As filed with the Securities and Exchange Commission on March 17, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMERICA ONLINE, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 54-1322110
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
22000 AOL Way
Dulles, Virginia 20166-9323
(Address of Principal Executive Offices,
including Zip Code)
Portola Communications, Inc.
1996 Stock Option Plan
Sheila A. Clark, Esq.
Acting General Counsel
America Online, Inc.
22000 AOL Way
Dulles, Virginia 20166-9323
(703) 265-1000
(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agent for Service)
CALCULATION OF REGISTRATION FEE
<TABLE>
Proposed Maximum Proposed Maximum
Title of Each Securities Amount to be Offering Price Per Aggregate Offering Amount of
to be Registered (1) Registered Share (2) Price Registration Fee
<S> <C> <C> <C> <C>
Common Stock, par value 9,750 shares $1.03 $10,042.50 $2.79
$0.01 per share
</TABLE>
(1) Common Stock being registered hereby includes associated Preferred
Share Purchase Rights, which initially are attached to and traded with
the shares of the Registrant's Common Stock. Value attributable to such
rights, if any, is reflected in the market price of the Common Stock.
(2) The maximum offering price per share has been determined solely for the
purpose of calculating the registration fee pursuant to Rules 457(c)
and (h) under the Securities Act as follows: for the 9,750 shares of
Common Stock , which may be purchased upon exercise of outstanding
options, the fee is based on the average price of $1.03 at which
options may be exercised.
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The documents containing the information specified in Part I will be
sent or given to employees as specified by Rule 428(b)(1). Such documents are
not being filed with the Securities and Exchange Commission (the "Commission")
either as part of this Registration Statement or as prospectuses or prospectus
supplements pursuant to Rule 424. Such documents and the documents incorporated
by reference in this Registration Statement pursuant to Item 3 of Part II of
this Form, taken together, constitute a prospectus that meets the requirements
of Section 10(a) of the Securities Act.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
The following documents have been filed by America Online, Inc., a Delaware
corporation (the "Company"), with the Commission and are incorporated herein by
reference:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended June
30, 1998 (SEC file number 001-12143 and filing date of September 28,
1998)
(b) The Company's Quarterly Report on Form 10-Q, for the quarterly period
ended September 30, 1998 (SEC file number 001-12143 and filing date of
November 6, 1998)
(c) The Company's Quarterly Report on Form 10-Q, for the quarterly period
ended December 31, 1998 (SEC file number 001-12143 and filing date of
February 10, 1999)
(d) The Company's Proxy Statement on Schedule 14A for the Company's 1998
Annual Meeting (SEC file number 001-12143 and filing date of September
28, 1998)
(e) The Company's Current Report on Form 8-K dated August 4, 1998 (SEC file
number 001-12143 and filing date of August 5, 1998)
(f) The Company's Current Report on Form 8-K dated September 28, 1998 (SEC
file number 001-12143 and filing date of September 29, 1998)
(g) The Company's Current Report on Form 8-K dated November 23, 1998 (SEC
file number 001-12143 and filing date of November 24, 1998)
(h) The Company's Current Report on Form 8-K dated February 1, 1999 (SEC
file number 001-12143 and filing date of February 11, 1999)
(i) The Company's Current Report on Form 8-K dated November 9, 1998 (SEC
file number 001-12143 and filing date of February 17, 1999)
(j) The description of the common stock set forth in the Company's
Registration Statement on Form S-3 dated June 24, 1998 (SEC file number
333-57153 and filing date of June 24, 1998) filed pursuant to Section
12 of the Securities Exchange Act
(k) The description of the preferred share purchase rights contained in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
1998 (SEC file number 001-12143 and filing date of May 15, 1998)
(l) In addition, all documents filed by the Company with the Commission
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 hereby have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by
reference herein and to be part hereof from the date of the 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.
Section 145(a) of the General Corporation Law of the State of Delaware
("Delaware Corporation Law") provides, in general, that a corporation shall have
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), because the person is or was a director
or officer of the corporation. Such indemnity may be against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with such action, suit or
proceeding, if the person acted in good faith and in a manner the person
reasonably believed to be in or not opposed to the best interests of the
corporation and if, with respect to any criminal action or proceeding, the
person did not have reasonable cause to believe the person's conduct was
unlawful.
Section 145(b) of the Delaware Corporation Law provides, in general,
that a corporation shall have the power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor because the person is or was a director or officer of the
corporation, against any expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation.
Section 145(g) of the Delaware Corporation Law provides, in general,
that a corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director or officer of the corporation
against any liability asserted against the person in any such capacity, or
arising out of the person's status as such, whether or not the corporation would
have the power to indemnify the person against such liability under the
provisions of the law.
Article Ninth of the Registrant's Restated Certificate of Incorporation
(incorporated by reference herein) provides for indemnification of directors,
officers and other persons as follows:
To the fullest extent permitted by the Delaware
General Corporation Law as the same now exists or may hereafter be
amended, the Corporation shall indemnify, and advance expenses to, its
directors and officers and any person who is or was serving at the
request of the Corporation as a director or officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise. The Corporation, by action of its board of directors, may
provide indemnification or advance expenses to employees and agents of
the Corporation or other persons only on such terms and conditions and
to the extent determined by the board of directors in its sole and
absolute discretion.
The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article Ninth shall not be
deemed exclusive of any other rights to which those seeking
indemnification or advancement of expenses may be entitled under any
By-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action
in another capacity while holding such office.
The Corporation shall have the power to purchase and
maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or
other enterprise, against any liability asserted against him and
incurred by him in any such capacity, or arising out of his status as
such, whether or not the Corporation would have the power to indemnify
him against such liability under this Article Ninth.
The indemnification and advancement of expenses
provided by, or granted pursuant to, this Article Ninth shall, unless
otherwise provided when authorized or ratified, continue as to a person
who has ceased to be a director or officer and shall inure to the
benefit of the heirs, executors and administrators of such officer or
director. The indemnification and advancement of expenses that may have
been provided to an employee or agent of the Corporation by action of
the board of directors, pursuant to the last sentence of Paragraph 1 of
this Article Ninth, shall, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be an employee or
agent of the Corporation and shall inure to the benefit of the heirs,
executors and administrators of such a person, after the time such
person has ceased to be an employee or agent of the Corporation, only
on such terms and conditions and to the extent determined by the board
of directors in its sole discretion.
Article Five of the Registrant's Restated By-Laws (incorporated by
reference herein) provides that:
Right to Indemnification. Each person who was or is made a party or is
threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, because he is or was a director or an officer of the
Corporation or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, including
service with respect to an employee benefit plan (hereinafter an
"Indemnitee"), whether the basis of such proceeding is alleged action
in an official capacity as a director, officer, employee or agent or in
any other capacity while serving as a director, officer, employee or
agent, shall be indemnified and held harmless by the Corporation to the
fullest extent authorized by the Delaware General Corporation Law, as
the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than such law
permitted the Corporation to provide before such amendment), against
all expense, liability and loss (including attorney's fees, judgments,
fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such Indemnitee in connection
therewith; provided, however, that, except as provided in the section
"Right of Indemnitees to Bring Suit" of this Article with respect to
proceedings to enforce rights to indemnification, the Corporation shall
indemnify any such Indemnitee in connection with a proceeding (or part
thereof) initiated by such Indemnitee only if such proceeding (or part
thereof) was authorized by the board of directors of the Corporation.
Right to Advancement of Expenses. The right to indemnification
conferred in the section "Right to Indemnification" of this Article
shall include the right to be paid by the Corporation the expenses
(including attorney's fees) incurred in defending any such proceeding
in advance of its final disposition; provided, however, that, if the
Delaware General Corporation Law requires, an advancement of expenses
incurred by an Indemnitee in his capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such
Indemnitee, including, without limitation, service to an employee
benefit plan) shall be made only upon delivery to the Corporation of an
undertaking, by or on behalf of such Indemnitee, to repay all amounts
so advanced if it shall ultimately be determined by final judicial
decision from which there is no further right to appeal that such
Indemnitee is not entitled to be indemnified for such expenses under
this section or otherwise. The rights to indemnification and to the
advancement of expenses conferred in this section and the section
"Right to Indemnification" of this Article shall be contract rights and
such rights shall continue as to an Indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of
the Indemnitee's heirs, executors and administrators. Any repeal or
modification of any of the provisions of this Article shall not
adversely affect any right or protection of an Indemnitee existing at
the time of such repeal or modification.
Right of Indemnitees to Bring Suit. If a claim under the section "Right
to Indemnification" or "Right to Advancement of Expenses" of this
Article is not paid in full by the Corporation within sixty (60) days
after a written claim has been received by the Corporation, except in
the case of a claim for an advancement of expenses, in which case the
applicable period shall be twenty (20) days, the Indemnitee may at any
time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim. If successful in whole or in part in any
such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the
Indemnitee shall also be entitled to be paid the expenses of
prosecuting or defending such suit. In (1) any suit brought by the
Indemnitee to enforce a right to indemnification hereunder (but not in
a suit brought by the Indemnitee to enforce a right to an advancement
of expenses) it shall be a defense that, and (2) in any suit brought by
the Corporation to recover an advancement of expenses pursuant to the
terms of an undertaking, the Corporation shall be entitled to recover
such expenses upon a final adjudication that, the Indemnitee has not
met any applicable standard for indemnification set forth in the
Delaware General Corporation Law. Neither the failure of the
Corporation (including its board of directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the Indemnitee is
proper in the circumstances because the Indemnitee has met the
applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) that the Indemnitee has not met such applicable standard
of conduct, shall create a presumption that the Indemnitee has not met
the applicable standard of conduct or, in the case of such a suit
brought by the Indemnitee, be a defense to such suit. In any suit
brought by the Indemnitee to enforce a right to indemnification or to
an advancement of expenses hereunder, or brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the Indemnitee is not entitled
to be indemnified, or to such advancement of expenses, under this
Article or otherwise shall be on the Corporation.
Non-Exclusivity of Rights. The rights to indemnification and to the
advancement of expenses conferred in this Article shall not be
exclusive of any other right which any person may have or hereafter
acquire under any statute, the Corporation's Certificate of
Incorporation as amended from time to time, these By-Laws, any
agreement, any vote of stockholders or disinterested directors or
otherwise.
Insurance. The Corporation may maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the
Corporation or another corporation, partnership, joint venture, trust
or other enterprise against any expense, liability or loss, whether or
not the Corporation would have the power to indemnify such person
against such expense, liability or loss under the Delaware General
Corporation Law.
Indemnification of Employees and Agents of the Corporation. The
Corporation may, to the extent authorized from time to time by the
board of directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to
the fullest extent of the provisions of this Article with respect to
the indemnification and advancement of expenses of directors and
officers of the Corporation.
The directors and officers of the Registrant are covered by a policy of
liability insurance.
Item 7. Exemption From Registration Claimed.
Not applicable.
Item 8. Exhibits.
Exhibit
Number Description
4.1 Article 4, Article 6, Article 8 and Article 11 of the Restated
Certificate of Incorporation of America Online, Inc. (filed as part of
Exhibit 3.1 to America Online, Inc.'s Form 10-K for the year ended June
30, 1997 and incorporated herein by reference)
4.2 Amendment of Section A of Article 4 of the Restated Certificate of
Incorporation of America Online, Inc. (filed as Exhibit 3.1 to America
Online, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
September 30, 1998 and incorporated herein by reference)
4.3 Rights Agreement dated as of May 12, 1998, between America Online, Inc.
and BankBoston, N.A., as Rights Agent (filed as Exhibit 4.1 to America
Online, Inc.'s Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998 and incorporated herein by reference)
4.4 Restated By-Laws of America Online, Inc. (filed as Exhibit 3.5 to
America Online, Inc.'s Annual Report on Form 10-K for the fiscal year
ended June 30, 1998 and incorporated herein by reference)
4.5 Portola Communications, Inc. 1996 Stock Option Plan
5.1 Opinion of Sheila A. Clark, Acting General Counsel to the Company
(including the consent of such acting general counsel) regarding the
legality of the securities being offered
23.1 Consent of Ernst & Young LLP
23.2 Consent of Sheila A. Clark (included in her opinion filed as Exhibit
5.1 and incorporated herein by reference)
24.1 Powers of Attorney (filed as Exhibit 24.1 to America Online, Inc.'s
Registration Statement on Form S-8 for the AtWeb, Inc. 1997 Stock Plan
filed on March 17, 1999 and incorporated herein by reference)
Item 9. Undertakings.
(a) The Registrant hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the
registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth
in the registration statement. Notwithstanding
the foregoing, any increase or decrease in
volume of securities offered (if the total
dollar value of securities offered would not
exceed that which was registered) and any
deviation from the low or high and of the
estimated maximum offering range may be
reflected in the form of prospectus filed with
the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price
represent no more than 20 percent change in the
maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in
the effective registration statement; and
(iii)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;
provided, however, that paragraphs (a) (1) (i)
and (a) (1) (ii) do not apply if this
registration statement is on Form S-3, Form S-8
or Form F-3, and the information required to be
included in a post-effective amendment by those
paragraphs is contained in periodic reports
filed with or furnished to the Commission by the
registrant pursuant to Section 13 or Section
15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability
under the Securities Act of 1933, 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 Securities Act of 1933,
each filing of the Registrant's annual report pursuant to Section
13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual
report pursuant to Section 15 (d) of the Securities Exchange Act
of 1934) 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
Securities Act of 1933 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, hereunto duly
authorized, in the County of Loudoun, State of Virginia, on this 17th day of
March, 1999.
AMERICA ONLINE, INC.
By: /s/J.Michael Kelly
Name: J. Michael Kelly
Title: Senior Vice President,
Chief Financial Officer,
Treasurer and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 17th day of March, 1999, by the
following persons in the capacities indicated.
Signature Title
* Chairman of the Board and Chief Executive Officer
Stephen M. Case (Principal Executive Officer)
* President, Chief Operating Officer and Director
Robert W. Pittman
Senior Vice President, Chief Financial Officer,
/s/J. Michael Kelly Treasurer and Assistant Secretary
J. Michael Kelly (Principal Financial Officer)
* Vice President, Controller, Chief Accounting and
James F. MacGuidwin Budget Officer (Principal Accounting Officer)
* Director
Daniel F. Akerson
* Director
Frank J. Caufield
* Director
Alexander M. Haig, Jr.
* Director
William N. Melton
* Director
Thomas Middelhoff
* Director
Colin L. Powell
* Director
Franklin D. Raines
* By: /s/J. Michael Kelly
J. Michael Kelly
Attorney-In-Fact
Exhibit Index
Exhibit
Number Description
4.5 Portola Communications, Inc. 1996 Stock Option Plan
5.1 Opinion of Sheila A. Clark, Acting General Counsel to the Company
(including the consent of such acting general counsel) regarding the
legality of the securities being offered
23.1 Consent of Ernst & Young LLP
23.2 Consent of Sheila A. Clark (included in her opinion filed as Exhibit
5.1 and incorporated herein by reference)
PORTOLA COMMUNICATIONS, INC.
1996 STOCK OPTION PLAN
1. Establishment, Purpose And Term Of Plan.
1.1 Establishment. The Portola Communications, Inc. 1996 Stock Option
Plan (the "Plan") is hereby established effective as of July 22, 1996 (the
"Effective Date").
1.2 Purpose. The purpose of the Plan is to advance the interests of the
Participating Company Group and its shareholders by providing an incentive to
attract, retain and reward persons performing services for the Participating
Company Group and by motivating such persons to contribute to the growth and
profitability of the Participating Company Group.
1.3 Term Of Plan. The Plan shall continue in effect until the earlier
of its termination by the Board or the date on which all of the shares of Stock
available for issuance under the Plan have been issued and all restrictions on
such shares under the terms of the Plan and the agreements evidencing Options
granted under the Plan have lapsed. However, 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.
2. Definitions And Construction.
2.1 Definitions. Whenever used herein, the following terms shall have
their respective meanings set forth below:
(a) "Board" means the Board of Directors of the Company. If
one or more Committees have been appointed by the Board to administer the Plan,
"Board" also means such Committee(s).
(b) "Code" means the Internal Revenue Code of 1986, as
amended, and any applicable regulations promulgated thereunder.
(c) "Committee" means the Compensation Committee or other
committee of the Board duly appointed to administer the Plan and having such
powers as shall be specified by the Board. 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 amend or
terminate the Plan at any time, subject to the terms of the Plan and any
applicable limitations imposed by law.
(d) "Company" means Portola Communications, Inc., a California
corporation, or any successor corporation thereto.
(e) "Consultant" means any person, including an advisor,
engaged by a Participating Company to render services other than as an Employee
or a Director.
(f) "Director" means a member of the Board or of the board of
directors of any other Participating Company.
(g) "Employee" means any person treated as an employee
(including an officer or a Director who is also treated as an
employee) in the records of a Participating Company; provided, however, that
neither service as a Director nor payment of a director's fee shall be
sufficient to constitute employment for purposes of the Plan.
(h) "Fair Market Value" means, as of any date, the value of a
share of stock or other property as determined by the Board, in its sole
discretion, or by the Company, in its sole discretion, if such determination is
expressly allocated to the Company herein.
(i) "Incentive Stock Option" means an Option intended to be
(as set forth in the Option Agreement) and which qualifies as an incentive stock
option within the meaning of Section 422(b) of the Code.
(j) "Nonstatutory Stock Option" means an Option not intended
to be (as set forth in the Option Agreement) or which does not qualify as an
Incentive Stock Option.
(k) "Option" means a right to purchase Stock (subject to
adjustment as provided in Section 4.2) pursuant to the terms and conditions of
the Plan. An Option may be either an Incentive Stock Option or a Nonstatutory
Stock Option.
(l) "Option Agreement" means a written agreement between the
Company and an Optionee setting forth the terms, conditions and restrictions of
the Option granted to the Optionee and any shares acquired upon the exercise
thereof.
(m) "Optionee" means a person who has been granted one or more
Options.
(n) "Parent Corporation" means any present or future "parent
corporation" of the Company, as defined in Section 424(e) of the Code.
(o) "Participating Company" means the Company or any Parent
Corporation or Subsidiary Corporation.
(p) "Participating Company Group" means, at any point in time,
all corporations collectively which are then Participating Companies.
(q) "Stock" means the common stock, without par value, of the
Company, as adjusted from time to time in accordance with Section 4.2.
(r) "Subsidiary Corporation" means any present or future
"subsidiary corporation" of the Company, as defined in Section 424(f) of the
Code.
(s) "Ten Percent Owner Optionee" means an Optionee who, at the
time an Option is granted to the Optionee, 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.
2.2 Construction. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of the Plan. Except when otherwise indicated by the context, the
singular shall include the plural, the plural shall include the singular, and
the term "or" shall include the conjunctive as well as the disjunctive.
3. Administration.
3.1 Administration By The Board. The Plan shall be administered by the
Board, including any duly appointed Committee of the Board. All questions of
interpretation of the Plan or of any Option shall be determined by the Board,
and such determinations shall be final and binding upon all persons having an
interest in the Plan or such 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, determination 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, determination
or election.
3.2 Powers Of The Board. In addition to any other powers set forth in
the Plan and subject to the provisions of the Plan, the Board shall have the
full and final power and authority, in its sole discretion:
(a) to determine the persons to whom, and the time or times at
which, Options shall be granted and the number of shares of Stock to be subject
to each Option;
(b) to designate Options as Incentive Stock Options or
Nonstatutory Stock Options;
(c) to determine the Fair Market Value of shares of Stock or
other property;
(d) to determine the terms, conditions and restrictions
applicable to each Option (which need not be identical) and any shares acquired
upon the exercise thereof, including, without limitation, (i) the exercise price
of the Option, (ii) the method of payment for shares purchased upon the exercise
of the Option, (iii) the method for satisfaction of any tax withholding
obligation arising in connection with the Option or such shares, including by
the withholding or delivery of shares of stock, (iv) the timing, terms and
conditions of the exercisability of the Option or the vesting of any shares
acquired upon the exercise thereof, (v) the time of the expiration of the
Option, (vi) the effect of the Optionee's termination of employment or service
with the Participating Company Group on any of the foregoing, and (vii) all
other terms, conditions and restrictions applicable to the Option or such shares
not inconsistent with the terms of the Plan;
(e) to approve one or more forms of Option Agreement;
(f) to amend, modify, extend, or renew, or grant a new Option
in substitution for, any Option or to waive any restrictions or conditions
applicable to any Option or any shares acquired upon the exercise thereof;
(g) to accelerate, continue, extend or defer the
exercisability of any Option or the vesting of any shares acquired upon the
exercise thereof, including with respect to the period following an Optionee's
termination of employment or service with the Participating Company Group;
(h) to prescribe, amend or rescind rules, guidelines and
policies relating to the Plan, or to adopt supplements to, or alternative
versions of, the Plan, including, without limitation, as the Board deems
necessary or desirable to comply with the laws of, or to accommodate the tax
policy or custom of, foreign jurisdictions whose citizens may be granted
Options; and
(i) to correct any defect, supply any omission or reconcile
any inconsistency in the Plan or any Option Agreement and to make all other
determinations and take such other actions with respect to the Plan or any
Option as the Board may deem advisable to the extent consistent with the Plan
and applicable law.
4. Shares Subject To Plan.
4.1 Maximum Number Of Shares Issuable. Subject to adjustment as
provided in Section 4.2, the maximum aggregate number of shares of Stock that
may be issued under the Plan shall be Three Million Five Hundred Five Thousand
(3,505,000) and shall consist of authorized but unissued or reacquired shares of
Stock or any combination thereof. If an outstanding Option for any reason
expires or is terminated or canceled or shares of Stock acquired, subject to
repurchase, upon the exercise of an Option are repurchased by the Company, the
shares of Stock allocable to the unexercised portion of such Option, or such
repurchased shares of Stock, shall again be available for issuance under the
Plan.
4.2 Adjustments For Changes In Capital Structure. In the event of any
stock dividend, stock split, reverse stock split, recapitalization, combination,
reclassification or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number and class of shares subject
to the Plan and to any outstanding Options and in the exercise price per share
of any outstanding Options. If a majority of the shares which are of the same
class as the shares that are subject to outstanding Options are exchanged for,
converted into, or otherwise become (whether or not pursuant to an Ownership
Change Event, as defined in Section 8.1) shares of another corporation (the "NEW
SHARES"), the Board may unilaterally amend the outstanding Options to provide
that such Options are exercisable for New Shares. In the event of any such
amendment, the number of shares subject to, and the exercise price per share of,
the outstanding Options shall be adjusted in a fair and equitable manner as
determined by the Board, in its sole discretion. Notwithstanding the foregoing,
any fractional share resulting from an adjustment pursuant to this Section 4.2
shall be rounded up or down to the nearest whole number, as determined by the
Board, and in no event may the exercise price of any Option be decreased to an
amount less than the par value, if any, of the stock subject to the Option. The
adjustments determined by the Board pursuant to this Section 4.2 shall be final,
binding and conclusive.
5. Eligibility And Option Limitations.
5.1 Persons Eligible For Options. Options may be granted only to
Employees, Consultants, and Directors. For purposes of the foregoing sentence,
"Employees" shall include prospective Employees to whom Options are granted in
connection with written offers of employment with the Participating Company
Group, and "Consultants" shall include prospective Consultants to whom Options
are granted in connection with written offers of engagement with the
Participating Company Group. Eligible persons may be granted more than one (1)
Option.
5.2 Option Grant Restrictions. Any person who is not an Employee on the
effective date of the grant of an Option to such person may be granted only a
Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective
Employee upon the condition that such person become an Employee shall be deemed
granted effective on the date such person commences service with a Participating
Company, with an exercise price determined as of such date in accordance with
Section 6.1.
5.3 Fair Market Value Limitation. To the extent that the aggregate Fair
Market Value of stock with respect to which options designated as Incentive
Stock Options are exercisable by an Optionee for the first time during any
calendar year (under all stock option plans of the Participating Company Group,
including the Plan) exceeds One Hundred Thousand Dollars ($100,000), the portion
of such options which exceeds such amount shall be treated as Nonstatutory Stock
Options. For purposes of this Section 5.3, 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 stock shall be determined as of the time the option
with respect to such stock is granted. If the Code is amended to provide for a
different limitation from that set forth in this Section 5.3, such different
limitation shall be deemed incorporated herein effective as of the date and with
respect to such Options as required or permitted by such amendment to the Code.
If an Option is treated as an Incentive Stock Option in part and as a
Nonstatutory Stock Option in part by reason of the limitation set forth in this
Section 5.3, the Optionee may designate which portion of such Option the
Optionee is exercising and may request that separate certificates representing
each such portion be issued upon the exercise of the Option. In the absence of
such designation, the Optionee shall be deemed to have exercised the Incentive
Stock Option portion of the Option first.
6. Terms And Conditions Of Option. Options shall be evidenced by Option
Agreements specifying the number of shares of Stock covered thereby, in such
form as the Board shall from time to time establish. Option Agreements may
incorporate all or any of the terms of the Plan by reference and shall comply
with and be subject to the following terms and conditions:
6.1 Exercise Price. The exercise price for each Option shall be
established in the sole discretion of the Board; provided, however, that (a) the
exercise price per share for an Incentive Stock Option shall be not less than
the Fair Market Value of a share of Stock on the effective date of grant of the
Option, (b) the exercise price per share for a Nonstatutory Stock Option shall
be not less than eighty-five percent (85%) of the Fair Market Value of a share
of Stock on the effective date of grant of the Option, and (c) no Option granted
to a Ten Percent Owner Optionee shall have an exercise price per share less than
one hundred ten percent (110%) of the Fair Market Value of a share of Stock on
the effective date of grant of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be
granted with an exercise price lower than the minimum exercise price set forth
above if such Option is granted pursuant to an assumption or substitution for
another option in a manner qualifying under the provisions of Section 424(a) of
the Code.
6.2 Exercise Period. Options shall be exercisable at such time or
times, or upon such event or events, and subject to such terms, conditions,
performance criteria, and restrictions as shall be determined by the Board and
set forth in the Option Agreement evidencing such Option; provided, however,
that (a) no Option shall be exercisable after the expiration of ten (10) years
after the effective date of grant of such Option, (b) no Incentive Stock Option
granted to a Ten Percent Owner Optionee shall be exercisable after the
expiration of five (5) years after the effective date of grant of such Option
and (C) no Option granted to prospective Employee or prospective Consultant may
become exercisable prior to the date on which such person commences service with
a Participating Company.
6.3 Payment Of Exercise Price.
(a) Forms Of Consideration Authorized. Except as otherwise
provided below, payment of the 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 Stock owned by the Optionee having a Fair Market Value (as
determined by the Company 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 exercise price, (iii) by the assignment of the proceeds
of a sale or loan with respect to some or all of the shares being
acquired upon the exercise of the 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) (a "CASHLESS EXERCISE"), (iv) by the
Optionee's promissory note in a form approved by the Company, (v) by
such other consideration as may be approved by the Board from time to
time to the extent permitted by applicable law, or (vi) by any
combination thereof. The Board may at any time or from time to time, by
adoption of or by amendment to the standard forms of Option Agreement
described in Section 7, or by other means, grant Options which do not
permit all of the foregoing forms of consideration to be used in
payment of the exercise price or which otherwise restrict one or more
forms of consideration.
(b) Tender Of Stock. Notwithstanding the foregoing, an Option
may not be exercised by tender to the Company of shares of Stock to the
extent such tender of Stock would constitute a violation of the
provisions of any law, regulation or agreement restricting the
redemption of the Company's stock. Unless otherwise provided by the
Board, an Option may not be exercised by tender to the Company of
shares of Stock unless such shares either have been owned by the
Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.
(c) Cashless Exercise. The Company reserves, at any and all
times, the right, in the Company's sole and absolute discretion, to
establish, decline to approve or terminate any program or procedures
for the exercise of Options by means of a Cashless Exercise.
(d) Payment By Promissory Note. No promissory note shall be
permitted if the exercise of an Option using a promissory note would be
a violation of any law. Any permitted promissory note shall be on such
terms as the Board shall determine at the time the Option is granted.
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 upon the exercise of the Option or with other
collateral acceptable to the Company. Unless otherwise provided by the
Board, if the Company at any time is 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.
6.4 Tax Withholding. The Company shall have the right, but not the
obligation, to deduct from the shares of Stock issuable upon the exercise of an
Option, or to accept from the Optionee the tender of, a number of whole shares
of Stock having a Fair Market Value, as determined by the Company, equal to all
or any part of the federal, state, local and foreign taxes, if any, required by
law to be withheld by the Participating Company Group with respect to such
Option or the shares acquired upon the exercise thereof. Alternatively or in
addition, in its sole discretion, the Company shall have the right to require
the Optionee, through payroll withholding, cash payment or otherwise, including
by means of a Cashless Exercise, to make adequate provision for any such tax
withholding obligations of the Participating Company Group arising in connection
with the Option or the shares acquired upon the exercise thereof. The Company
shall have no obligation to deliver shares of Stock or to release shares of
Stock from an escrow established pursuant to the Option Agreement until the
Participating Company Group's tax withholding obligations have been satisfied by
the Optionee.
6.5 Repurchase Rights. Shares issued under the Plan may be subject to a
right of first refusal, one or more repurchase options, or other conditions and
restrictions as determined by the Board in its sole discretion at the time the
Option is granted. The Company shall have the right to assign at any time any
repurchase right it may have, whether or not such right is then exercisable, to
one or more persons as may be selected by the Company. Upon request by the
Company, each Optionee shall execute any agreement evidencing such transfer
restrictions prior to the receipt of shares of Stock hereunder and shall
promptly present to the Company any and all certificates representing shares of
Stock acquired hereunder for the placement on such certificates of appropriate
legends evidencing any such transfer restrictions.
7. Standard Forms Of Option Agreement.
7.1 Incentive Stock Options. Unless otherwise provided by the Board at
the time the 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 Immediately Exercisable Incentive Stock Option Agreement adopted
by the Board concurrently with its adoption of the Plan and as amended from time
to time.
7.2 Nonstatutory Stock Options. Unless otherwise provided by the Board
at the time the Option is granted, an Option designated as a "Nonstatutory Stock
Option" shall comply with and be subject to the terms and conditions set forth
in the form of Immediately Exercisable Nonstatutory Stock Option Agreement
adopted by the Board concurrently with its adoption of the Plan and as amended
from time to time.
7.3 Standard Term Of Options. Except as otherwise provided in Section
6.2 or by the Board in the grant of an Option, any Option granted hereunder
shall have a term of ten (10) years from the effective date of grant of the
Option.
7.4 Authority To Vary Terms. The Board shall have the authority from
time to time to vary the terms of any of the standard forms of Option Agreement
described in this Section 7 either in connection with the grant or amendment 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 any such new,
revised or amended standard form or forms of Option 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.
8. Transfer Of Control.
8.1 Definitions.
(a) An "Ownership Change Event" shall be deemed to have occurred if any
of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single or
series of related transactions by the shareholders of the Company of more than
fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a
party;
(iii) the sale, exchange, or transfer of all or substantially
all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "Transfer Of Control" shall mean an Ownership Change Event or a
series of related Ownership Change Events (collectively, the "Transaction")
wherein the shareholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "Transferee
Corporation(s)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 Effect Of Transfer Of Control On Options. In the event of a
Transfer of Control, the surviving, continuing, successor, or purchasing
corporation or parent corporation thereof, as the case may be (the "Acquiring
Corporation"), may either assume the Company's rights and obligations under
outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. Any Options which are
neither assumed or substituted for by the Acquiring Corporation in connection
with the Transfer of Control nor exercised as of the date of the Transfer of
Control shall terminate and cease to be outstanding effective as of the date of
the Transfer of Control. Notwithstanding the foregoing, shares acquired upon
exercise of an Option prior to the Transfer of Control and any consideration
received pursuant to the Transfer of Control with respect to such shares shall
continue to be subject to all applicable provisions of the Option Agreement
evidencing such Option except as otherwise provided in such Option Agreement.
Furthermore, notwithstanding the foregoing, if the corporation the stock of
which is subject to the outstanding Options immediately prior to an Ownership
Change Event described in Section 8.1(a)(i) constituting a Transfer of Control
is the surviving or continuing corporation and immediately after such Ownership
Change Event less than fifty percent (50%) of the total combined voting power of
its voting stock is held by another corporation or by other corporations that
are members of an affiliated group within the meaning of Section 1504(a) of the
Code without regard to the provisions of Section 1504(b) of the Code, the
outstanding Options shall not terminate unless the Board otherwise provides in
its sole discretion.
9. Provision Of Information. At least annually, copies of the Company's
balance sheet and income statement for the just completed fiscal year shall be
made available to each Optionee and purchaser of shares of Stock upon the
exercise of an Option. The Company shall not be required to provide such
information to persons whose duties in connection with the Company assure them
access to equivalent information.
10. Nontransferability Of Options. During the lifetime of the Optionee,
an Option shall be exercisable only by the Optionee or the Optionee's guardian
or legal representative. No Option shall be assignable or transferable by the
Optionee, except by will or by the laws of descent and distribution.
11. 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 upon 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 Section 11 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 Section 11 shall not constitute a defense or otherwise prevent the exercise
of the repurchase right by the assignee of such right.
12. Indemnification. In addition to such other rights of
indemnification as they may have as members of the Board or officers or
employees of the Participating Company Group, members of the Board and any
officers or employees of the Participating Company Group to whom authority to
act for the Board is delegated shall be indemnified by the Company against all
reasonable expenses, including attorneys' fees, actually and necessarily
incurred in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan, or any right granted hereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such person
is liable for gross negligence, bad faith or intentional misconduct in duties;
provided, however, that within sixty (60) days after the institution of such
action, suit or proceeding, such person shall offer to the Company, in writing,
the opportunity at its own expense to handle and defend the same.
13. Termination Or Amendment Of Plan. The Board may terminate or amend
the Plan at any time. However, subject to changes in the law or other legal
requirements that would permit otherwise, without the approval of the Company's
shareholders, there shall be (a) no increase in the maximum aggregate number of
shares of Stock that may be issued under the Plan (except by operation of the
provisions of Section 4.2), (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 Nonstatutory Stock Options. In any event, no termination or
amendment of the Plan may adversely affect any then outstanding Option or any
unexercised portion thereof, without the consent of the Optionee, unless such
termination or amendment is required to enable an Option designated as an
Incentive Stock Option to qualify as an Incentive Stock Option or is necessary
to comply with any applicable law or government regulation.
14. Shareholder Approval. The Plan or any increase in the maximum
number of shares of Stock issuable thereunder as provided in Section 4.1 (the
"Maximum Shares") shall be approved by the shareholders of the Company within
twelve (12) months of the date of adoption thereof by the Board. Options granted
prior to shareholder approval of the Plan or in excess of the Maximum Shares
previously approved by the shareholders shall become exercisable no earlier than
the date of shareholder approval of the Plan or such increase in the Maximum
Shares, as the case may be.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Portola Communications, Inc. 1996 Stock Option Plan was duly
adopted by the Board on July 22, 1996, as amended on September 16, 1996, and
September __, 1996.
Secretary
PLAN HISTORY
July 22, 1996 Board adopts Plan, with an initial reserve of 1,400,000
shares.
_______, 1996 Shareholders approve Plan, with an initial reserve of
1,400,000 shares.
September 16, 1996 Board authorizes an increase in the share reserve of
105,000 for a total of 1,505,000
September __, 1996 Board authorizes an increase in the share reserve of
2,000,000 for a total of 3,505,000
September __, 1996 Shareholders approve increase in the share reserve of
2,105,000 for a total of 3,505,000
STANDARD FORM OF
PORTOLA COMMUNICATIONS, INC.
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
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.
PORTOLA COMMUNICATIONS, INC.
IMMEDIATELY EXERCISABLE
INCENTIVE STOCK OPTION AGREEMENT
THIS IMMEDIATELY EXERCISABLE INCENTIVE STOCK OPTION AGREEMENT (the
"OPTION AGREEMENT") is made and entered into as of _________, 199__, by and
between Portola Communications, Inc. and ______________ (the "OPTIONEE").
The Company has granted to the Optionee pursuant to the Portola
Communications, Inc. 1996 Stock Option Plan (the "PLAN") an option to purchase
certain shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "OPTION"). The Option shall in all respects be subject to the
terms and conditions of the Plan, the provisions of which are incorporated
herein by reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein, capitalized terms
shall have the meanings assigned to such terms in the Plan. Whenever used
herein, the following terms shall have their respective meanings set forth
below:
(a) "DATE OF OPTION GRANT" means ___________________, 199__.
(b) "NUMBER OF OPTION SHARES" means __________ shares of
Stock, as adjusted from time to time pursuant to Section 9.
(c) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(d) "EXERCISE PRICE" means $__________ per share of Stock, as
adjusted from time to time pursuant to Section 9.
(e) "INITIAL EXERCISE DATE" means the Date of Option Grant.
(f) "INITIAL VESTING DATE" means the date occurring one (1)
year after (check one):
__ the Date of Option Grant.
__ __________, 199__, the date the Optionee's Service
commenced.
(g) "VESTED RATIO" means, on any relevant date, the ratio
determined as follows:
Vested Ratio
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee's
Service is continuous from the Date of Option Grant
until the Initial
Vesting Date 1/4
Plus
For each full month of the Optionee's continuous
Service from the Initial Vesting Date until the
Vested Ratio equals
1/1, an additional 1/48
(h) "OPTION EXPIRATION DATE" means the date ten (10) years
after the Date of Option Grant.
(i) "COMPANY" means Portola Communications, Inc., a California
corporation, or any successor corporation thereto.
(j) "DISABILITY" means the inability of the Optionee, in the
opinion of a qualified physician acceptable to the Company, to perform the major
duties of the Optionee's position with the Participating Company Group because
of the sickness or injury of the Optionee.
(k) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(l) "SERVICE" means the Optionee's employment or service with
the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The Optionee's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. The
Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee performs
Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its sole discretion, shall determine whether the Optionee's Service
has terminated and the effective date of such termination. (NOTE: If the Option
is exercised more than three (3) months after the date on which the Optionee
ceased to be an Employee (other than by reason of death or a permanent and total
disability as defined in Section 22(e)(3) of the Code), the Option will be
treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to
the extent required by Section 422 of the Code.)
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.
2. TAX CONSEQUENCES.
2.1 TAX STATUS OF OPTION. This Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) 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 advisor 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. (NOTE: If the aggregate Exercise Price of the
Option (that is, the Exercise Price multiplied by the Number of Option Shares)
plus the aggregate exercise price of any other Incentive Stock Options held by
the Optionee (whether granted pursuant to the Plan or any other stock option
plan of the Participating Company Group) is greater than One Hundred Thousand
Dollars ($100,000), the Optionee should contact the Chief Financial Officer of
the Company to ascertain whether the entire Option qualifies as an Incentive
Stock Option.)
2.2 ELECTION UNDER SECTION 83(b) OF THE CODE. If the Optionee exercises
this Option to purchase shares of Stock that are both nontransferable and
subject to a substantial risk of forfeiture, the Optionee understands that the
Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Service terminates, or (b) the Optionee is subject to a
restriction on transfer to comply with "Pooling-of-Interests Accounting" rules.
Failure to file an election under Section 83(b), if appropriate, may result in
adverse tax consequences to the Optionee. The Optionee acknowledges that the
Optionee has been advised to consult with a tax advisor prior to the exercise of
the Option regarding the tax consequences to the Optionee of the exercise of the
Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE
DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE
EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b)
ELECTION IS THE OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS
THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. 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.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE.
(a) Except as otherwise provided herein, the Option shall be
exercisable on and after the Initial Exercise Date and prior to the termination
of the Option (as provided in Section 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 Section 11
and Section 12. Notwithstanding the foregoing, except as provided in Section
4.1(b), the aggregate Fair Market Value of the shares of Stock with respect to
which the Optionee may exercise the Option for the first time during any
calendar year, when added to the aggregate Fair Market Value of the shares
subject to any other options designated as Incentive Stock Options granted to
the Optionee under all stock option plans of the Participating Company Group
prior to the Date of Option Grant with respect to which such options are
exercisable for the first time during the same calendar year, 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
Section 4.1(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 Service, (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 Section 8, or (iii) the day ten (10)
days prior to the Option Expiration Date. Upon such termination of the ISO
Exercise Limitation, the Option shall be deemed a Nonstatutory 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 Section 4.1(a) will
result in the exercisability of any Vested Shares (as defined in Section 11.2)
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 Section 4.1(a) shall not
apply to the second option and (ii) each such share shall become a Vested Share
on the Vesting Date 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 option
shall be deemed to be exercised first to the maximum possible extent and then
the second option shall be deemed to be exercised.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock 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, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, 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 Section 6, accompanied by (i) full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased and
(ii) an executed copy, if required herein, of the then current forms of escrow
and security agreement referenced below. The Option shall be deemed to be
exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and, if required by the Company, such executed agreements.
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock 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 whole shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company 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 aggregate Exercise Price, (iii)
by means of a Cashless Exercise, as defined in Section 4.3(C), (iv) in the
Company's sole discretion at the time the Option is exercised, by the Optionee's
promissory note for the aggregate Exercise Price, or (v) by any combination of
the foregoing.
(b) TENDER OF STOCK. Notwithstanding the foregoing, the Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option may not be exercised by tender to the Company of shares of Stock unless
such shares either have been owned by the Optionee for more than six (6) months
or were not acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. A "CASHLESS EXERCISE" means the
assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of
the Option pursuant to a program 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 or terminate any such program or procedure.
(d) PAYMENT BY PROMISSORY NOTE. No promissory note shall be
permitted if an exercise of the Option using a promissory note would be a
violation of any law. The promissory note permitted in clause (iv) of Section
4.3(a) shall be a full recourse note in a form satisfactory to the Company, with
principal payable no more than four (4) years after the date the Option is
exercised. Interest on the principal balance of the promissory note shall be
payable in annual installments at the minimum interest rate necessary to avoid
imputed interest pursuant to all applicable sections of the Code. Such recourse
promissory note shall be secured by the shares of Stock acquired pursuant to the
then current form of security agreement as approved by the Company. At any time
the Company is 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. Except as the Company in its sole
discretion shall determine, the Optionee shall pay the unpaid principal balance
of the promissory note and any accrued interest thereon upon termination of the
Optionee's Service with the Participating Company Group for any reason, with or
without cause.
4.4 TAX 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 withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Participating Company Group, 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 upon 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. The Optionee is cautioned that the Option is not
exercisable unless the tax withholding obligations of the Participating Company
Group are satisfied. Accordingly, the Optionee may not be able to exercise the
Option when desired even though the Option is vested, and the Company shall have
no obligation to issue a certificate for such shares or release such shares from
any escrow provided for herein.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise Price
is paid by means of a Cashless Exercise, the certificate for the shares as to
which the Option is exercised shall be registered in the name of the Optionee,
or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under 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 EXERCISED 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. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares subject to the Option shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. 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.
4.7 FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY 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 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 provided in Section 7, 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 Expiration Date, (b) the last
date for exercising the Option following termination of the Optionee's Service
as described in Section 7, or (c ) a Transfer of Control to the extent provided
in Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date. (NOTE: If
the Option is exercised more than three (3) months after the date on which the
Optionee's Service as an Employee terminated as a result of a Disability other
than a permanent and total disability as defined in Section 22(e)(3) of the
Code, the Option will be treated as a Nonstatutory Stock Option and not as an
Incentive Stock Option to the extent required by Section 422 of the Code.)
(b) DEATH. If the Optionee's Service with the Participating
Company Group is terminated because of the death of the Optionee, the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee (or the Optionee's legal
representative, or other person who acquired the right to exercise the Option by
reason of the Optionee's death) at any time prior to the expiration of six (6)
months after the date on which the Optionee's Service terminated, but in any
event no later than the Option Expiration Date. The Optionee's Service shall be
deemed to have terminated on account of death if the Optionee dies within thirty
(30) days after the Optionee's termination of Service (other than due to a
Termination For Cause).
(c) TERMINATION AFTER TRANSFER OF CONTROL. If the Optionee's
Service with the Participating Company Group is terminated because of a
Termination After Transfer of Control (as defined below), (i) the Option, to the
extent unexercised and exercisable on the date on which the Optionee's Service
terminated, may be exercised by the Optionee (or the Optionee's guardian or
legal representative) at any time prior to the expiration of six (6) months
after the date on which the Optionee's Service terminated, but in any event no
later than the Option Expiration Date, and (ii) solely for purposes of computing
the Vested Ratio, the Optionee shall be given credit for an additional twelve
(12) months of continuous Service; provided, however, that in no event shall the
Vested Ratio exceed 1/1. The Company makes no representation as to the tax
consequences if the Option is exercised more than three (3) months after the
date on which the Optionee's Service as an Employee terminated. The Optionee
should consult with the Optionee's own tax advisor as to the tax consequences to
the Optionee of any such delayed exercise.
(d) OTHER TERMINATION OF SERVICE. If the Optionee's Service
with the Participating Company Group terminates for any reason, except
Disability, death, or Termination After Transfer of Control, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee's Service terminated, may be exercised by the Optionee within thirty
(30) days (or such other longer period of time as determined by the Board, in
its sole discretion) after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date.
7.2 CERTAIN DEFINITIONS.
(a) "TERMINATION AFTER TRANSFER OF CONTROL" shall mean either
of the following events occurring within twelve (12) months after a Transfer of
Control (as defined in Section 8.1(b) below):
(i) termination by the Participating Company Group of
the Optionee's Service with the Participating Company Group for any reason other
than a Termination For Cause; or
(ii) the Optionee's resignation from Service with the
Participating Company Group within a reasonable period of time following any
Constructive Termination (as defined below).
Notwithstanding any provision herein to the contrary, Termination After Transfer
of Control shall not include any termination of the Optionee's Service with the
Participating Company Group which (1) is a Termination For Cause; (2) is a
result of the Optionee's death or Disability; (3) is a result of the Optionee's
voluntary termination of Service other than upon Constructive Termination (as
defined below); or (4) occurs prior to the effectiveness of a Transfer of
Control.
(b) "TERMINATION FOR CAUSE" shall mean termination by the
Participating Company Group of the Optionee's Service with the Participating
Company Group for any of the following reasons: (i) theft, dishonesty, or
falsification of any Participating Company records; (ii) improper use or
disclosure of a Participating Company's confidential or proprietary information;
(iii) any action by the Optionee which has a detrimental effect on a
Participating Company's reputation or business; (iv) the Optionee's failure or
inability to perform any reasonable assigned duties after written notice from
the Participating Company Group of, and a reasonable opportunity to cure, such
failure or inability; (v) any material breach by the Optionee of any employment
agreement between the Optionee and the Participating Company Group, which breach
is not cured pursuant to the terms of such agreement; or (vi) the Optionee's
conviction of any criminal act which impairs the Optionee's ability to perform
his or her duties with the Participating Company Group.
(c) "CONSTRUCTIVE TERMINATION" shall mean any one or more of
the following:
(i) without the Optionee's express written consent, the
assignment to the Optionee of any duties, or any limitation of the Optionee's
responsibilities, substantially inconsistent with the Optionee's positions,
duties, responsibilities and status with the Participating Company Group
immediately prior to the date of the Transfer of Control;
(ii) without the Optionee's express written consent,
the relocation of the principal place of the Optionee's employment to a location
that is more than fifty (50) miles from the Optionee's principal place of
employment immediately prior to the date of the Transfer of Control, or the
imposition of travel requirements substantially more demanding of the Optionee
than such travel requirements existing immediately prior to the date of the
Transfer of Control;
(iii) any failure by the Participating Company Group to
pay, or any material reduction by the Participating Company Group of, (1) the
Optionee's base salary in effect immediately prior to the date of the Transfer
of Control (unless reductions comparable in amount and duration are concurrently
made for all other employees of the Participating Company Group with
responsibilities, organizational level and title comparable to the Optionee's),
or (2) the Optionee's bonus compensation, if any, in effect immediately prior to
the date of the Transfer of Control (subject to applicable performance
requirements with respect to the actual amount of bonus compensation earned by
the Optionee); or
(iv) any failure by the Participating Company Group to
(1) continue to provide the Optionee with the opportunity to participate, on
terms no less favorable than those in effect for the benefit of any employee
group which customarily includes a person holding the employment position or a
comparable position with the Participating Company Group then held by the
Optionee, in any benefit or compensation plans and programs, including, but not
limited to, the Participating Company Group's life, disability, health, dental,
medical, savings, profit sharing, stock purchase and retirement plans, if any,
in which the Optionee was participating immediately prior to the date of the
Transfer of Control, or their equivalent, or (2) provide the Optionee with all
other fringe benefits (or their equivalent) from time to time in effect for the
benefit of any employee group which customarily includes a person holding the
employment position or a comparable position with the Participating Company
Group then held by the Optionee.
7.3 ADDITIONAL LIMITATIONS ON OPTION EXERCISE. Notwithstanding the
provisions of Section 7.1, the Option may not be exercised after the Optionee's
termination of Service to the extent that the shares to be acquired upon
exercise of the Option would be subject to the Unvested Share Repurchase Option
as provided in Section 11. Except as the Company and the Optionee otherwise
agree, exercise of the Option pursuant to Section 7.1 following termination of
the Optionee's Service may not be made by delivery of a promissory note as
provided in Section 4.3(a).
7.4 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, 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 Expiration 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 advisor as to the tax consequences of any such delayed
exercise.
7.5 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b). Notwithstanding the
foregoing, if a sale within the applicable time periods set forth in Section 7.1
of shares acquired upon the exercise of the Option would subject the Optionee to
suit under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day following
the date on which a sale of such shares by the Optionee would no longer be
subject to such suit, (ii) the one hundred and ninetieth (190th) day after the
Optionee's termination of Service, or (iii) the Option Expiration 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 advisor as to
the tax consequences of any such delayed exercise.
7.6 LEAVE OF ABSENCE. For purposes of Section 7.1, the Optionee's
Service 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 of absence in excess of ninety (90) days, the Optionee's Service shall be
deemed to terminate on the ninety-first (91st) day of such leave unless the
Optionee's right to reemployment with the Participating Company Group remains
guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company (or required by law), a leave of absence
shall not be treated as Service for purposes of determining the Optionee's
Vested Ratio.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have occurred if any
of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single or
series of related transactions by the shareholders of the Company of more than
fifty percent (50%) of the voting stock of the Company;
(ii)a merger or consolidation in which the Company is a
party; or
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change Event or a
series of related Ownership Change Events (collectively, the "TRANSACTION")
wherein the shareholders of the Company immediately before the Transaction do
not retain immediately after the Transaction, in substantially the same
proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTION. In the event of a Transfer
of Control, the surviving, continuing, successor, or purchasing corporation or
parent corporation thereof, as the case may be (the "ACQUIRING CORPORATION"),
may either assume the Company's rights and obligations under the Option or
substitute for the Option a substantially equivalent option for the Acquiring
Corporation's stock. The Option shall terminate and cease to be outstanding
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 the
Transfer of Control. Notwithstanding the foregoing, shares acquired upon
exercise of the Option prior to the Transfer of Control and any consideration
received pursuant to the Transfer of Control with respect to such shares shall
continue to be subject to all applicable provisions of this Option Agreement
except as otherwise provided herein. Furthermore, notwithstanding the foregoing,
if the corporation the stock of which is subject to the Option immediately prior
to an Ownership Change Event described in Section 8.1(a)(i) constituting a
Transfer of Control is the surviving or continuing corporation and immediately
after such Ownership Change Event less than fifty percent (50%) of the total
combined voting power of its voting stock is held by another corporation or by
other corporations that are members of an affiliated group within the meaning of
Section 1504(a) of the Code without regard to the provisions of Section 1504(b)
of the Code, the Option shall not terminate unless the Board otherwise provides
in its sole discretion.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option. If 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 Event) shares of another corporation (the "NEW SHARES"), the Board 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 Option Shares and the
Exercise Price shall be adjusted in a fair and equitable manner, as determined
by the Board, in its sole discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 9 shall
be rounded up or down to the nearest whole number, as determined by the Board,
and in no event may the Exercise Price be decreased to an amount less than the
par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.
10. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT. 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 for the shares for which the Option
has been exercised (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company). No adjustment
shall be made for dividends, distributions or other rights for which the record
date is prior to the date such certificate is issued, except as provided in
Section 9. Nothing in this Option Agreement shall confer upon the Optionee any
right to continue in the Service of a Participating Company or interfere in any
way with any right of the Participating Company Group to terminate the
Optionee's Service as an Employee or Consultant, as the case may be, at any
time.
11. UNVESTED SHARE REPURCHASE OPTION.
11.1 GRANT OF UNVESTED SHARE REPURCHASE OPTION. In the event the
Optionee's Service with the Participating Company Group is terminated for any
reason or no reason, with or without cause, or, if the Optionee, the Optionee's
legal representative, or other holder of shares acquired upon exercise of the
Option attempts to sell, exchange, transfer, pledge, or otherwise dispose of
(other than pursuant to an Ownership Change Event) any shares acquired upon
exercise of the Option which exceed the Vested Shares as defined in Section 11.2
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 Section 11 (the "UNVESTED SHARE REPURCHASE OPTION").
11.2 VESTED SHARES AND UNVESTED SHARES DEFINED. The "VESTED SHARES"
shall mean, on any given date, a number of shares of Stock equal to the Number
of Option Shares multiplied by the Vested Ratio determined as of such date and
rounded down to the nearest whole share. On such given date, the "UNVESTED
SHARES" shall mean the number of shares of Stock acquired upon exercise of the
Option which exceed the Vested Shares determined as of such date.
11.3 EXERCISE OF UNVESTED SHARE REPURCHASE OPTION. The Company may
exercise the Unvested Share Repurchase Option by written notice delivered
personally or forwarded by first class mail to the Optionee within sixty (60)
days after (a) termination of the Optionee's Service (or exercise of the Option,
if later) or (b) the Company has received notice of the attempted disposition of
Unvested Shares. 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.
11.4 PAYMENT FOR SHARES AND RETURN OF SHARES TO COMPANY. 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 Section 9 (the
"REPURCHASE PRICE"). The Company shall pay the aggregate Repurchase Price to the
Optionee in cash within thirty (30) days after the date of personal delivery or
mailing of the written notice of the Company's 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 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.
11.5 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 or more persons as may be
selected by the Company.
11.6 OWNERSHIP CHANGE EVENT. Upon the occurrence of an Ownership Change
Event, 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 terms "Stock" and "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 Event. While the
aggregate Repurchase Price shall remain the same after such Ownership Change
Event, the Repurchase Price per Unvested Share upon exercise of the Unvested
Share Repurchase Option following such Ownership Change Event shall be adjusted
as appropriate. For purposes of determining the Vested Ratio following an
Ownership Change Event, credited Service shall include all Service with any
corporation which is a Participating Company at the time the Service is
rendered, whether or not such corporation is a Participating Company both before
and after the Ownership Change Event.
12. RIGHT OF FIRST REFUSAL.
12.1 GRANT OF RIGHT OF FIRST REFUSAL. Except as provided in Section
12.7 below, in the event the Optionee, the Optionee's legal representative, or
other holder of shares acquired upon exercise of the Option proposes to sell,
exchange, transfer, pledge, or otherwise dispose of any Vested Shares (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 Section 12 (the "RIGHT OF FIRST REFUSAL").
12.2 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 Board in good faith. If the Optionee
proposes to transfer any Transfer Shares to more than one 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.
12.3 BONA FIDE TRANSFER. If the Company determines 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 Section 12, and the Optionee shall have no right to transfer
the Transfer Shares without first complying with the procedure described in this
Section 12. The Optionee shall not be permitted to transfer the Transfer Shares
if the proposed transfer is not bona fide.
12.4 EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company determines the
proposed transfer 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 right 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 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 present value 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.
12.5 FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL. If the Company fails
to exercise the Right of First Refusal in full (or to such lesser extent as the
Company and the Optionee otherwise agree) within the period specified in Section
12.4 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 ninety (90) 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 Section 12.
12.6 TRANSFEREES OF 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
interest therein subject to all of the terms and conditions of this Option
Agreement, including this Section 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
Section 12 are met.
12.7 TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The Right of
First Refusal shall not apply to any transfer or exchange of the shares acquired
upon exercise of the Option if such transfer. or exchange is in connection with
an Ownership Change Event. 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 Section 12.9 below result in a termination of the Right of First
Refusal.
12.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. The Company shall have the
right to assign the Right of First Refusal at any time, whether or not there has
been an attempted transfer, to one or more persons as may be selected by the
Company.
12.9 EARLY TERMINATION OF RIGHT OF FIRST REFUSAL. The other provisions
of this Option Agreement notwithstanding, the Right of First Refusal shall
terminate and be of no further force and effect upon (a) the occurrence of a
Transfer of Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Option or substitutes a substantially
equivalent option for the Acquiring Corporation's stock for the Option, or (b)
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 (i) such stock is
listed on a national securities exchange (as that term is used in the Exchange
Act) or (ii) 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.
13.1 ESTABLISHMENT OF ESCROW. To ensure that shares subject to the
Unvested Share Repurchase Option or the Right of First Refusal or securing any
promissory note will be available for repurchase, the Company may require the
Optionee to deposit the certificate evidencing the shares which the Optionee
purchases upon exercise of the Option with an agent designated by the Company
under the terms and conditions of escrow and security agreements 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 in escrow. Upon the occurrence of an
Ownership Change Event or a change, as described in Section 9, 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, 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 shares of Stock acquired upon
exercise of the Option that remain, following such Ownership Change Event or
change described in Section 9, subject to the Unvested Share Repurchase Option,
the Right of First Refusal or any security interest held by the Company shall be
immediately subject to the escrow to the same extent as such shares of Stock
immediately before such event.
The Company shall bear the expense of the escrow.
13.2 DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after the
expiration of the Unvested Share Repurchase Option and the Right of First
Refusal and after full repayment of any promissory note secured by the shares or
other property in escrow, but not more frequently than twice each calendar year,
the escrow agent shall deliver to the Optionee the shares and any other property
no longer subject to such restrictions and no longer securing any promissory
note.
13.3 NOTICES AND PAYMENTS. In the event the shares and any other
property 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 and any other property which the Company has purchased to the Company
and shall deliver the payment received from the Company to the Optionee.
14. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT. If, from time to time,
there is any stock dividend, stock split or other change, as described in
Section 9, 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, the Right of First
Refusal, and any security interest held by the Company with the same force and
effect as the shares subject to the Unvested Share Repurchase Option, the Right
of First Refusal, and such security interest immediately before such event.
15. 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 after the
date of the Optionee exercises all or part of the Option or within two (2) years
after the Date of Option Grant. Until such time as the Optionee disposes of such
shares in a manner consistent with the provisions of this Option Agreement,
unless otherwise expressly authorized by the Company, 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 the exercise
of the Option and the two-year period immediately after Date of Option Grant. At
any time during the one-year or two-year periods set forth above, the Company
may place a legend on any certificate 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 pursuant to the preceding sentence.
16. LEGENDS. The Company may at any time place legends referencing the Unvested
Share Repurchase Option, the Right of First Refusal, and any applicable federal,
state or foreign 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 carry out the provisions of this Section.
Unless otherwise specified by the Company, legends placed on such certificates
may include, but shall not be limited to, the following:
16.1 "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."
16.2 Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
16.3 "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
HOLDERS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
16.4 "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."
16.5 "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
("ISO"). IN ORDER TO OBTAIN THE PREFERENTIAL TAX TREATMENT AFFORDED TO ISOs, THE
SHARES SHOULD NOT BE TRANSFERRED PRIOR TO ___________________. SHOULD THE
REGISTERED HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND
FOREGO ISO TAX TREATMENT, THE TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE
CORPORATION IMMEDIATELY. THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED
UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE
NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED
ABOVE."
17. PUBLIC OFFERING. The Optionee hereby agrees that in the event of any
underwritten public offering of stock, including 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
public offering; provided, however, that such period of time shall not exceed
one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing
limitation shall not apply to shares registered in the public offering under the
Securities Act. The Optionee shall be subject to this Section provided and only
if the officers and directors of the Company are also subject to similar
arrangements.
18. BINDING EFFECT. Subject to the restrictions on transfer set forth herein,
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 may terminate or amend the Plan or the
Option at any time; provided, however, that except as provided in Section 8.2 in
connection with a Transfer of Control, no such termination or amendment may
adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or amendment is necessary to
comply with any applicable law or government regulation or is required to enable
the Option to qualify as an Incentive Stock Option. No amendment or addition to
this Option Agreement shall be effective unless in writing.
20. INTEGRATED AGREEMENT. This Option Agreement and the Plan constitute the
entire understanding and agreement of the 0ptionee and the Participating Company
Group with respect to the subject matter contained herein and therein and there
are no agreements, understandings, restrictions, representations, or warranties
among the Optionee and the Participating Company Group with respect to such
subject matter other than those as set forth or provided for herein or therein.
To the extent contemplated herein or therein, 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.
PORTOLA COMMUNICATIONS, INC.
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 Section 11 and the Right of First Refusal set forth in
Section 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.
OPTIONEE ---------------------------
Date:-------------------------------
THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN QUALIFIED
WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE
ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF THE
CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS THE SALE
OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102, OR 25105 OF
THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT
ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, UNLESS THE
SALE IS SO EXEMPT.
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.
PORTOLA COMMUNICATIONS, INC.
IMMEDIATELY EXERCISABLE
NONSTATUTORY STOCK OPTION AGREEMENT
THIS IMMEDIATELY EXERCISABLE NONSTATUTORY STOCK OPTION AGREEMENT (the
"OPTION AGREEMENT") is made and entered into as of _____________, 199___, by and
between Portola Communications, Inc. and __________ (the "OPTIONEE").
The Company has granted to the Optionee pursuant to the Portola
Communications, Inc. 1996 Stock Option Plan (the "PLAN") an option to purchase
certain shares of Stock, upon the terms and conditions set forth in this Option
Agreement (the "OPTION"). The Option shall in all respects be subject to the
terms and conditions of the Plan, the provisions of which are incorporated
herein by reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein, capitalized terms
shall have the meanings assigned to such terms in the Plan. Whenever used
herein, the following terms shall have their respective meanings set forth
below:
(a) "DATE OF OPTION GRANT" means ____________, 199_.
(b) "NUMBER OF OPTION SHARES" means ___________________ shares
of Stock, as adjusted from time to time pursuant to Section 9.
(c) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(d) "EXERCISE PRICE" means $_____ per share of Stock, as
adjusted from time to time pursuant to Section 9.
(e) "INITIAL EXERCISE DATE" means the later of the Date of
Option Grant or the date the Optionee's Service commences.
(f) "INITIAL VESTING DATE" means the date occurring one (1)
year after (check one):
___ the Date of Option Grant.
___ ____________, 199_, the date the Optionee's Service
commenced.
(g) "VESTED RATIO" means, on any relevant date, the ratio
determined as follows:
Vested Ratio
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee's Service is
continuous from the later of the Date of Option Grant or the
Optionee's Service commencement date until the
Initial Vesting Date 1 /4
Plus
For each full month of the Optionee's continuous Service from
the Initial Vesting Date until the Vested Ratio equals
1/1, an additional 1/48
(h) "OPTION EXPIRATION DATE" means the date ten (10) years
after the Date of Option Grant.
(i) "COMPANY" means Portola Communications, Inc., a California
corporation, or any successor corporation thereto.
(j) "DISABILITY" means the inability of the Optionee, in the
opinion of a qualified physician acceptable to the Company, to perform the major
duties of the Optionee's position with the Participating Company Group because
of the sickness or injury of the Optionee.
(k) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(l) "SERVICE" means the Optionee's employment or service with
the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The Optionee's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided that
there is no interruption or termination of the Optionee's Service. The
Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee performs
Service ceasing to be a Participating Company. Subject to the foregoing, the
Company, in its sole discretion, shall determine whether the Optionee's Service
has terminated and the effective date of such termination.
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.
2. TAX CONSEQUENCES.
2.1 TAX STATUS OF OPTION. This Option is intended to be a Nonstatutory
Stock Option and shall not be treated as an Incentive Stock Option within the
meaning of Section 422(b) of the Code.
2.2 ELECTION UNDER SECTION 83(b) OF THE CODE. If the Optionee exercises
this Option to purchase shares of Stock that are both nontransferable and
subject to a substantial risk of forfeiture, the Optionee understands that the
Optionee should consult with the Optionee's tax advisor regarding the
advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days
after the date on which the Optionee exercises the Option. Shares acquired upon
exercise of the Option are nontransferable and subject to a substantial risk of
forfeiture if, for example, (a) they are unvested and are subject to a right of
the Company to repurchase such shares at the Optionee's original purchase price
if the Optionee's Service terminates, or (b) the Optionee is subject to a
restriction on transfer to comply with "Pooling-of-Interests Accounting" rules.
Failure to file an election under Section 83(b), if appropriate, may result in
adverse tax consequences to the Optionee. The Optionee acknowledges that the
Optionee has been advised to consult with a tax advisor prior to the exercise of
the Option regarding the tax consequences to the Optionee of the exercise of the
Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE
DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD CANNOT BE
EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b)
ELECTION IS THE OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE OPTIONEE REQUESTS
THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS OR HER BEHALF.
3. ADMINISTRATION. All questions of interpretation concerning this Option
Agreement shall be determined by the Board, including any duly appointed
Committee of the Board. 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.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE.
(a) Except as otherwise provided herein, the Option shall be
exercisable on and after the Initial Exercise Date and prior to the termination
of the Option (as provided in Section 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 Section 11
and Section 12.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option, the
number of whole shares of Stock 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, by certified or registered mail, return receipt requested,
by confirmed facsimile transmission, or by such other means as the Company may
permit, 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 Section 6, accompanied by (i) full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased and
(ii) an executed copy, if required herein, of the then current forms of escrow
and security agreement referenced below. The Option shall be deemed to be
exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and, if required by the Company, such executed agreements.
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of shares
of Stock 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 whole shares of
Stock owned by the Optionee having a Fair Market Value (as determined by the
Company 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 aggregate Exercise Price, (iii)
by means of a Cashless Exercise, as defined in Section 4.3(C), (iv) in the
Company's sole discretion at the time the Option is exercised, by the Optionee's
promissory note for the aggregate Exercise Price, or (v) by any combination of
the foregoing.
(b) TENDER OF STOCK. Notwithstanding the foregoing, the Option
may not be exercised by tender to the Company of shares of Stock to the extent
such tender of Stock would constitute a violation of the provisions of any law,
regulation or agreement restricting the redemption of the Company's stock. The
Option may not be exercised by tender to the Company of shares of Stock unless
such shares either have been owned by the Optionee for more than six (6) months
or were not acquired, directly or indirectly, from the Company.
(c) CASHLESS EXERCISE. A "CASHLESS EXERCISE" means the
assignment in a form acceptable to the Company of the proceeds of a sale or loan
with respect to some or all of the shares of Stock acquired upon the exercise of
the Option pursuant to a program 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 or terminate any such program or procedure.
(d) PAYMENT BY PROMISSORY NOTE. No promissory note shall be
permitted if an exercise of the Option using a promissory note would be a
violation of any law. The promissory note permitted in clause (iv) of Section
4.3(a) shall be a full recourse note in a form satisfactory to the Company, with
principal payable no more than four (4) years after the date the Option is
exercised. Interest on the principal balance of the promissory note shall be
payable in annual installments at the minimum interest rate necessary to avoid
imputed interest pursuant to all applicable sections of the Code. Such recourse
promissory note shall be secured by the shares of Stock acquired pursuant to the
then current form of security agreement as approved by the Company. At any time
the Company is 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. Except as the Company in its sole
discretion shall determine, the Optionee shall pay the unpaid principal balance
of the promissory note and any accrued interest thereon upon termination of the
Optionee's Service with the Participating Company Group for any reason, with or
without cause.
4.4 TAX 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 withholding from payroll and any other amounts payable to the
Optionee, and otherwise agrees to make adequate provision for (including by
means of a Cashless Exercise to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Participating Company Group, 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 upon 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. The Optionee is cautioned that the Option is not
exercisable unless the tax withholding obligations of the Participating Company
Group are satisfied. Accordingly, the Optionee may not be able to exercise the
Option when desired even though the Option is vested, and the Company shall have
no obligation to issue a certificate for such shares or release such shares from
any escrow provided for herein.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise Price is
paid by means of a Cashless Exercise, the certificate for the shares as to which
the Option is exercised shall be registered in the name of the Optionee, or, if
applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of shares of Stock upon exercise of the
Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the Option
may not be exercised unless (i) a registration statement under 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 EXERCISED 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. The inability of the Company to obtain from
any regulatory body having jurisdiction the authority, if any, deemed by the
Company's legal counsel to be necessary to the lawful issuance and sale of any
shares subject to the Option shall relieve the Company of any liability in
respect of the failure to issue or sell such shares as to which such requisite
authority shall not have been obtained. 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.
4.7 FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY 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 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 provided in Section 7, 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 Expiration Date, (b) the last
date for exercising the Option following termination of the Optionee's Service
as described in Section 7, or (c) a Transfer of Control to the extent provided
in Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on
which the Optionee's Service terminated, may be exercised by the Optionee (or
the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.
(b) DEATH. If the Optionee's Service with the Participating
Company Group is terminated because of the death of the Optionee, the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee (or the Optionee's legal
representative, or other person who acquired the right to exercise the Option by
reason of the Optionee's death) at any time prior to the expiration of six (6)
months after the date on which the Optionee's Service terminated, but in any
event no later than the Option Expiration Date. The Optionee's Service shall be
deemed to have terminated on account of death if the Optionee dies within thirty
(30) days after the Optionee's termination of Service (other than due to a
Termination For Cause).
(c) TERMINATION AFTER TRANSFER OF CONTROL. If the Optionee's
Service with the Participating Company Group is terminated because of a
Termination After Transfer of Control (as defined below), (i) the Option, to the
extent unexercised and exercisable on the date on which the Optionee's Service
terminated, may be exercised by the Optionee (or the Optionee's guardian or
legal representative) at any time prior to the expiration of six (6) months
after the date on which the Optionee's Service terminated, but in any event no
later than the Option Expiration Date, and (ii) solely for purposes of computing
the Vested Ratio, the Optionee shall be given credit for an additional twelve
(12) months of continuous Service; provided, however, that in no event shall the
Vested Ratio exceed 1/1.
(d) OTHER TERMINATION OF SERVICE. If the Optionee's Service
with the Participating Company Group terminates for any reason, except
Disability, death, or Termination After Transfer of Control, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee's Service terminated, may be exercised by the Optionee within thirty
(30) days (or such other longer period of time as determined by the Board, in
its sole discretion) after the date on which the Optionee's Service terminated,
but in any event no later than the Option Expiration Date.
7.2 CERTAIN DEFINITIONS.
(a) "TERMINATION AFTER TRANSFER OF CONTROL" shall mean either
of the following events occurring within twelve (12) months after a Transfer of
Control (as defined in Section 8.1(b) below):
(i) termination by the Participating Company Group of
the Optionee's Service with the Participating Company Group for any reason other
than a Termination For Cause; or
(ii) the Optionee's resignation from Service with the
Participating Company Group within a reasonable period of time following any
Constructive Termination (as defined below).
Notwithstanding any provision herein to the contrary,
Termination After Transfer of Control shall not include any termination of the
Optionee's Service with the Participating Company Group which (1) is a
Termination For Cause; (2) is a result of the Optionee's death or Disability;
(3) is a result of the Optionee's voluntary termination of Service other than
upon Constructive Termination (as defined below); or (4) occurs prior to the
effectiveness of a Transfer of Control.
(b) "TERMINATION FOR CAUSE" shall mean termination by the
Participating Company Group of the Optionee's Service with the Participating
Company Group for any of the following reasons: (i) theft, dishonesty, or
falsification of any Participating Company records; (ii) improper use or
disclosure of a Participating Company's confidential or proprietary information;
(iii) any action by the Optionee which has a detrimental effect on a
Participating Company's reputation or business; (iv) the Optionee's failure or
inability to perform any reasonable assigned duties after written notice from
the Participating Company Group of, and a reasonable opportunity to cure, such
failure or inability; (v) any material breach by the Optionee of any employment
agreement between the Optionee and the Participating Company Group, which breach
is not cured pursuant to the terms of such agreement; or (vi) the Optionee's
conviction of any criminal act which impairs the Optionee's ability to perform
his or her duties with the Participating Company Group.
(c) "CONSTRUCTIVE TERMINATION" shall mean any one or more of
the following:
(i) without the Optionee's express written consent, the
assignment to the Optionee of any duties, or any limitation of the Optionee's
responsibilities, substantially inconsistent with the Optionee's positions,
duties, responsibilities and status with the Participating Company Group
immediately prior to the date of the Transfer of Control;
(ii) without the Optionee's express written consent,
the relocation of the principal place of the Optionee's employment to a location
that is more than fifty (50) miles from the Optionee's principal place of
employment immediately prior to the date of the Transfer of Control, or the
imposition of travel requirements substantially more demanding of the Optionee
than such travel requirements existing immediately prior to the date of the
Transfer of Control;
(iii) any failure by the Participating Company Group to
pay, or any material reduction by the Participating Company Group of, (1) the
Optionee's base salary in effect immediately prior to the date of the Transfer
of Control (unless reductions comparable in amount and duration are concurrently
made for all other employees of the Participating Company Group with
responsibilities organizational level and title comparable to the Optionee's),
or (2) the Optionee's bonus compensation, if any, in effect immediately prior to
the date of the Transfer of Control (subject to applicable performance
requirements with respect to the actual amount of bonus compensation earned by
the Optionee); or
(iv) any failure by the Participating Company Group to
(1) continue to provide the Optionee with the opportunity to participate, on
terms no less favorable than those in effect for the benefit of any employee
group which customarily includes a person holding the employment position or a
comparable position with the Participating Company Group then held by the
Optionee, in any benefit or compensation plans and programs, including, but not
limited to, the Participating Company Group's life, disability, health, dental,
medical, savings, profit sharing, stock purchase and retirement plans, if any,
in which the Optionee was participating immediately prior to the date of the
Transfer of Control, or their equivalent, or (2) provide the Optionee with all
other fringe benefits (or their equivalent) from time to time in effect for the
benefit of any employee group which customarily includes a person holding the
employment position or a comparable position with the Participating Company
Group then held by the Optionee.
7.3 ADDITIONAL LIMITATIONS ON OPTION EXERCISE. Notwithstanding the
provisions of Section 7.1, the Option may not be exercised after the Optionee's
termination of Service to the extent that the shares to be acquired upon
exercise of the Option would be subject to the Unvested Share Repurchase Option
as provided in Section 11. Except as the Company and the Optionee otherwise
agree, exercise of the Option pursuant to Section 7.1 following termination of
the Optionee's Service may not be made by delivery of a promissory note as
provided in Section 43(a).
7.4 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth in Section 7.1 is prevented by the provisions of Section 4.6, 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 Expiration Date.
7.5 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b). Notwithstanding the
foregoing, if a sale within the applicable time periods set forth in Section 7.1
of shares acquired upon the exercise of the Option would subject the Optionee to
suit under Section 16(b) of the Exchange Act, the Option shall remain
exercisable until the earliest to occur of (i) the tenth (10th) day following
the date on which a sale of such shares by the Optionee would no longer be
subject to such suit, (ii) the one hundred and ninetieth (190th) day after the
Optionee's termination of Service, or (iii) the Option Expiration Date.
7.6 LEAVE OF ABSENCE. For purposes of Section 7.1, the Optionee's
Service 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 of absence in excess of ninety (90) days, the Optionee's Service shall be
deemed to terminate on the ninety-first (91st) day of such leave unless the
Optionee's right to reemployment with the Participating Company Group remains
guaranteed by statute or contract. Notwithstanding the foregoing, unless
otherwise designated by the Company (or required by law), a leave of absence
shall not be treated as Service for purposes of determining the Optionee's
Vested Ratio.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company:
(i) the direct or indirect sale or exchange in a single
or series of related transactions by the shareholders of the Company of more
than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is
a party; or
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the shareholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting stock
immediately before the Transaction, direct or indirect beneficial ownership of
more than fifty percent (50%) of the total combined voting power of the
outstanding voting stock of the Company or the corporation or corporations to
which the assets of the Company were transferred (the "TRANSFEREE
CORPORATION(S)"), as the case may be. For purposes of the preceding sentence,
indirect beneficial ownership shall include, without limitation, an interest
resulting from ownership of the voting stock of one or more corporations which,
as a result of the Transaction, own the Company or the Transferee
Corporation(s), as the case may be, either directly or through one or more
subsidiary corporations. The Board shall have the right to determine whether
multiple sales or exchanges of the voting stock of the Company or multiple
Ownership Change Events are related, and its determination shall be final,
binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTION. In the event of a Transfer
of Control, the surviving, continuing, successor, or purchasing corporation or
parent corporation thereof, as the case may be (the "Acquiring Corporation"),
may either assume the Company's rights and obligations under the Option or
substitute for the Option a substantially equivalent option for the Acquiring
Corporation's stock. The Option shall terminate and cease to be outstanding
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 the
Transfer of Control. Notwithstanding the foregoing, shares acquired upon
exercise of the Option prior to the Transfer of Control and any consideration
received pursuant to the Transfer of Control with respect to such shares shall
continue to be subject to all applicable provisions of this Option Agreement
except as otherwise provided herein. Furthermore, notwithstanding the foregoing,
if the corporation the stock of which is subject to the Option immediately prior
to an Ownership Change Event described in Section 8.1(a)(i) constituting a
Transfer of Control is the surviving or continuing corporation and immediately
after such Ownership Change Event less than fifty percent (50%) of the total
combined voting power of its voting stock is held by another corporation or by
other corporations that are members of an affiliated group within the meaning of
Section 1504(a) of the Code without regard to the provisions of Section 1504(b)
of the Code, the Option shall not terminate unless the Board otherwise provides
in its sole discretion.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any stock
dividend, stock split, reverse stock split, recapitalization, combination,
reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of
shares of stock subject to the Option. If 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 Event) shares of another corporation (the "NEW SHARES"), the Board 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 Option Shares and the
Exercise Price shall be adjusted in a fair and equitable manner, as determined
by the Board, in its sole discretion. Notwithstanding the foregoing, any
fractional share resulting from an adjustment pursuant to this Section 9 shall
be rounded up or down to the nearest whole number, as determined by the Board,
and in no event may the Exercise Price be decreased to an amount less than the
par value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.
10. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT. 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 for the shares for which the Option
has been exercised (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company). No adjustment
shall be made for dividends, distributions or other rights for which the record
date is prior to the date such certificate is issued, except as provided in
Section 9. Nothing in this Option Agreement shall confer upon the Optionee any
right to continue in the Service of a Participating Company or interfere in any
way with any right of the Participating Company Group to terminate the
Optionee's Service as an Employee or Consultant, as the case may be, at any
time.
11. UNVESTED SHARE REPURCHASE OPTION.
11.1 GRANT OF UNVESTED SHARE REPURCHASE OPTION. In the event the
Optionee's Service with the Participating Company Group is terminated for any
reason or no reason, with or without cause, or, if the Optionee, the Optionee's
legal representative, or other holder of shares acquired upon exercise of the
Option attempts to sell, exchange, transfer, pledge, or otherwise dispose of
(other than pursuant to an Ownership Change Event) any shares acquired upon
exercise of the Option which exceed the Vested Shares as defined in Section 11.2
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 Section 11 (the "UNVESTED SHARE REPURCHASE OPTION").
11.2 VESTED SHARES AND UNVESTED SHARES DEFINED. The "VESTED SHARES"
shall mean, on any given date, a number of shares of Stock equal to the Number
of Option Shares multiplied by the Vested Ratio determined as of such date and
rounded down to the nearest whole share. On such given date, the "UNVESTED
SHARES" shall mean the number of shares of Stock acquired upon exercise of the
Option which exceed the Vested Shares determined as of such date.
11.3 EXERCISE OF UNVESTED SHARE REPURCHASE OPTION. The Company may
exercise the Unvested Share Repurchase Option by written notice delivered
personally or forwarded by first class mail to the Optionee within sixty (60)
days after (a) termination of the Optionee's Service (or exercise of the Option,
if later) or (b) the Company has received notice of the attempted disposition of
Unvested Shares. 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.
11.4 PAYMENT FOR SHARES AND RETURN OF SHARES TO COMPANY. 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 Section 9 (the
"REPURCHASE PRICE"). The Company shall pay the aggregate Repurchase Price to the
Optionee in cash within thirty (30) days after the date of personal delivery or
mailing of the written notice of the Company's 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 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.
11.5 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 or more persons as may be
selected by the Company.
11.6 OWNERSHIP CHANGE EVENT. Upon the occurrence of an Ownership Change
Event, 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 terms "Stock" and "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 Event. While the
aggregate Repurchase Price shall remain the same after such Ownership Change
Event, the Repurchase Price per Unvested Share upon exercise of the Unvested
Share Repurchase Option following such Ownership Change Event shall be adjusted
as appropriate. For purposes of determining the Vested Ratio following an
Ownership Change Event, credited Service shall include all Service with any
corporation which is a Participating Company at the time the Service is
rendered, whether or not such corporation is a Participating Company both before
and after the Ownership Change Event.
12. RIGHT OF FIRST REFUSAL.
12.1 GRANT OF RIGHT OF FIRST REFUSAL. Except as provided in Section
12.7 below, in the event the Optionee, the Optionee's legal representative, or
other holder of shares acquired upon exercise of the Option proposes to sell,
exchange, transfer, pledge, or otherwise dispose of any Vested Shares (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 Section 12 (the "RIGHT OF FIRST REFUSAL").
12.2 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 Board in good faith. If the Optionee
proposes to transfer any Transfer Shares to more than one 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.
12.3 BONA FIDE TRANSFER. If the Company determines 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 Section 12, and the Optionee shall have no right to transfer
the Transfer Shares without first complying with the procedure described in this
Section 12. The Optionee shall not be permitted to transfer the Transfer Shares
if the proposed transfer is not bona fide.
12.4 EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company determines the
proposed transfer 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 right 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 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 present value 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.
12.5 FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL. If the Company fails
to exercise the Right of First Refusal in full (or to such lesser extent as the
Company and the Optionee otherwise agree) within the period specified in Section
12.4 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 ninety (90) 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 Section 12.
12.6 TRANSFEREES OF 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
interest therein subject to all of the terms and conditions of this Option
Agreement, including this Section 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
Section 12 are met.
12.7 TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The Right of
First Refusal shall not apply to any transfer or exchange of the shares acquired
upon exercise of the Option if such transfer or exchange is in connection with
an Ownership Change Event. 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 Section 12.9 below result in a termination of the Right of First
Refusal.
12.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. The Company shall have the
right to assign the Right of First Refusal at any time, whether or not there has
been an attempted transfer, to one or more persons as may be selected by the
Company.
12.9 EARLY TERMINATION OF RIGHT OF FIRST REFUSAL. The other provisions
of this Option Agreement notwithstanding, the Right of First Refusal shall
terminate and be of no further force and effect upon (a) the occurrence of a
Transfer of Control, unless the Acquiring Corporation assumes the Company's
rights and obligations under the Option or substitutes a substantially
equivalent option for the Acquiring Corporation's stock for the Option, or (b)
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 (i) such stock is
listed on a national securities exchange (as that term is used in the Exchange
Act) or (ii) 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.
13.1 ESTABLISHMENT OF ESCROW. To ensure that shares subject to the
Unvested Share Repurchase Option or the Right of First Refusal or securing any
promissory note will be available for repurchase, the Company may require the
Optionee to deposit the certificate evidencing the shares which the Optionee
purchases upon exercise of the Option with an agent designated by the Company
under the terms and conditions of escrow and security agreements 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 in escrow. Upon the occurrence of an
Ownership Change Event or a change, as described in Section 9, 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, 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 shares of Stock acquired upon
exercise of the Option that remain, following such Ownership Change Event or
change described in Section 9, subject to the Unvested Share Repurchase Option,
the Right of First Refusal or any security interest held by the Company shall be
immediately subject to the escrow to the same extent as such shares of Stock
immediately before such event.
The Company shall bear the expenses of the escrow.
13.2 DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after the
expiration of the Unvested Share Repurchase Option and the Right of First
Refusal and after full repayment of any promissory note secured by the shares or
other property in escrow, but not more frequently than twice each calendar year,
the escrow agent shall deliver to the Optionee the shares and any other property
no longer subject to such restrictions and no longer securing any promissory
note.
13.3 NOTICES AND PAYMENTS. In the event the shares and any other
property 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 and any other property which the Company has purchased to the Company
and shall deliver the payment received from the Company to the Optionee.
14. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT. If, from time to time,
there is any stock dividend, stock split or other change, as described in
Section 9, 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, the Right of First
Refusal, and any security interest held by the Company with the same force and
effect as the shares subject to the Unvested Share Repurchase Option, the Right
of First Refusal, and such security interest immediately before such event.
15. LEGENDS. The Company may at any time place legends referencing the Unvested
Share Repurchase Option, the Right of First Refusal, and any applicable federal,
state or foreign 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 carry out the provisions of this Section.
Unless otherwise specified by the Company, legends placed on such certificates
may include, but shall not be limited to, the following:
15.1 "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."
15.2 Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
15.3 "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."
15.4 "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."
16. PUBLIC OFFERING. The Optionee hereby agrees that in the event of any
underwritten public offering of stock, including 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
public offering; provided, however, that such period of time shall not exceed
one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing
limitation shall not apply to shares registered in the public offering under the
Securities Act. The Optionee shall be subject to this Section provided and only
if the officers and directors of the Company are also subject to similar
arrangements.
17. BINDING EFFECT. Subject to the restrictions on transfer set forth herein,
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.
18. TERMINATION OR AMENDMENT. The Board may terminate or amend the Plan or the
Option at any time; provided, however, that except as provided in Section 8.2 in
connection with a Transfer of Control, no such termination or amendment may
adversely affect the Option or any unexercised portion hereof without the
consent of the Optionee unless such termination or amendment is necessary to
comply with any applicable law or government regulation. No amendment or
addition to this Option Agreement shall be effective unless in writing.
19. INTEGRATED AGREEMENT. This Option Agreement and the Plan constitute the
entire understanding and agreement of the Optionee and the Participating Company
Group with respect to the subject matter contained herein and therein and there
are no agreements, understandings, restrictions, representations, or warranties
among the Optionee and the Participating Company Group with respect to such
subject matter other than those as set forth or provided for herein or therein.
To the extent contemplated herein or therein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
20. 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.
PORTOLA COMMUNICATIONS, INC.
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 Section 11 and the Right of First Refusal set forth in
Section 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.
OPTIONEE
Date:
Exhibit 5.1
March 17, 1999
America Online, Inc.
22000 AOL Way
Dulles, Virginia 20166
Ladies and Gentlemen:
This opinion is furnished in connection with the filing by America
Online, Inc. (the "Company") with the Securities and Exchange Commission of a
Registration Statement on Form S-8 (the "Registration Statement") under the
Securities Act of 1933, as amended. You have requested my opinion concerning the
status under Delaware law of the 9,750 shares (the "Shares") of the Company's
common stock, par value $.01 per share ("Common Stock"), and certain Preferred
Stock Purchase Rights (the "Rights") which are being registered under the
Registration Statement for issuance by the Company pursuant to the terms of the
Portola Communications, Inc. 1996 Stock Option Plan (the "Plan").
I am Acting General Counsel to the Company and have acted as counsel in
connection with the Registration Statement. In that connection, I, or a member
of my staff upon whom I have relied, have examined and am familiar with
originals or copies, certified or otherwise, identified to our satisfaction, of:
1. Restated Certificate of Incorporation of the Company, as amended, and
as presently in effect;
2. Restated By-Laws of the Company as presently in effect;
3. Certain resolutions adopted by the Company's Board of Directors;
4. Rights Agreement of the Company adopted on May 12, 1998 (the "Rights
Agreement"); and
5. The Plan.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies. We have also assumed that: (i) all
of the Shares will be issued for the consideration permitted under the Plan as
currently in effect, and none of such Shares will be issued for less than $.01;
(ii) all actions required to be taken under the Plan by the Compensation and
Management Development Committee and the Board of Directors of the Company have
been or will be taken by the Compensation and Management Development Committee
and the Board of Directors of the Company, respectively; and (iii) at the time
of the exercise of the options under the Plan, the Company shall continue to
have sufficient authorized and unissued shares of Common Stock reserved for
issuance thereunder.
Based upon and subject to the foregoing, we are of the opinion that:
1. The shares of Common Stock and the related Preferred Stock Purchase
Rights which may be issued upon the exercise of the Rights have been
duly authorized for issuance.
2. If and when any Common Stock and the related Preferred Stock Purchase
Rights are issued in accordance with the authorization therefor (as
adjusted) established with respect to the applicable Rights in
accordance with the requirements of the Plan, and against receipt of
the exercise price therefor, and assuming the continued updating and
effectiveness of the Registration Statement and the completion of any
necessary action to permit such issuance to be carried out in
accordance with applicable securities laws, such shares of Common
Stock will be validly issued, fully-paid and nonassessable, and the
accompanying Preferred Stock Purchase Rights, if the Company's
Preferred Stock Purchase Rights have not expired or been redeemed in
accordance with the terms of the Rights Agreement, will be validly
issued.
You acknowledge that I am admitted to practice only in Massachusetts,
Texas and the District of Columbia and am not an expert in the laws of any other
jurisdiction. No one other than the addressees and their assigns are permitted
to rely on or distribute this opinion without the prior written consent of the
undersigned.
This opinion is limited to the General Corporation Law of the State of
Delaware and federal law, although the Company acknowledges that I am not
admitted to practice in the State of Delaware and am not an expert in the laws
of that jurisdiction. We express no opinion with respect to the laws of any
other jurisdiction.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, and further consent to the use of my name wherever
appearing in the Registration Statement and any amendment thereto.
Very truly yours,
/s/Sheila A. Clark, Esq.
Sheila A. Clark, Esq.
Acting General Counsel
Exhibit 23.1
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-______) pertaining to the Portola Communications, Inc. 1996 Stock
Option Plan of our report dated September 25, 1998, except for the last
paragraph of Note 17, as to which the date is February 15, 1999, with respect to
the consolidated financial statements of America Online, Inc., included in its
Current Report on Form 8-K dated November 9, 1998, filed with the Securities and
Exchange Commission on February 17, 1999.
/S/ ERNST & YOUNG LLP
Ernst & Young LLP
Vienna, Virginia
March 16, 1999
