, or, if applicable, the heirs of the
Optionee.
(f) Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of the shares upon exercise of
the Option shall be subject to compliance with all applicable requirements of
federal or state law with respect to such securities. The Option may not be
exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal or state securities laws or other law or
regulations. In addition, no Option may be exercised unless (i) a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
shall at the time of exercise of the Option be in effect with respect to the
shares issuable upon exercise of the Option or (ii) in the opinion of legal
counsel to the Company, the shares issuable upon exercise of the Option may be
issued in accordance with the terms of an applicable exemption from the
registration requirements of the Securities Act. THE OPTIONEE IS CAUTIONED THAT
THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS ARE SATISFIED.
ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED
EVEN THOUGH THE OPTION IS VESTED. As a condition to the exercise of the Option,
the Company may require the Optionee to satisfy any qualifications that may be
necessary or appropriate, to evidence compliance with any applicable law or
regulation and to make any representation or warranty with respect thereto as
may be requested by the Company.
(g) Fractional Shares. The Company shall not be required to
issue fractional shares upon the exercise of the Option.
70. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative as provided under section 422(b)(5) of the Code
and may not be assigned or transferred in any manner except by will or by the
laws of descent and distribution. Following the death of the Optionee, the
Option, to the extent unexercised and exercisable by the Optionee on the date of
death, may be exercised by the Optionee's
66
<PAGE> 67
legal representative or by any person empowered to do so under the deceased
Optionee's will or under the then applicable laws of descent and distribution.
71. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) a Transfer of Control to
the extent provided in paragraph 8 below.
72. Termination of Employment.
(a) Termination of the Option. If the Optionee ceases to be an
employee of the Participating Company Group for any reason, except death or
disability within the meaning of section 422(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee within three
(3) months after the date on which the Optionee's employment terminated, but in
any event no later than the Option Term Date. If the Optionee's employment with
the Company is terminated because of the death or disability of the Optionee
within the meaning of section 422(c) of the Code, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee
ceased to be an employee, may be exercised by the Optionee (or the Optionee's
legal representative) at any time prior to the expiration of twelve (12) months
from the date on which the Optionee's employment terminated, but in any event no
later than the Option Term Date. The Optionee's employment shall be deemed to
have terminated on account of death if the Optionee dies within three (3) months
after the Optionee's termination of employment. Notwithstanding the provisions
of this paragraph 7(a), the Option may not be exercised after the Optionee's
termination of employment if the shares to be acquired on exercise of the Option
would be subject to the Unvested Share Repurchase Option as provided in
paragraph 11 below.
(b) Termination of Employment Defined. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company. The Optionee's employment shall not be deemed to
have terminated merely because of a change in the capacity in which the Optionee
serves as an employee, provided that there is no interruption or termination of
the Optionee's serving as an employee.
(c) Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented by the provisions of paragraph 4(f) above, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date.
(d) Extension if Optionee Subject to Section 16(b).
Notwithstanding the foregoing, if the exercise of the Option within the
applicable time periods set forth above would subject the Optionee to suit under
Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") Exchange Act, the Option shall remain exercisable until the earliest to
occur of (i) the tenth (10th) day following the date on which the Optionee would
no longer be subject to such suit, (ii) the one hundred and ninetieth (190th)
day after the Optionee's termination of employment, or (iii) the Option Term
Date.
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(e) Leave of Absence. For purposes hereof, the Optionee's
employment with the Participating Company Group shall not be deemed to terminate
if the Optionee takes any military leave, sick leave, or other bona fide leave
of absence approved by the Company of ninety (90) days or less. In the event of
a leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
(f) Application to Directors, Consultants and Advisors. For
purposes of this Option Agreement, in the event the Optionee is a director or
consultant or advisor but not an employee of a Participating Company at the time
the Option is granted, termination of the Optionee's status as a director or
consultant or advisor of the Participating Company shall be deemed to be
termination of the Optionee's employment.
73. Ownership Change and Transfer of Control. An "Ownership Change"
shall be deemed to have occurred in the event any of the following occurs with
respect to the Company:
(a) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company;
(b) a merger or consolidation in which the Company is a party;
(c) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one (1) or more subsidiary corporations as defined in paragraph 1(k) above of
the Company); or
(d) a liquidation or dissolution of the Company.
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Company before such Ownership Change do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such transaction or in which the Company is not the
surviving corporation.
In the event of a Transfer of Control, the Board, in its sole
discretion, may arrange with the surviving, continuing, successor, or purchasing
corporation, as the case may be (the "Acquiring Corporation"), for the Acquiring
Corporation to assume the Company's rights and obligations under this Option
Agreement or substitute an option for the Acquiring Corporation's stock of the
Option. The Option shall terminate and cease to be effective as of the date of
the Transfer of Control to the extent that the Option is neither assumed or
substituted for by the Acquiring Corporation in connection with the Transfer of
Control nor exercised as of the date of Transfer of Control.
74. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in
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the capital structure of the Company. In the event a majority of the shares
which are of the same class as the shares that are subject to the Option are
exchanged for, converted into, or otherwise become (whether or not pursuant to
an Ownership Change) shares of another corporation (the "New Shares"), the
Company may unilaterally amend the Option to provide that the Option is
exercisable for New Shares. In the event of any such amendment, the number of
shares and the exercise price shall be adjusted in a fair and equitable manner.
In the event of (a) the direct or indirect sale or exchange by the shareholders
of the Company of all or substantially all of the stock of the Company where the
shareholders of the Company before such sale or exchange do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such sale or exchange, (b) the sale, exchange, or
transfer of all or substantially all of the assets of the Company (other than a
sale, exchange, or transfer to one (1) or more subsidiary corporations as
defined in paragraph 1(k) above of the Company), or (c) a liquidation or
dissolution of the Company, the Company may unilaterally arrange with the
surviving, continuing, successor, or purchasing corporation, as the case may be,
that such corporation either assume the Company's rights and obligations under
this Option Agreement or substitute an option for such corporation's stock for
the Option.
75. Rights as a Shareholder or Employee. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
76. Unvested Share Repurchase Option.
(a) Unvested Share Repurchase Option. In the event the
Optionee's employment with the Participating Company Group is terminated for any
reason, with or without cause, or if the Optionee or the Optionee's legal
representative attempts to sell, exchange, transfer, pledge, or otherwise
dispose of (other than pursuant to an Ownership Change) any shares acquired upon
exercise of the Option which exceed the Optionee's Vested Shares as defined in
paragraph 11(b) below (the "Unvested Shares"), the Company shall have the right
to repurchase the Unvested Shares under the terms and subject to the conditions
set forth in this paragraph 11 (the "Unvested Share Repurchase Option").
(b) Vested Shares and Unvested Shares Defined. The total
Number of Option Shares multiplied by the Vested Ratio as set forth in paragraph
1 above are Vested Shares. For purposes of this paragraph 11, the Unvested
Shares are the number of shares acquired upon exercise of the Option in excess
of the Vested Shares.
(c) Exercise of Unvested Share Repurchase Option. The Company
may exercise the Unvested Share Repurchase Option by written notice to the
Optionee within sixty (60) days after (i) such termination of employment (or
exercise of the Option, if later) or (ii) the Company has received notice of the
attempted disposition. If the Company fails to give notice within such sixty
(60) day period, the Unvested Share Repurchase Option shall terminate unless the
Company and the Optionee have extended the time for the exercise of the Unvested
Share Repurchase Option. The Unvested Share Repurchase
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Option must be exercised, if at all, for all of the Unvested Shares, except as
the Company and the Optionee otherwise agree.
(d) Payment for Shares and Return of Shares. Payment by the
Company to the Optionee shall be made in cash within thirty (30) days after the
date of the mailing of the written notice of exercise of the Unvested Share
Repurchase Option. For purposes of the foregoing, cancellation of any
indebtedness of the Optionee to any Participating Company shall be treated as
payment to the Optionee in cash to the extent of the unpaid principal and any
accrued interest canceled. The purchase price per share being repurchased by the
Company shall be an amount equal to the Optionee's original cost per share, as
adjusted pursuant to paragraph 9 above (the "Repurchase Price"). The shares
being repurchased shall be delivered to the Company by the Optionee at the same
time as the delivery of the Repurchase Price to the Optionee.
(e) Assignment of Unvested Share Repurchase Option. The
Company shall have the right to assign the Unvested Share Repurchase Option at
any time, whether or not such option is then exercisable, to one (1) person as
may be selected by the Company.
(f) Ownership Change. Upon the occurrence of an Ownership
Change, any and all new, substituted or additional securities or other property
to which the Optionee is entitled by reason of the Optionee's ownership of
Unvested Shares shall be immediately subject to the Unvested Share Repurchase
Option and included in the term "Unvested Shares" for all purposes of the
Unvested Share Repurchase Option with the same force and effect as the Unvested
Shares immediately prior to the Ownership Change. While the aggregate Repurchase
Price shall remain the same after such Ownership Change, the Repurchase Price
per Unvested Share upon exercise of the Unvested Share Repurchase Option
following such Ownership Change shall be adjusted as appropriate. For purposes
of determining the Vested Ratio following an Ownership Change, credited
employment shall include all employment with any corporation which is a
Participating Company at the time such service is rendered, whether or not such
corporation is a Participating Company both before and after the Ownership
Change.
77. Right of First Refusal.
(a) Right of First Refusal. In the event the Optionee proposes
to sell, pledge, or otherwise transfer any Vested Shares acquired upon the
exercise of the Option (the "Transfer Shares") to any person or entity,
including, without limitation, any shareholder of the Participating Company
Group, the Company shall have the right to repurchase the Transfer Shares under
the terms and subject to the conditions set forth in this paragraph 12 (the
"Right of First Refusal").
(b) Notice of Proposed Transfer. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall give a written notice (the
"Transfer Notice") to the Company describing fully the proposed transfer,
including the number of Transfer Shares, the name and address of the proposed
transferee (the "Proposed Transferee") and, if the transfer is voluntary, the
proposed transfer price and containing such information necessary to show the
bona fide nature of the proposed transfer. In the event of a bona fide gift or
involuntary transfer, the proposed transfer price shall be deemed to be the fair
market value of the Transfer Shares as determined by the Company in good faith.
In the event the Optionee proposes to transfer any Transfer Shares to more than
one (1) Proposed Transferee, the Optionee shall provide a separate Transfer
Notice for the proposed transfer to each Proposed Transferee.
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The Transfer Notice shall be signed by both the Optionee and the Proposed
Transferee and must constitute a binding commitment of the Optionee and the
Proposed Transferee for the transfer of the Transfer Shares to the Proposed
Transferee subject only to the Right of First Refusal.
(c) Bona Fide Transfer. In the event that the Company shall
determine that the information provided by the Optionee in the Transfer Notice
is insufficient to establish the bona fide nature of a proposed voluntary
transfer, the Company shall give the Optionee written notice of the Optionee's
failure to comply with the procedure described in this paragraph 12 and the
Optionee shall have no right to transfer the Transfer Shares without first
complying with the procedure described in this paragraph 12. The Optionee shall
not be permitted to transfer the Transfer Shares if the proposed transfer is not
bona fide.
(d) Exercise of the Right of First Refusal. In the event the
proposed transfer is deemed to be bona fide, the Company shall have the right to
purchase all, but not less than all, of the Transfer Shares (except as the
Company and the Optionee otherwise agree) at the purchase price and on the terms
set forth in the Transfer Notice by delivery to the Optionee of a notice of
exercise of the Right of First Refusal within thirty (30) days after the date
the Transfer Notice is delivered to the Company. The Company's exercise or
failure to exercise the Right of First Refusal with respect to any proposed
transfer described in a Transfer Notice shall not affect the Company's ability
to exercise the Right of First Refusal with respect to any proposed transfer
described in any other Transfer Notice, whether or not such other Transfer
Notice is issued by the Optionee or issued by a person other than the Optionee
with respect to a proposed transfer to the same Proposed Transferee. If the
Company exercises the Right of First Refusal, the Company and the Optionee shall
thereupon consummate the sale of the Transfer Shares to the Company on the terms
set forth in the Transfer Notice within sixty (60) days after the date of the
Transfer Notice is delivered to the Company (unless a longer period is offered
by the Proposed Transferee); provided, however, that in the event the Transfer
Notice provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the
discounted cash equivalent of the consideration described in the Transfer Notice
as reasonably determined by the Company. For purposes of the foregoing,
cancellation of any indebtedness of the Optionee to any Participating Company
shall be treated as payment to the Optionee in cash to the extent of the unpaid
principal and any accrued interest canceled.
(e) Failure to Exercise the Right of First Refusal. If the
Company fails to exercise the Right of First Refusal in full within the period
specified in paragraph 12(d) above, the Optionee may conclude a transfer to the
Proposed Transferee of the Transfer Shares on the terms and conditions described
in the Transfer Notice, provided such transfer occurs not later than one hundred
twenty (120) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona fide.
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 by the Optionee with the procedure described in this paragraph 12.
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(f) Transferees of the Transfer Shares. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interests subject to the provisions of this paragraph 12
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any shares acquired upon exercise of the
Option shall be void unless the provisions of this paragraph 12 are met.
(g) Transfers Not Subject to the Right of First Refusal. The
Right of First Refusal shall not apply to any transfer or exchange of the shares
acquired pursuant to the exercise of the Option if such transfer is in
connection with an Ownership Change. If the consideration received pursuant to
such transfer or exchange consists of stock of a Participating Company, such
consideration shall remain subject to the Right of First Refusal unless the
provisions of paragraph 12(i) below result in a termination of the Right of
First Refusal.
(h) Assignment of the Right of First Refusal. The Company
shall have the right to assign the Right of First Refusal at any time, whether
or not the Optionee has attempted a transfer, to one (1) or more persons as may
be selected by the Company.
(i) Early Termination of the Right of First Refusal. The other
provisions of this paragraph 12 notwithstanding, the Right of First Refusal
shall terminate, and be of no further force and effect, upon (i) the occurrence
of a Transfer of Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Plan, or (ii) the existence of a public market
for the class of shares subject to the Right of First Refusal. A "public market"
shall be deemed to exist if (x) such stock is listed on a national securities
exchange (as that term is used in the Exchange Act) or (y) such stock is traded
on the over-the-counter market and prices therefor are published daily on
business days in a recognized financial journal.
78. Escrow.
(a) Establishment of Escrow. To insure shares subject to the
Unvested Share Repurchase Option will be available for repurchase, the Company
may require the Optionee to deposit the certificate or certificates evidencing
the shares which the Optionee purchases upon exercise of the Option with an
escrow agent designated by the Company under the terms and conditions of an
escrow agreement approved by the Company. If the Company does not require such
deposit as a condition of exercise of the Option, the Company reserves the right
at any time to require the Optionee to so deposit the certificate or
certificates in escrow. The Company shall bear the expenses of the escrow.
(b) Delivery of Shares to Optionee. As soon as practicable
after the expiration of the Unvested Share Repurchase Option, the escrow agent
shall deliver to the Optionee the shares no longer subject to such restriction.
(c) Notices and Payments. In the event the shares held in
escrow are subject to the Company's exercise of the Unvested Share Repurchase
Option, the notices required to be given to the Optionee shall be given to the
escrow agent and any payment required to be given to the Optionee shall be given
to the escrow agent. Within thirty (30) days after payment by the Company, the
escrow agent
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shall deliver the shares which the Company has purchased to the Company and
shall deliver the payment received from the Company to the Optionee.
79. Stock Dividends Subject to Option Agreement. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Unvested Share Repurchase Option
and the Right of First Refusal with the same force and effect as the shares
subject to the Unvested Share Repurchase Option and the Right of First Refusal
immediately before such event.
80. Rules of the Commissioner of Corporations. The Optionee is hereby
delivered a copy of Section 260.141.11 of the Rules of the Commissioner of
Corporations of the State of California, adopted pursuant to the California
Corporate Securities Act of 1968. References to the "Code" in the following text
are references to the California Corporations Code.
260.141.11. Restriction on Transfer.
(a) The issuer of any security upon which a restriction on
transfer has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534
shall cause a copy of this section to be delivered to each issuee or transferee
of such security at the time the certificate evidencing the security is
delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to
consummate a sale or transfer of such security, or any interest therein, without
the prior written consent of the Commissioner (until this condition is removed
pursuant to Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in subdivision (i) of
Section 25102 of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants, or
spouse, or any custodian or trustee for the account of the transferor or the
transferor's ancestors, descendants, or spouse; or to a transferee by a trustee
or custodian for the account of the transferee or the transferee's ancestors,
descendants, or spouse;
(5) to holders of securities of the same class of the
same issuer;
(6) by way of gift or donation inter vivos or on
death;
(7) by or through a broker-dealer licensed under the
Code (either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this
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state to the knowledge of the broker-dealer, nor actually present in this state
if the sale of such securities is not in violation of any securities law of the
foreign state, territory or country concerned;
(8) to a broker-dealer licensed under the Code in a
principal transaction, or as an underwriter or member of an underwriting
syndicate or selling group;
(9) if the interest sold or transferred is a pledge
or other lien given by the purchaser to the seller upon a sale of the security
for which the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111,
25112, 25113, or 25121 of the Code, of the securities to be transferred,
provided that no order under Section 25140 or subdivision (a) of Section 25143
is in effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of
such corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section
25111, 25112 or 25113 of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories
or countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the
Unclaimed Property Law or to the administrator of the unclaimed property law of
another state;
(15) by the State Controller pursuant to the
Unclaimed Property Law or by the administrator of the unclaimed property law of
another state if, in either such case, such person (i) discloses to potential
purchasers at the sale that transfer of the securities is restricted under this
rule, (ii) delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such
transfer does not involve a change in the beneficial ownership of the
securities;
(17) by way of an offer and sale of outstanding
securities in an issuer transaction that is subject to the qualification
requirement of Section 25110 of the Code but exempt from that qualification
requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject
to such a restriction on transfer, whether upon initial issuance or upon any
transfer thereof, shall bear on their face a legend prominently stamped or
printed thereon in capital letters of not less than 10-point size reading as
follows:
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"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
81. Legends. The Company may at any time place legends referencing the
Unvested Share Repurchase Option set forth in paragraph 11 above, the Right of
First Refusal set forth in paragraph 12 above and any applicable federal or
state securities law restrictions on all certificates representing shares of
stock subject to the provisions of this Option Agreement. The Optionee shall, at
the request of the Company, promptly present to the Company any and all
certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to effectuate the provisions of this
paragraph. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by the
Commissioner of Corporations of the State of California.
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE
SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR
SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS CORPORATION."
(d) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
82. Initial Public Offering. The Optionee hereby agrees that in the
event of an initial public offering of stock , made by the Company pursuant to
an effective registration statement filed under the Securities Act, the Optionee
shall not offer, sell, contract to sell, pledge, hypothecate, grant any option
to purchase or make any short sale of, or otherwise dispose of any shares of
stock of the Company or any rights to acquire stock of the Company for such
period of time from and after the effective date of such registration statement
as may be established by the underwriter for such initial public offering;
provided, however, that such period of time shall not exceed one hundred eighty
(180) days from the effective date
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of the registration statement to be filed in connection with such initial public
offering. The foregoing limitation shall not apply to shares registered in the
initial public offering under the Securities Act.
83. Binding Effect. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
84. Termination or Amendment. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee.
85. Integrated Agreement. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
86. Applicable Law. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
RED PEPPER SOFTWARE COMPANY
By:
--------------------------
Title:
------------------------
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in paragraph 11 and the Right of First Refusal set forth in
paragraph 12, and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Board upon any questions
arising under this Option Agreement.
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The undersigned acknowledges receipt of a copy of the Plan and a copy
of Section 260.141.11 of the Rules of the Commissioner of Corporations of the
State of California regarding restriction on transfer (included in paragraph 15
above).
OPTIONEE:
Date:
----------------------------------- ----------------------------------
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EXHIBIT 5.1
October 23, 1996
PeopleSoft, Inc.
4440 Rosewood Drive
Pleasanton, California 94588
RE: REGISTRATION STATEMENT ON FORM S-8
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by
you with the Securities and Exchange Commission on or about October 24, 1996
(the "Registration Statement") in connection with the registration under the
Securities Act of 1933, as amended, of 299,441 shares of your Common Stock (the
"Shares") reserved for issuance under the Red Pepper Software Company 1993 Stock
Option Plan (the "Plan"). As legal counsel for PeopleSoft, Inc., we have
examined the proceedings taken and are familiar with the proceedings proposed to
be taken by you in connection with the sale and issuance of the Shares under the
Plan.
It is our opinion that, when issued and sold in the manner referred to
in the Plan and pursuant to the respective agreement which accompanies each
grant under the Plan, the Shares will be legally and validly issued, fully paid
and nonassessable.
We consent to the use of this opinion as an exhibit to the
Registration Statement and further consent to the use of our name wherever it
appears in the Registration Statement and any amendments to it.
Very truly yours,
WILSON, SONSINI, GOODRICH & ROSATI
Professional Corporation
