EXHIBIT 10.05
No.
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NETSCREEN TECHNOLOGIES, INC.
1997 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") is made and entered into as
of the date of grant set forth below (the "Date of Grant") by and between
NetScreen Technologies, Inc., a Delaware corporation (the "Company"), and the
participant named below (the "Participant"). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Company's 1997 Equity
Incentive Plan, as amended through the date hereof (the "Plan").
Participant:
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Social Security Number:
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Address:
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Total Option Shares:
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Exercise Price Per Share: $
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Date of Grant:
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First Vesting Date:
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Expiration Date:
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(unless earlier terminated under
Section 5.6 of the Plan)
Type of Stock Option
(Check one): [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
1. Grant of Option. The Company hereby grants to Participant an option
(this "Option") to purchase the total number of shares of Common Stock, $0.001
par value, of the Company set forth above as Total Option Shares (the "Shares")
at the Exercise Price Per Share set forth above (the "Exercise Price"), subject
to all of the terms and conditions of this Agreement and the Plan.
2. Exercise Period.
2.1 Exercise Period of Option.
(a) This Option is immediately exercisable although the Shares
issued upon exercise of the Option will be subject to the restrictions
on transfer and Repurchase Options set forth in Section 8 and 9 below.
Provided Participant continues to provide services to the Company or
to any Parent or Subsidiary of the Company, the Shares issuable upon
exercise of this Option will become vested with respect to twenty-five
percent (25%) of the Shares on the
First Vesting Date set forth on the first page of this Agreement (the
"First Vesting Date") and thereafter at the end of each full
succeeding month after the First Vesting Date an additional 2.08333%
of the Shares will become vested until the Shares are vested with
respect to one hundred percent (100%) of the Shares. If application of
the vesting percentage causes a fractional share, such share shall be
rounded down to the nearest whole share for each month except for the
last month in such vesting period, at the end of which last month this
Option shall become exercisable for the full remainder of the Shares.
Unvested Shares may not be sold or otherwise transferred by
Participant without the Company's prior written consent.
Notwithstanding any provision in the Plan or this Agreement to the
contrary, Options for Unvested Shares (as defined in Section 2.2 of
this Agreement) will not be exercisable on or after Participant's
Termination Date.
(b) If there is a Sale of the Company and Participant's
employment is terminated by the Company or its successor without
Cause in connection with the Sale of the Company, then upon such
termination the Option will become vested as to an additional number
of Unvested Shares equal to fifty percent (50%) of the Shares that
were Unvested Shares at the closing of the Sale of the Company.
(c) For purposes of the vesting acceleration provisions of
paragraph (b), "Cause" means (i) willfully engaging in gross
misconduct that is materially and demonstrably injurious to the
Company; (ii) willful act or acts of dishonesty undertaken by
Participant and intended to result in substantial gain or personal
enrichment for Participant at the expense of the Company; or (iii)
willful and continued failure to substantially perform Participant's
duties with the Company or its successor (other than incapacity due to
physical or mental illness); provided that the action or conduct
described in clause (iii) above will constitute "Cause" only if such
failure continues after the Board of Directors has provided
Participant with a written demand for substantial performance setting
forth in detail the specify respects in which it believes Participant
has willfully and not substantially performed his duties thereof and a
reasonable opportunity (to be not less than 30 days) to cure the same.
For such purpose, a termination by the Company without Cause includes
a termination of employment by Participant within 30 days following
any of the following events: (x) the assignment of any duties to
Participant inconsistent with, or reflecting a materially adverse
change in, Participant's position, duties or responsibilities with the
Company (or any successor) without Participant's concurrence; or (y)
the relocation of the Company's principal executive offices, or
relocating Participant's principal place of business, in excess of
fifty (50) miles from the company's current executive offices located
in Santa Clara, California. For purposes of the vesting acceleration
provisions of paragraph (b), the term "Sale of the Company" means (i)
the sale or other disposition of all or substantially all of the
assets of the Company, or (ii) the acquisition of the Company by
another entity by means of consolidation, corporate reorganization or
merger, or other transaction or series of related transactions in
which more than fifty percent (50%) of the outstanding voting power of
the Company is transferred.
2.2 Vesting of Options. Shares that are vested pursuant to the
schedule set forth in Section 2.1 are "Vested Shares." Shares that are
not vested pursuant to the schedule set forth in Section 2.1 are
"Unvested Shares."
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2.3 Expiration. The Option shall expire on the Expiration Date set
forth above or earlier as provided in Section 3 below or pursuant to
Section 5.6 of the Plan.
3. Termination.
3.1 Termination for Any Reason Except Death, Disability or Cause. If
Participant is Terminated for any reason, except death, Disability or
for Cause, the Option, to the extent (and only to the extent) that it
would have been exercisable by Participant on the Termination Date,
may be exercised by Participant no later than three (3) months after
the Termination Date, but in any event no later than the Expiration
Date.
3.2 Termination Because of Death or Disability. If Participant is
Terminated because of death or Disability of Participant (or
Participant dies within three (3) months of Termination when
Termination is for any reason other than Participant's Disability or
for Cause), the Option, to the extent that it is exercisable by
Participant on the Termination Date, may be exercised by Participant
(or Participant's legal representative) no later than twelve (12)
months after the Termination Date, but in any event no later than the
Expiration Date. Any exercise beyond (i) three (3) months after the
Termination Date when the Termination is for any reason other than the
Participant's death or disability, within the meaning of Section
22(e)(3) of the Code; or (ii) twelve (12) months after the Termination
Date when the termination is for Participant's disability, within the
meaning of Section 22(e)(3) of the Code, is deemed to be an NQSO.
3.3 Termination for Cause. If Participant is Terminated for Cause,
then the Option will expire on Participant's Termination Date, or at
such later time and on such conditions as are determined by the
Committee.
3.4 No Obligation to Employ. Nothing in the Plan or this Agreement
shall confer on Participant any right to continue in the employ of, or
other relationship with, the Company or any Parent or Subsidiary of
the Company, or limit in any way the right of the Company or any
Parent or Subsidiary of the Company to terminate Participant's
employment or other relationship at any time, with or without Cause.
4. Manner of Exercise.
4.1 Stock Option Exercise Agreement. To exercise this Option,
Participant (or in the case of exercise after Participant's death or
incapacity, Participant's executor, administrator, heir or legatee, as
the case may be) must deliver to the Company an executed stock option
exercise agreement in the form attached hereto as Exhibit A, or in
such other form as may be approved by the Committee from time to time
(the "Exercise Agreement"), which shall set forth, inter alia, (i)
Participant's election to exercise the Option, (ii) the number of
Shares being purchased, (iii) any restrictions imposed on the Shares
and (iv) any representations, warranties and agreements regarding
Participant's investment intent and access to information as may be
required by the Company to comply with applicable securities laws. If
someone other than Participant exercises the Option, then such person
must submit documentation reasonably acceptable to the Company
verifying that such person has the legal right to exercise the Option.
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4.2 Limitations on Exercise. The Option may not be exercised unless
such exercise is in compliance with all applicable federal and state
securities laws, as they are in effect on the date of exercise. The
Option may not be exercised as to fewer than one hundred (100) Shares
unless it is exercised as to all Shares as to which the Option is then
exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied by full
payment of the Exercise Price for the shares being purchased in cash
(by check), or where permitted by law:
(a) by tender of a full recourse promissory note having such
terms as may be approved by the Committee and bearing interest at a
rate sufficient to avoid imputation of income under Section 483 and
1274 of the Code; provided, however, that Participants who are not
employees or directors of the Company shall not be entitled to
purchase Shares with a promissory note unless the note is adequately
secured by collateral other than the Shares; provided, further, that
the portion of the Exercise Price equal to the par value of the Shares
must be paid in cash or other legal consideration permitted by
Delaware General Corporation Law;
(b) by waiver of compensation due or accrued to Participant for
services rendered;
(c) provided that a public market for the Company's stock exists:
(i) through a "same day sale" commitment from Participant and a
broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD Dealer") whereby Participant irrevocably
elects to exercise the Option and to sell a portion of the Shares so
purchased sufficient to pay for the total Exercise Price and whereby
the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the total Exercise Price directly to the Company, or (ii)
through a "margin" commitment from Participant and an NASD Dealer
whereby Participant irrevocably elects to exercise the Option and to
pledge the Shares so purchased to the NASD Dealer in a margin account
as security for a loan from the NASD Dealer in the amount of the total
Exercise Price, and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the total Exercise Price directly to
the Company; or
(d) any other form of consideration approved by the Committee; or
(e) by any combination of the foregoing.
4.4 Tax Withholding. Prior to the issuance of the Shares upon exercise
of the Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company. If
the Committee permits, Participant may provide for payment of
withholding taxes upon exercise of the Option by requesting that the
Company retain the minimum number of Shares with a Fair Market Value
equal to the minimum amount of taxes required to be withheld; but in
no event will the Company withhold Shares if such withholding would
result in adverse accounting consequences to the Company. In such
case, the Company shall issue the net number of Shares to the
Participant by deducting the Shares retained from the Shares issuable
upon exercise.
4.5 Issuance of Shares. Provided that the Exercise Agreement and
payment are in form and substance satisfactory to counsel for the
Company, the Company shall issue the
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Shares registered in the name of Participant, Participant's authorized
assignee, or Participant's legal representative, and shall deliver
certificates representing the Shares with the appropriate legends
affixed thereto.
5. Notice of Disqualifying Disposition of ISO Shares. If the Option is an
ISO, and if Participant sells or otherwise disposes of any of the Shares
acquired pursuant to the ISO on or before the later of (i) the date two (2)
years after the Date of Grant, and (ii) the date one (1) year after transfer of
such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.
6. Compliance with Laws and Regulations. The Plan and this Agreement are
intended to comply with Section 25102(o) of the California Corporations Code and
any regulations relating thereto. Any provision of this Agreement which is
inconsistent with Section 25102(o) or any regulations relating thereto shall,
without further act or amendment by the Company or the Board, be reformed to
comply with the requirements of Section 25102(o) and any regulations relating
thereto. The exercise of the Option and the issuance and transfer of Shares
shall be subject to compliance by the Company and Participant with all
applicable requirements of federal and state securities laws and with all
applicable requirements of any stock exchange on which the Company's Common
Stock may be listed at the time of such issuance or transfer. Participant
understands that the Company is under no obligation to register or qualify the
Shares with the SEC, any state securities commission or any stock exchange to
effect such compliance.
7. Nontransferability of Option. The Option may not be transferred in any
manner other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of Participant only by Participant or in the event
of Participant's incapacity, by Participant's legal representative. The terms of
the Option shall be binding upon the executors, administrators, successors and
assigns of Participant.
8. Company's Repurchase Option for Unvested Shares. The Company, or its
assignee, shall have the option to repurchase Participant's Unvested Shares (as
defined in Section 2.2 of this Agreement) on the terms and conditions set forth
in the Exercise Agreement (the "Repurchase Option") if Participant is Terminated
(as defined in the Plan) for any reason, or no reason, including without
limitation Participant's death, Disability (as defined in the Plan), voluntary
resignation or termination by the Company with or without Cause. Notwithstanding
the foregoing, the Company shall retain the Repurchase Option for Unvested
Shares only as to that number of Unvested Shares (whether or not exercised) that
exceeds the number of shares which remain unexercised.
9. Company's Right of First Refusal. Unvested Shares may not be sold or
otherwise transferred by Participant without the Company's prior written
consent. Before any Vested Shares held by Participant or any transferee of such
Vested Shares may be sold or otherwise transferred (including without limitation
a transfer by gift or operation of law), the Company and/or its assignee(s)
shall have an assignable right of first refusal to purchase the
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Vested Shares to be sold or transferred on the terms and conditions set forth in
the Exercise Agreement (the "Right of First Refusal"). The Company's Right of
First Refusal will terminate when the Company's securities become publicly
traded.
10. Tax Consequences. Set forth below is a brief summary as of the
Effective Date of the Plan of some of the federal and California tax
consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION
OR DISPOSING OF THE SHARES.
10.1 Exercise of ISO. To the extent the Option qualifies as an
ISO, there will be no regular federal or California income tax
liability upon the exercise of the Option, although the excess, if
any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price will be treated as a tax preference item for
federal alternative minimum tax purposes and may subject the
Participant to the alternative minimum tax in the year of exercise.
10.2 Exercise of Nonqualified Stock Option. To the extent the
Option does not qualify as an ISO, there may be a regular federal and
California income tax liability upon the exercise of the Option.
Participant will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of
the Fair Market Value of the Shares on the date of exercise over the
Exercise Price. If Participant is a current or former employee of the
Company, the Company may be required to withhold from Participant's
compensation or collect from Participant and pay to the applicable
taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
10.3 Disposition of Shares. The following tax consequences may
apply upon disposition of the Shares.
(a) Incentive Stock Options. If the Shares are held for more
than twelve (12) months after the date of the transfer of the
Shares pursuant to the exercise of an ISO and are disposed of
more than two (2) years after the Date of Grant, any gain
realized on disposition of the Shares will be treated as long
term capital gain for federal and California income tax purposes.
If Shares purchased under an ISO are disposed of within the
applicable one (1) year or two (2) year period, any gain realized
on such disposition will be treated as compensation income
(taxable at ordinary income rates) to the extent of the excess,
if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price.
(b) Nonqualified Stock Options. If the Shares are held for
more than twelve (12) months after the date of the transfer of
the Shares pursuant to the exercise of an NQSO, any gain realized
on disposition of the Shares will be treated as long term capital
gain.
(c) Withholding. The Company may be required to withhold
from the Participant's compensation or collect from the
Participant and pay to the applicable taxing authorities an
amount equal to a percentage of this compensation income.
10.4 Section 83(b) Election for Unvested Shares. With respect to
Unvested Shares, which are subject to the Repurchase Option, unless an
election is filed by the Participant
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with the Internal Revenue Service (and, if necessary, the proper state
taxing authorities), within 30 days of the purchase of the Unvested Shares,
electing pursuant to Section 83(b) of the Code (and similar state tax
provisions, if applicable) to be taxed currently on any difference between
the Exercise Price of the Unvested Shares and their Fair Market Value on
the date of purchase, there may be a recognition of taxable income
(including, where applicable, alternative minimum taxable income) to the
Participant, measured by the excess, if any, of the Fair Market Value of
the Unvested Shares at the time they cease to be Unvested Shares, over the
Exercise Price of the Unvested Shares.
11. Privileges of Stock Ownership. Participant shall not have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to Participant.
12. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Participant or the Company to the Committee for
review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
13. Entire Agreement. The Plan is incorporated herein by reference. This
Agreement and the Plan constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.
14. Notices. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: (i) personal
delivery; (ii) three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); (iii) one (1) business
day after deposit with any return receipt express courier (prepaid); or (iv) one
(1) business day after transmission by facsimile, rapifax or telecopier.
15. Successors and Assigns. The Company may assign any of its rights under
this Agreement, including its rights to purchase Shares under the Repurchase
Option and the Right of First Refusal. This Agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer set forth herein, this Agreement shall be binding
upon Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
16. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California as such laws are applied to
agreements between California residents entered into and to be performed
entirely within California. If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.
17. Acceptance. Participant hereby acknowledges receipt of a copy of the
Plan and this Agreement. Participant has read and understands the terms and
provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement.
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Participant acknowledges that there may be adverse tax consequences upon
exercise of the Option or disposition of the Shares and that Participant should
consult a tax adviser prior to such exercise or disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
duplicate by its duly authorized representative and Participant has executed
this Agreement in duplicate, effective as of the Date of Grant.
NETSCREEN TECHNOLOGIES, INC. PARTICIPANT
By:
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(Signature)
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(Please print name) [Participant]
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(Please print name)
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(Please print title)
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EXHIBIT A
FORM OF STOCK OPTION EXERCISE AGREEMENT
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No.
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NETSCREEN TECHNOLOGIES, INC.
1997 EQUITY INCENTIVE PLAN
STOCK OPTION EXERCISE AGREEMENT
This Exercise Agreement is made and entered into as of ______________,
19___ (the "Effective Date") by and between NetScreen Technologies, Inc., a
Delaware corporation (the "Company"), and the purchaser named below (the
"Purchaser"). Capitalized terms not defined herein shall have the meaning
ascribed to them in the Company's 1997 Equity Incentive Plan (the "Plan").
Purchaser:
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Social Security Number:
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Address:
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Total Number of Shares:
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Exercise Price Per Share:
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Total Exercise Price:
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Option No. ___ Date of Grant:
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Type of Option: [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
1. Exercise of Option.
1.1 Exercise. Pursuant to exercise of that certain option ("Option")
granted to Purchaser under the Plan and subject to the terms and
conditions of this Exercise Agreement, Purchaser hereby purchases from the
Company, and the Company hereby sells to Purchaser, the Total Number of
Shares set forth above ("Shares") of the Company's Common Stock, $0.001 par
value per share, at the Exercise Price Per Share set forth above ("Exercise
Price"). As used in this Exercise Agreement, the term "Shares" refers to
the Shares purchased under this Exercise Agreement and includes all
securities received (a) in replacement of the Shares, (b) as a result of
stock dividends or stock splits with respect to the Shares, and (c) all
securities received in replacement of the Shares in a merger,
recapitalization, reorganization or similar corporate transaction.
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1.2 Title to Shares. The exact spelling of the name(s) under which
Purchaser will take title to the Shares is:
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Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[ ] Other; please specify:
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1.3 Payment. Purchaser hereby delivers payment of the Exercise price
in cash (by check) in the amount of $_________________, receipt of
which is acknowledged by the Company.
2. Delivery.
2.1 Deliveries by Purchaser. Purchaser hereby delivers to the Company
(i) this Exercise Agreement, (ii) two (2) copies of a blank Stock Power and
Assignment Separate from Stock Certificate in the form of Exhibit 1
attached hereto (the "Stock Powers"), both executed by Purchaser (and
Purchaser's spouse, if any), (iii) if Purchaser is married, a Consent of
Spouse in the form of Exhibit 2 attached hereto (the "Spouse Consent")
executed by Purchaser's spouse, and (iv) the Exercise Price and any payment
or other provision for any applicable tax obligations.
2.2 Deliveries by the Company. Upon its receipt of the Exercise Price,
payment or other provision for any applicable tax obligations and all the
documents to be executed and delivered by Purchaser to the Company under
Section 2.1, the Company will issue a duly executed stock certificate
evidencing the Shares in the name of Purchaser, to be placed in escrow as
provided in Section 10 until expiration or termination of the Company's
Repurchase Option and Right of First Refusal described in Sections 8 and 9.
3. Representations and Warranties of Purchaser. Purchaser represents and
warrants to the Company that:
3.1 Agrees to Terms of the Plan. Purchaser has received a copy of the
Plan and the Stock Option Agreement, has read and understands the terms of
the Plan, the Stock Option Agreement and this Exercise Agreement, and
agrees to be bound by their terms and conditions. Purchaser acknowledges
that there may be adverse tax consequences upon exercise of the Option or
disposition of the Shares, and that Purchaser should consult a tax adviser
prior to such exercise or disposition.
3.2 Purchase for Own Account for Investment. Purchaser is purchasing
the Shares for Purchaser's own account for investment purposes only and not
with a view to, or for sale in connection with, a distribution of the
Shares within the meaning of the Securities Act. Purchaser has no present
intention of selling or otherwise disposing of all or any portion of the
Shares and no one other than Purchaser has any beneficial ownership of any
of the Shares.
3.3 Access to Information. Purchaser has had access to all information
regarding the Company and its present and prospective business, assets,
liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and
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Purchaser has had ample opportunity to ask questions of the Company's
representatives concerning such matters and this investment.
3.4 Understanding of Risks. Purchaser is fully aware of: (i) the
highly speculative nature of the investment in the Shares; (ii) the
financial hazards involved; (iii) the lack of liquidity of the Shares and
the restrictions on transferability of the Shares (e.g., that Purchaser may
not be able to sell or dispose of the Shares or use them as collateral for
loans); (iv) the qualifications and backgrounds of the management of the
Company; and (v) the tax consequences of investment in the Shares.
Purchaser is capable of evaluating the merits and risks of this investment,
has the ability to protect Purchaser's own interests in this transaction
and is financially capable of bearing a total loss of this investment.
3.5 No General Solicitation. At no time was Purchaser presented with
or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in
connection with the offer, sale and purchase of the Shares.
4. Compliance with Securities Laws.
4.1 Compliance with U.S. Federal Securities Laws. Purchaser
understands and acknowledges that the Shares have not been registered with
the SEC under the Securities Act and that, notwithstanding any other
provision of the Stock Option Agreement to the contrary, the exercise of
any rights to purchase any Shares is expressly conditioned upon compliance
with the Securities Act and all applicable state securities laws. Purchaser
agrees to cooperate with the Company to ensure compliance with such laws.
The Shares are being issued under the Securities Act pursuant to the
exemption provided by SEC Rule 701.
4.2 Compliance with California Securities Laws. The Plan, The stock
option agreement, and this Exercise Agreement are intended to comply with
Section 25102(o) of the California Corporations Code. Any provision of this
Exercise Agreement which is inconsistent with Section 25102(o) shall,
without further act or amendment by the Company or the Board, be reformed
to comply with the requirements of Section 25102(o). THE SALE OF THE
SECURITIES THAT ARE THE SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET
QUALIFIED WITH THE CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT
FROM SUCH QUALIFICATION, IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE
OF SUCH SECURITIES, AND THE RECEIPT OF ANY PART OF THE CONSIDERATION
THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE IS EXEMPT.
THE RIGHTS OF THE PARTIES TO THIS EXERCISE AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION BEING
AVAILABLE.
5. Restricted Securities.
5.1 No Transfer Unless Registered or Exempt. Purchaser understands
that Purchaser may not transfer any Shares unless such Shares are
registered under the Securities Act or qualified under applicable state
securities laws or unless, in the opinion of counsel to the Company,
exemptions from such registration and qualification requirements are
available. Purchaser understands that only the Company may file a
registration statement with the SEC and that the Company is under no
obligation to do so with respect to the Shares. Purchaser has also been
advised that exemptions from registration and qualification may not be
available or may not permit Purchaser to transfer all or any of the Shares
in the amounts or at the times proposed by Purchaser.
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5.2 SEC Rule 144. In addition, Purchaser has been advised that SEC
Rule 144 promulgated under the Securities Act, which permits certain
limited sales of unregistered securities, is not presently available with
respect to the Shares and, in any event, requires that the Shares be held
for a minimum of one (1) year, and in certain cases two (2) years, after
they have been purchased and paid for (within the meaning of Rule 144).
Purchaser understands that Rule 144 may indefinitely restrict transfer of
the Shares so long as Purchaser remains an "affiliate" of the Company or if
"current public information" about the Company (as defined in Rule 144) is
not publicly available.
5.3 SEC Rule 701. The Shares are issued pursuant to SEC Rule 701
promulgated under the Securities Act and may become freely tradeable by
non-affiliates (under limited conditions regarding the method of sale)
ninety (90) days after the first sale of Common Stock of the Company to the
general public pursuant to a registration statement filed with and declared
effective by the SEC, subject to the lengthier market standoff agreement
contained in Section 7 of this Exercise Agreement or any other agreement
entered into by Purchaser. Affiliates must comply with the provisions
(other than the holding period requirements) of Rule 144.
6. Restrictions on Transfers.
6.1 Disposition of Shares. Purchaser hereby agrees that Purchaser
shall make no disposition of the Shares (other than as permitted by this
Exercise Agreement) unless and until:
(a) Purchaser shall have notified the Company of the proposed
disposition and provided a written summary of the terms and conditions
of the proposed disposition;
(b) Purchaser shall have complied with all requirements of this
Exercise Agreement applicable to the disposition of the Shares;
(c) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to counsel for the
Company, that (i) the proposed disposition does not require
registration of the Shares under the Securities Act or (ii) all
appropriate action necessary for compliance with the registration
requirements of the Securities Act or of any exemption from
registration available under the Securities Act (including Rule 144)
has been taken; and
(d) Purchaser shall have provided the Company with written
assurances, in form and substance satisfactory to the Company, that
the proposed disposition will not result in the contravention of any
transfer restrictions applicable to the Shares pursuant to the
provisions of the Commissioner Rules identified in Section 4.2.
6.2 Restriction on Transfer. Purchaser shall not transfer, assign,
xxxxx x xxxx or security interest in, pledge, hypothecate, encumber or
otherwise dispose of any of the Shares which are subject to the Company's
Repurchase Option or Right of First Refusal, except as permitted by this
Exercise Agreement.
6.3 Transferee Obligations. Each person (other than the Company) to
whom the Shares are transferred by means of one of the permitted transfers
specified in this Exercise Agreement must, as a condition precedent to the
validity of such transfer, acknowledge in writing to the Company that such
person is bound by the provisions of this Exercise Agreement and that the
transferred Shares are subject to (i) both the Company's Repurchase Option
and Right of First Refusal granted hereunder and (ii) the market stand-off
provisions of Section 7, to the same extent such Shares would be so subject
if retained by the Purchaser.
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7. Market Standoff Agreement. Purchaser agrees in connection with any
registration of the Company's securities that, upon the request of the Company
or the underwriters managing any public offering of the Company's securities,
Purchaser will not sell or otherwise dispose of any Shares without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed 180 days) after the effective date of such
registration requested by such managing underwriters and subject to all
restrictions as the Company or the underwriters may specify.
8. Company's Repurchase Option for Unvested Shares. The Company, or its
assignee, shall have the option to repurchase Purchaser's Unvested Shares (as
defined in Section 2.2 of the Stock Option Agreement) on the terms and
conditions set forth in this Section the "Repurchase Option") if Purchaser is
Terminated (as defined in the Plan) for any reason, or no reason, including
without limitation Purchaser's death, Disability (as defined in the Plan),
voluntary resignation or termination by the Company with or without Cause.
Notwithstanding the foregoing, the Company shall retain the Repurchase Option
for Unvested Shares only as to that number of Unvested Shares (whether or not
exercised) that exceeds the number of shares which remain unexercised.
8.1 Termination and Termination Date. In case of any dispute as to
whether Purchaser is Terminated, the Committee shall have discretion to
determine whether Purchaser has been Terminated and the effective date of
such Termination (the "Termination Date").
8.2 Exercise of Repurchase Option. At any time within ninety (90) days
after the Purchaser's Termination Date (or, in the case of securities
issued upon exercise of an Option after the Purchaser's Termination Date,
within ninety (90) days after the date of such exercise), the Company, or
its assignee, may elect to repurchase the Purchaser's Unvested Shares by
giving Purchaser written notice of exercise of the Repurchase Option.
8.3 Calculation of Repurchase Price for Unvested Shares. The Company
or its assignee shall have the option to repurchase from Purchaser (or from
Purchaser's personal representative as the case may be) the Unvested Shares
at the Purchaser's Exercise Price, proportionately adjusted for any stock
split or similar change in the capital structure of the Company as set
forth in Section 2.2 of the Plan (the "Repurchase Price").
8.4 Payment of Repurchase Price. The Repurchase Price shall be
payable, at the option of the Company or its assignee, by check or by
cancellation of all or a portion of any outstanding indebtedness owed by
Purchaser to the Company or such assignee, or by any combination thereof.
The Repurchase Price shall be paid without interest within sixty (60) days
after exercise of the Repurchase Option.
8.5 Right of Termination Unaffected. Nothing in this Exercise
Agreement shall be construed to limit or otherwise affect in any manner
whatsoever the right or power of the Company (or any Parent or Subsidiary
of the Company) to terminate Purchaser's employment or other relationship
with Company (or the Parent or Subsidiary of the Company) at any time, for
any reason or no reason, with or without Cause.
9. Company's Right of First Refusal. Unvested Shares may not be sold or
otherwise transferred by Purchaser without the Company's prior written consent.
Before any Vested Shares held by Purchaser or any transferee of such Vested
Shares (either being sometimes referred to herein as the "Holder") may be sold
or otherwise transferred (including without limitation a transfer by gift or
operation of law), the Company and/or its assignee(s) shall have an assignable
right of first refusal
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to purchase the Vested Shares to be sold or transferred (the "Offered Shares")
on the terms and conditions set forth in this Section (the "Right of First
Refusal").
9.1 Notice of Proposed Transfer. The Holder of the Offered Shares
shall deliver to the Company a written notice (the "Notice") stating: (i)
the Holder's bona fide intention to sell or otherwise transfer the Offered
Shares; (ii) the name of each proposed bona fide purchaser or other
transferee ("Proposed Transferee"); (iii) the number of Offered Shares to
be transferred to each Proposed Transferee; (iv) the bona fide cash price
or other consideration for which the Holder proposes to transfer the
Offered Shares (the "Offered Price"); and (v) that the Holder will offer to
sell the Offered Shares to the Company and/or its assignee(s) at the
Offered Price as provided in this Section.
9.2 Exercise of Right of First Refusal. At any time within thirty (30)
days after the date of the Notice, the Company and/or its assignee(s) may,
by giving written notice to the Holder, elect to purchase all (or, with the
consent of the Holder, less than all) the Offered Shares proposed to be
transferred to any one or more of the Proposed Transferees named in the
Notice, at the purchase price determined as specified below.
9.3 Purchase Price. The purchase price for the Offered Shares
purchased under this Section will be the Offered Price. If the Offered
Price includes consideration other than cash, then the cash equivalent
value of the non-cash consideration shall conclusively be deemed to be the
value of such non-cash consideration as determined in good faith by the
Board.
9.4 Payment. Payment of the Offered Price will be payable, at the
option of the Company and/or its assignee(s) (as applicable), by check or
by cancellation of all or a portion of any outstanding indebtedness of the
Holder to the Company (or to such assignee, in the case of a purchase of
Offered Shares by such assignee) or by any combination thereof. The Offered
Price will be paid without interest within sixty (60) days after the
Company's receipt of the Notice, or, at the option of the Company and/or
its assignee(s), in the manner and at the time(s) set forth in the Notice.
9.5 Holder's Right to Transfer. If all of the Offered Shares proposed
in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this
Section, then the Holder may sell or otherwise transfer such Offered Shares
to that Proposed Transferee at the Offered Price or at a higher price,
provided that such sale or other transfer is consummated within 120 days
after the date of the Notice, and provided further, that (i) any such sale
or other transfer is effected in compliance with all applicable securities
laws and (ii) the Proposed Transferee agrees in writing that the provisions
of this Section will continue to apply to the Offered Shares in the hands
of such Proposed Transferee. If the Offered Shares described in the Notice
are not transferred to the Proposed Transferee within such 120 day period,
then a new Notice must be given to the Company, and the Company will again
be offered the Right of First Refusal before any Shares held by the Holder
may be sold or otherwise transferred.
9.6 Exempt Transfers. Notwithstanding anything to the contrary in this
Section, the following transfers of Vested Shares will be exempt from the
Right of First Refusal: (i) the transfer of any or all of the Vested Shares
during Purchaser's lifetime by gift or on Purchaser's death by will or
intestacy to Purchaser's "immediate family" (as defined below) or to a
trust for the benefit of Purchaser or Purchaser's immediate family,
provided that each transferee or other recipient agrees in a writing
satisfactory to the Company that the provisions of this Section will
continue to apply to the transferred Vested Shares in the hands of such
transferee or other recipient; (ii) any transfer of Vested Shares made
pursuant to a statutory merger or statutory consolidation of the Company
with or into another corporation or corporations (except that the Right of
First Refusal will continue to apply thereafter to such Vested Shares, in
which case the surviving corporation of such merger or consolidation
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shall succeed to the rights of the Company under this Section unless the
Agreement of merger or consolidation expressly otherwise provides); or (iii) any
transfer of Vested Shares pursuant to the winding up and dissolution of the
Company. As used herein, the term "immediate family" will mean Purchaser's
spouse, the lineal descendant or antecedent, father, mother, brother or sister,
child, adopted child, grandchild or adopted grandchild of the Purchaser or the
Purchaser's spouse, or the spouse of any child, adopted child, grandchild or
adopted grandchild of Purchaser or the Purchaser's spouse.
9.7 Termination of Right of First Refusal. The Company's Right of
First Refusal will terminate when the Company's securities become publicly
traded.
10. Rights as Stockholder. Subject to the terms and conditions of this
Exercise Agreement, Purchaser will have all of the rights of a stockholder of
the Company with respect to the Shares from and after the date that Shares are
issued to Purchaser until such time as Purchaser disposes of the Shares or the
Company and/or its assignee(s) exercise(s) the Repurchase Option or Right of
First Refusal. Upon an exercise of the Repurchase Option or Right of First
Refusal, Purchaser will have no further rights as a holder of the Shares so
purchased upon such exercise, except the right to receive payment for the Shares
so purchased in accordance with the provisions of this Exercise Agreement, and
Purchaser will promptly surrender the stock certificate(s) evidencing the Shares
so purchased to the Company for transfer or cancellation.
11. Escrow. As security for Purchaser's faithful performance of this
Exercise Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if any
(with the date and number of Shares left blank), to the Secretary of the Company
or other designee of the Company ("Escrow Holder"), who is hereby appointed to
hold such certificate(s) and Stock Powers in escrow and to take all such actions
and to effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Exercise Agreement. Purchaser and the Company
agree that Escrow Holder will not be liable to any party to this Exercise
Agreement (or to any other party) for any actions or omissions unless Escrow
Holder is grossly negligent or intentionally fraudulent in carrying out the
duties of Escrow Holder under this Exercise Agreement. Escrow Holder may rely
upon any letter, notice or other document executed by any signature purported to
be genuine and may rely on the advice of counsel and obey any order of any court
with respect to the transactions contemplated by this Exercise Agreement. The
Shares will be released from escrow upon termination of both the Repurchase
Option and the Right of First Refusal.
12. Restrictive Legends and Stop-Transfer Orders.
12.1 Legends. Purchaser understands and agrees that the Company will
place the legends set forth below or similar legends on any stock
certificate(s) evidencing the Shares, together with any other legends that
may be required by state or U.S. Federal securities laws, the Company's
Certificate of Incorporation or Bylaws, any other agreement between
Purchaser and the Company or any agreement between Purchaser and any third
party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR UNDER
THE SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED
OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
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REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE
AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE
WITH THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS. THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON PUBLIC RESALE, TRANSFER, AND RIGHT OF REPURCHASE AND
RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER AND/OR ITS
ASSIGNEE(S) AS SET FORTH IN A STOCK OPTION EXERCISE AGREEMENT BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH
MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH PUBLIC
SALE AND TRANSFER RESTRICTIONS AND THE RIGHT OF REPURCHASE AND RIGHT
OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
The California Commissioner of Corporations may require that the
following legend also be placed upon the share certificate(s) evidencing
ownership of the Shares:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES.
12.2 Stop-Transfer Instructions. Purchaser agrees that, to ensure
compliance with the restrictions imposed by this Exercise Agreement, the
Company may issue appropriate "stop-transfer" instructions to its transfer
agent, if any, and if the Company transfers its own securities, it may make
appropriate notations to the same effect in its own records.
12.3 Refusal to Transfer. The Company will not be required (i) to
transfer on its books any Shares that have been sold or otherwise
transferred in violation of any of the provisions of this Exercise
Agreement or (ii) to treat as owner of such Shares, or to accord the right
to vote or pay dividends to any purchaser or other transferee to whom such
Shares have been so transferred.
13. Tax Consequences. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR DISPOSITION OF
THE SHARES. PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH ANY TAX
ADVISER PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION
OF THE SHARES AND THAT PURCHASER IS NOT RELYING ON THE COMPANY FOR ANY TAX
ADVICE. IN PARTICULAR, IF UNVESTED SHARES ARE SUBJECT TO REPURCHASE BY THE
COMPANY, PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH PURCHASER'S OWN
TAX ADVISER CONCERNING THE ADVISABILITY OF FILING AN 83(b) ELECTION WITH THE
INTERNAL REVENUE SERVICE WHICH MUST BE FILED WITHIN THIRTY (30) DAYS OF THE
PURCHASE OF SHARES TO BE EFFECTIVE. Set forth below is a brief summary as of the
date the Plan was adopted by the Board of some of the U.S. Federal and
California tax consequences of exercise of the Option and disposition of the
Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS
ARE SUBJECT TO CHANGE. PURCHASER SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
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13.1 Exercise of Incentive Stock Option. If the Option qualifies as an
ISO, there will be no regular U.S. Federal income tax liability or
California income tax liability upon the exercise of the Option, although
the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price will be treated as a tax preference item
for U.S. Federal alternative minimum tax purposes and may subject Purchaser
to the alternative minimum tax in the year of exercise.
13.2 Exercise of Nonqualified Stock Option. If the Option does not
qualify as an ISO, there may be a regular U.S. Federal income tax liability
and a California income tax liability upon the exercise of the Option.
Purchaser will be treated as having received compensation income (taxable
at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price.
If Purchaser is or was an employee of the Company, the Company may be
required to withhold from Purchaser's compensation or collect from
Purchaser and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
13.3 Disposition of Shares. The following tax consequences may apply
upon disposition of the Shares.
a. Incentive Stock Options. If the Shares are held for more than
twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an ISO and are disposed of more than two
(2) years after the Date of Grant, any gain realized on disposition of
the Shares will be treated as capital gain for federal and California
income tax purposes. The maximum federal capital gain tax rates are
twenty eight percent (28%) for Shares held more than twelve (12)
months, but not more than eighteen (18) months ("Mid-Term Capital
Gain"), and twenty percent (20%) for Shares held for more than
eighteen (18) months ("Long-Term Capital Gain"). If Shares purchased
under an ISO are disposed of within the applicable one (1) year or two
(2) year period, any gain realized on such disposition will be treated
as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares
on the date of exercise over the Exercise Price.
b. Nonqualified Stock Options. If the Shares are held for more
than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of an NQSO, any gain realized on disposition
of the Shares will be treated as Mid-Term Capital Gain or Long-Term
Capital Gain, as the case may be.
c. Withholding. The Company may be required to withhold from the
Participant and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income.
13.4 Section 83(b) Election for Unvested Shares. With respect to
Unvested Shares, which are subject to the Repurchase Option, unless an
election is filed by the Purchaser with the Internal Revenue Service (and,
if necessary, the proper state taxing authorities), within 30 days of the
purchase of the Unvested Shares, electing pursuant to Section 83(b) of the
Code (and similar state tax provisions, if applicable) to be taxed
currently on any difference between the Exercise Price of the Unvested
Shares and their Fair Market Value on the date of purchase, there may be a
recognition of taxable income (including, where applicable, alternative
minimum taxable income) to the Purchaser, measured by the excess, if any,
of the Fair Market Value of the Unvested Shares at the time they cease to
be Unvested Shares, over the Exercise Price of the Unvested Shares. A form
of Election under Section 83(b) is attached hereto as Exhibit 5 for
reference.
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14. Compliance with Laws and Regulations. The issuance and transfer of the
Shares will be subject to and conditioned upon compliance by the Company and
Purchaser with all applicable state and U.S. Federal laws and regulations and
with all applicable requirements of any stock exchange or automated quotation
system on which the Company's Common Stock may be listed or quoted at the time
of such issuance or transfer.
15. Successors and Assigns. The Company may assign any of its rights under
this Exercise Agreement, including its rights to repurchase Shares under the
Repurchase Option and the Right of First Refusal. This Exercise Agreement shall
be binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer herein set forth, this Exercise
Agreement will be binding upon Purchaser and Purchaser's heirs, executors,
administrators, legal representatives, successors and assigns.
16. Governing Law; Severability. This Exercise Agreement shall be governed
by and construed in accordance with the internal laws of the State of California
as such laws are applied to agreements between California residents entered into
and to be performed entirely within California. If any provision of this
Exercise Agreement is determined by a court of law to be illegal or
unenforceable, then such provision will be enforced to the maximum extent
possible and the other provisions will remain fully effective and enforceable.
17. Notices. Any notice required to be given or delivered to the Company
shall be in writing and addressed to the Corporate Secretary of the Company at
its principal corporate offices. Any notice required to be given or delivered to
Purchaser shall be in writing and addressed to Purchaser at the address
indicated above or to such other address as Purchaser may designate in writing
from time to time to the Company. All notices shall be deemed effectively given
upon personal delivery, three (3) days after deposit in the United States mail
by certified or registered mail (return receipt requested), one (1) business day
after its deposit with any return receipt express courier (prepaid), or one (1)
business day after transmission by rapifax or telecopier.
18. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Exercise Agreement.
19. Headings. The captions and headings of this Exercise Agreement are
included for ease of reference only and will be disregarded in interpreting or
construing this Exercise Agreement. All references herein to Sections will refer
to Sections of this Exercise Agreement.
20. Entire Agreement. The Plan, the Stock Option Agreement and
this Exercise Agreement, together with all its Exhibits, constitute the entire
agreement and understanding of the parties with respect to the subject matter of
this Exercise Agreement, and supersede all prior understandings and agreements,
whether oral or written, between the parties hereto with respect to the specific
subject matter hereof.
IN WITNESS WHEREOF, the Company has caused this Stock Option Exercise
Agreement to be executed in duplicate by its duly authorized representative and
Purchaser has executed this Stock Option Exercise Agreement in duplicate as of
the Effective Date.
NETSCREEN TECHNOLOGIES, INC. PURCHASER
By:
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(Signature)
-------------------------
(Please print Name) -------------------------
(Please print name)
-------------------------
(Please print title)
[Signature Page to NetScreen Technologies, Inc. Stock Option Exercise Agreement]
-12-
LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
Exhibit 3: Copy of Purchaser's Check
Exhibit 5: Section 83(b) Election
EXHIBIT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
Stock Power and Assignment
Separate from Stock Certificate
FOR VALUE RECEIVED and pursuant to that certain Stock Option
Exercise Agreement No. ___ dated as of _______________, 19___, (the
"Agreement"), the undersigned hereby sells, assigns and transfers unto
_______________________________, shares of the Common Stock, $0.001 par value
per share, of NetScreen Technologies, Inc., a Delaware corporation (the
"Company"), standing in the undersigned's name on the books of the Company
represented by Certificate No(s). ______ delivered herewith, and does hereby
irrevocably constitute and appoint the Secretary of the Company as the
undersigned's attorney-in-fact, with full power of substitution, to transfer
said stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THIS EXERCISE AGREEMENT AND ANY EXHIBITS THERETO.
Dated: _______________, 19____
PURCHASER
-------------------------------
(Signature)
-------------------------------
(Please Print Name)
-------------------------------
(Spouse's Signature, if any)
-------------------------------
(Please Print Spouse's Name)
Instructions: Please do not fill in any blanks other than the signature line.
The purpose of this Stock Power and Assignment is to enable the Company to
acquire the shares upon exercise of its "Repurchase Option" or "Right of First
Refusal" set forth in this Exercise Agreement without requiring additional
signatures on the part of the Purchaser or Purchaser's Spouse.
EXHIBIT 2
SPOUSE CONSENT
Spouse Consent
The undersigned spouse of Purchaser has read, understands, and
hereby approves the Stock Option Exercise Agreement between Purchaser and the
Company (the "Agreement"). In consideration of the Company's granting my spouse
the right to purchase the Shares as set forth in this Exercise Agreement, the
undersigned hereby agrees to be irrevocably bound by this Exercise Agreement and
further agrees that any community property interest shall similarly be bound by
this Exercise Agreement. The undersigned hereby appoints Purchaser as my
attorney-in-fact with respect to any amendment or exercise of any rights under
this Exercise Agreement.
Date:
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Name of Purchaser - Please Print
-------------------------------------
Signature of Purchaser's Spouse
Address:
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EXHIBIT 3
COPY OF PURCHASER'S CHECK
EXHIBIT 5
SECTION 83(b) ELECTION
[FOR REGULAR INCOME TAX - NONQUALIFIED OPTIONS]
[FOR AMT AND DISQUALIFYING DISPOSITION PURPOSES - INCENTIVE STOCK OPTION]
ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE
The undersigned Taxpayer hereby elects, pursuant to Section 83(b) of the
Internal Revenue Code of 1986, as amended, to include the excess, if any, of the
fair market value of the property described below at the time of transfer over
the amount paid for such property, as compensation for services in the
calculation of: (1) regular gross income; (2) alternative minimum taxable income
or (3) disqualifying disposition gross income, as the case may be.
1. TAXPAYER'S NAME:
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TAXPAYER'S ADDRESS:
-----------------------------------------------------
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SOCIAL SECURITY NUMBER:
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2. The property with respect to which the election is made is described as
follows: _______ shares of Common Stock of ______________________________
NetScreen Technologies, Inc., a Delaware corporation (the "Company") which
were transferred upon exercise of an option by Company, which is Taxpayer's
employer or the corporation for whom the Taxpayer performs services.
3. The date on which the shares were transferred pursuant to the exercise of
the option was _______________, _____ and this election is made for
calendar year _____.
4. The shares received upon exercise of the option are subject to the
following restrictions: The Company may repurchase all or a portion of the
shares at the Taxpayer's original purchase price under certain conditions
at the time of Taxpayer's termination of employment or services.
5. The fair market value of the shares (without regard to restrictions other
than restrictions which by their terms will never lapse) was $___ per share
at the time of exercise of the option.
6. The amount paid for such shares upon exercise of the option was $___ per
share.
7. The Taxpayer has submitted a copy of this statement to the Company.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS"), AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS, WITHIN 30 DAYS AFTER
THE DATE OF TRANSFER OF THE SHARES, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR. THE ELECTION CANNOT BE REVOKED WITHOUT
THE CONSENT OF THE IRS.
Dated:
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Taxpayer's Signature
