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EXHIBIT 99.2
VERITY, INC.
IMMEDIATELY EXERCISABLE
STOCK OPTION AGREEMENT
FOR VERITY CANADA
THIS IMMEDIATELY EXERCISABLE STOCK OPTION AGREEMENT (the "Option
Agreement") is made and entered into as of the date set forth on the Notice of
Grant of Stock Options (the "Notice"), by and between Verity, Inc. and the
individual named on The Notice (the "Optionee").
The Company has granted to the Optionee pursuant to the Verity, Inc.
1997 Nonstatutory Stock Option Plan for Verity Canada (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 the effective date set
forth on The Notice.
(b) "NUMBER OF OPTION SHARES" means the number of shares of
Stock set forth on The Notice, as adjusted from time to time pursuant to
Section 9.
(c) "EXERCISE PRICE" means the exercise price set forth on
The Notice, as adjusted from time to time pursuant to Section 9.
(d) "INITIAL EXERCISE DATE" means the Date of Grant.
(e) "INITIAL VESTING DATE" means the vesting date set forth
on The Notice.
(f) "OPTION EXPIRATION DATE" means the expiration date set
forth on The Notice.
(g) "DISABILITY" means the inability of the Optionee to
engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or which has lasted or can be expected to
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last for a continuous period of not less than twelve (12) months in the opinion
of a qualified physician acceptable to the Company.
(h) "Securities Act" means the Securities Act of 1933, as
amended, of the United States of America.
(i) "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 and the plural shall include the
singular. Use of the term "or" is not intended to be exclusive, unless the
context clearly requires otherwise.
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 United States Internal Revenue Code
of 1986, as amended (the "Code"). The Company makes no representation as to the
status or treatment of the Option or the tax consequences to the Optionee of
the grant or exercise of the Option or subsequent disposition of any shares
acquired upon exercise of the Option under the tax laws of any jurisdiction
other than the United States of America.
2.2 ELECTION UNDER SECTION 83(b) OF THE CODE. If the Optionee is
subject to income taxation under the Code and 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
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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. All determinations by the
Board shall be final and binding upon all persons having an interest in the
Option. Any officer of the 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) EXERCISE. 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 right set forth
in Section 11.
(b) FREQUENCY OF EXERCISE. Notwithstanding the foregoing, the
Option may not be exercised more frequently than twice in any continuous twelve
(12) month period; provided, however, that the foregoing restriction shall not
apply so as to prevent an exercise (i) following the Optionee's termination of
Service as set forth in Section 7 or (ii) during the thirty (30) day periods
immediately preceding and following an Ownership Change Event as defined in
Section 8.1.
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 Company, 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
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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 United States federal or state securities laws, laws
of other jurisdictions, 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 cash for a portion of the aggregate Exercise Price
not less than the par value of the shares being acquired and the Optionee's
promissory note for the balance of the aggregate Exercise Price, or (v) by any
combination of the foregoing. The Company may establish, from time to time, an
exchange ratio applicable to amounts paid in a currency other than United States
dollars.
(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 United States 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. Unless otherwise specified by the Board at the time the
Option is granted, the promissory note permitted in clause (iv) of Section
4.3(a) shall be for not more than ninety percent (90%) of the aggregate Exercise
Price of the shares of Stock being purchased and shall be a full recourse note
in a form satisfactory to the Company, with principal payable 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 or other applicable tax law, if any. Such recourse promissory note
shall be secured by the shares of Stock acquired pursuant to the then current
form of security
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agreement as approved by the Company. At any time the Company is subject to the
regulations promulgated by the Board of Governors of the United States 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
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 United States federal, state and local tax withholding
obligations, if any, and the tax withholding obligations of other
jurisdictions, if any, of the Participating Company Group 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 heir(s) of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE AND SUBSEQUENT
DISPOSITION OF SHARES. The grant of the Option, the issuance of shares of Stock
upon exercise of the Option, and the subsequent disposition of such shares by
the Optionee shall be subject to compliance with all applicable requirements of
United States federal and state laws and laws of other jurisdictions with
respect to such securities. The Option may not be exercised and any shares
acquired upon exercise of the Option may not be disposed of if the issuance of
shares of Stock upon exercise or the disposition of such shares, respectively,
would constitute a violation of any applicable securities law of the United
States or of any state or other jurisdiction or other law or regulation 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
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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
AND ANY SHARES ACQUIRED MAY NOT BE SOLD UNLESS THE FOREGOING CONDITIONS ARE
SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION OR
SELL ANY SHARES SO ACQUIRED 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 or subsequent
disposition of any such shares by the Optionee shall relieve the Company of any
liability in respect of the failure to issue or sell such shares or to obtain
for the Optionee the ability to dispose of 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
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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 one (1) month after the Optionee's
termination of Service.
(e) OTHER TERMINATION OF SERVICE. If the Optionee's Service
with the Participating Company Group terminates for any reason, except
Disability or death, 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 one (1) month (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 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).
7.3 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.
7.4 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.
7.5 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 Percentage.
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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 stockholders 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 stockholders 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 date of 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
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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 STOCKHOLDER, EMPLOYEE OR CONSULTANT. The Optionee shall
have no rights as a stockholder 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
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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 be calculated, on any given date, in accordance with the vesting terms
set forth on The Notice. 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 OPTIONS. 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 the Company or 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 Percentage
following an Ownership Change Event, credited Service shall include all service
with the Company or any corporation which is a
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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. ESCROW.
12.1 ESTABLISHMENT OF ESCROW. To ensure that shares subject to the
Unvested Share Repurchase Option 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 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.
12.2 DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after the
expiration of the Unvested Share Repurchase Option 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.
12.3 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, 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.
13. 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 and any security
interest held by the Company with the same force and effect as the shares
subject to the Unvested Share Repurchase Option and such security interest
immediately before such event.
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14. LEGENDS. The Company may at any time place legends referencing
the Unvested Share Repurchase Option and any restrictions under applicable
securities or other law of the United States or any state or other jurisdiction
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:
"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. 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.
16. 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.
17. 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.
18. 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.
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