EXHIBIT 4.1B
NO. _______
CLOUDSCAPE, INC.
1996 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement ("AGREEMENT") is made and entered into as of
the date of grant set forth below (the "DATE OF GRANT") by and between
Cloudscape, Inc., a California corporation (the "COMPANY"), and the participant
named below ("PARTICIPANT"). Capitalized terms not defined herein shall have
the meaning ascribed to them in the Company's 1996 Equity Incentive Plan (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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TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an
option (the "OPTION") to purchase the total number of shares of Common Stock of
the Company set forth above (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. If designated as an Incentive Stock Option
above, the Option is intended to qualify as an "incentive stock option" ("ISO")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "CODE").
2. EXERCISE PERIOD.
2.1 EXERCISE PERIOD OF OPTION. This Option is immediately
exercisable although the Shares issued upon exercise of the Option will be
subject to the repurchase option and right of first refusal set forth in
Sections 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 ___________, 199_ (the "FIRST VESTING DATE") and
thereafter at the end of each full succeeding month after the First Vesting Date
an additional two and eighty-three one thousandths percent (2.083%) of the
Shares will become vested until the Shares are vested with respect to 100% of
the Shares, provided that if application of the vesting percentage causes a
fractional shares, such share shall be rounded up to the nearest whole share.
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.
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."
Unvested Shares may not be sold or otherwise transferred by Participant without
the Company's prior written consent.
2.3 EXPIRATION. The Option shall expire on the Expiration Date
set forth above and must be exercised, if at all, on or before the Expiration
Date.
3. TERMINATION.
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH, DISABILITY. If
Participant is Terminated for any reason, except death, Disability of
Participant (or Participant dies within three (3) months after Termination other
than because of Participant's death or Disability), 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, 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 (a) 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 (b) twelve (12) months after the Termination Date when the termination
is for Participant's death or disability, within the meaning of Section 22(e)(3)
of the Code, is deemed to be an NQSO.
3.3 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
Company from time to time (the "EXERCISE AGREEMENT"), which shall set forth,
INTER ALIA, Participant's election to exercise the Option, the number of Shares
being purchased, any restrictions imposed on the Shares and 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 that
such person has the right to exercise the Option.
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 cancellation of indebtedness of the Company to the
Participant;
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(b) by surrender of shares of the Company's Common Stock that either:
(1) have been owned by Participant for more than six (6) months
and have been paid for within the meaning of SEC Rule 144 (and,
if such shares were purchased from the Company by use of a
promissory note, such note has been fully paid with respect to
such shares); or (2) were obtained by Participant in the open
public market; and (3) are clear of all liens, claims,
encumbrances or security interests;
(c) 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 Sections 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;
(d) by waiver of compensation due or accrued to Participant for
services rendered;
(e) provided that a public market for the Company's stock exists, (1)
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 to pay for the Exercise Price and
whereby the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the Company, OR
(2) 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 Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the
Exercise Price directly to the Company; or
(f) 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 Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld. 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 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 (a) the date two (2)
years after the Date of Grant, and (b) 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. Any provision of this Agreement which is inconsistent with
Section 25102(o) shall, without further act or amendment by the Company or the
Board, be
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reformed to comply with the requirements of Section 25102(o). 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 Securities and Exchange
Commission, 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. 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 this Section (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 exercisable.
8.1 TERMINATION AND TERMINATION DATE. In case of any dispute as
to whether Participant is Terminated, the Committee shall have discretion to
determine whether Participant 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 Termination Date, the Company, or its assignee, may elect to
repurchase the Participant's Unvested Shares by giving Participant 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 Participant (or
from Participant's personal representative as the case may be) the Unvested
Shares at Participant'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.
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 of Participant
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 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 Participant'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 Participant without the Company's prior written
consent. Before any Vested Shares held by Participant 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 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");
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(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) of 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 Company's Board of
Directors.
9.4 PAYMENT. Payment of the purchase price for Offered Shares
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
purchase 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 Participant's lifetime by gift or on Participant's death by will or
intestacy to Participant's "immediate family" (as defined below) or to a trust
for the benefit of Participant or Participant'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 and Repurchase Option will
continue to apply thereafter to such Vested Shares, in which case the surviving
corporation of such merger or consolidation 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 Participant's spouse, the lineal descendant or
antecedent, father, mother, brother or sister, adopted child or grandchild of
the Participant or the Participant's spouse, or the spouse of any child, adopted
child, grandchild or adopted grandchild of Participant or the Participant'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. TAX CONSEQUENCES. Set forth below is a brief summary of some of
the federal and California tax consequences of exercise of the Option and
disposition of the Shares. THIS SUMMARY IS
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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. If 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. If 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 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.
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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: 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 deposit
with any return receipt express courier (prepaid); or 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 repurchase Shares under the
Repurchase Option and the Right of First Refusal. However, if the Company
assigns its right to repurchase Shares under the Repurchase Option for Unvested
Shares, the assignee (unless the assignee is a one hundred percent (100%) owned
subsidiary of the Company or is the parent of the Company owning one hundred
percent (100%) of the Company) will pay to the Company upon assignment of such
right, the excess of the Fair Market Value of the Shares at the time of
assignment over the Exercise Price. 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. 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.
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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 as of the Date of Grant.
CLOUDSCAPE, INC. PARTICIPANT
By:
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(Signature)
Xxxxxx Xxxx
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(Please print name) (Please print name)
President and CEO
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(Please print title)
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EXHIBIT A
STOCK OPTION EXERCISE AGREEMENT
9
NO. _______
CLOUDSCAPE, INC.
1996 EQUITY INCENTIVE PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
This Restricted Stock Purchase Agreement ("AGREEMENT") is made and
entered into as of ________, 199__ (the "EFFECTIVE DATE") by and between
Cloudscape, Inc., a California 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 1996 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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PURCHASE PRICE PER SHARE:
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TOTAL PURCHASE PRICE:
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1. PURCHASE OF SHARES.
1.1 PURCHASE OF SHARES. On the Effective Date and
subject to the terms and conditions of this Agreement and the Plan, Purchaser
hereby purchases from the Company, and the Company hereby sells to Purchaser,
the Total Number of Shares set forth above of the Company's Common Stock at the
Purchase Price Per Share as set forth above (the "PURCHASE PRICE PER SHARE") for
a Total Purchase Price as set forth above (the "PURCHASE PRICE"). As used in
this Agreement, the term "SHARES" refers to the Shares purchased under this
Agreement and includes all securities received (a) in replacement of the Shares,
(b) as a result of stock dividends or stock splits in respect of the Shares, and
(c) in replacement of the Shares in a merger, recapitalization, reorganization
or similar corporate transaction.
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
[ ] Alone or with spouse as trustee(s) of the following trust
(including date):
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[ ] Other; please specify:
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1.3 PAYMENT. Purchaser hereby delivers payment of the
Purchase Price as follows (check and complete as appropriate):
[ ] in cash (by check) in the amount of $_____________,
receipt of which is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company to
Purchaser in the amount of $_____________;
[ ] by delivery of _________ fully-paid, nonassessable
and vested shares of the Common Stock of the Company
owned by Purchaser for at least six (6) months prior to
the date hereof (and which have been paid for within
the meaning of SEC Rule 144 and, if purchased by use of
a promissory note, such note has been fully paid with
respect to such vested shares), or obtained by
Purchaser in the open public market, and owned free and
clear of all liens, claims, encumbrances or security
interests, valued at the current Fair Market Value of
$________ per share;
[ ] by tender of a Full Recourse Promissory Note in the
principal amount of $__________, having such terms as
may be approved by the Committee and bearing interest
at a rate sufficient to avoid imputation of income
under Sections 483 and 1274 of the Code and secured by
a Pledge Agreement herewith; 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;
[ ] by the waiver hereby of compensation due or accrued for
services rendered in the amount of $_____________.
2. DELIVERY.
2.1 DELIVERIES BY PURCHASER. Purchaser hereby delivers
to the Company (i) this 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 Purchase Price.
2.2 DELIVERIES BY THE COMPANY. Upon its receipt of the
Purchase Price 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 11.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to the Company that:
3.1 AGREES TO TERMS OF THE PLAN AND THIS AGREEMENT.
Purchaser has received a copy of the Plan and this Agreement, has read and
understands the terms of the Plan and this Agreement, and agrees to be bound by
their terms and conditions. Purchaser acknowledges that there may be adverse tax
consequences upon purchase and disposition of the Shares, and that Purchaser
should consult a tax adviser prior to such purchase 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 of 1933, as amended (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.
2
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 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 FEDERAL SECURITIES LAWS. Purchaser
understands and acknowledges that the Shares have not been registered with the
Securities and Exchange Commission ("SEC") under the Securities Act and that,
notwithstanding any other provision of this 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 AND THIS AGREEMENT ARE INTENDED TO COMPLY WITH SECTION 25102(o) OF THE
CALIFORNIA CORPORATIONS CODE. ANY PROVISION OF THIS 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 TRANSFERS UNLESS REGISTERED OR EXEMPT. Purchaser
understands that Purchaser may not transfer any Shares unless such Shares are
registered under the Securities Act and 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.
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 two years, and in certain cases three years, after they have
been purchased AND PAID FOR (within the meaning of Rule 144), before they may be
resold under 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.
3
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) 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 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 will make no disposition of the Shares (other than a permitted
transfer under Section 9.6) unless and until:
(a) Purchaser has notified the Company of the
proposed disposition and provided a written summary of the terms and conditions
of the proposed disposition;
(b) Purchaser has complied with all requirements
of this Agreement applicable to the disposition of the Shares;
(c) Purchaser has 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 has 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 Right of First Refusal, except as permitted by this 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 Section 9.6 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 Agreement and that the transferred
shares are subject to: (i) the Company's 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.
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 registered 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
managing underwriters, as the case may be, for a 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
managing underwriters may specify.
8. VESTED SHARES. On the effective date all Shares
shall be vested shares.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares
held by Purchaser or any transferee of such 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
to purchase the Shares to be sold or transferred (the "OFFERED SHARES") on the
terms and conditions set forth in this Section (the "RIGHT OF FIRST REFUSAL").
4
9.1 NOTICE OF PROPOSED TRANSFER. The Holder of the
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 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 in accordance
with Section 9.3 below.
9.3 PURCHASE PRICE. The purchase price for the Offered
Shares purchased under this Section will be equal to 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 Company's
Board of Directors.
9.4 PAYMENT. Payment of the purchase price for the
Offered Shares 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 purchase 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 Shares will be exempt from
the Right of First Refusal: (i) the transfer of any or all of the 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 Shares in
the hands of such transferee or other recipient; (ii) any transfer of 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 Shares, in which case the
surviving corporation of such merger or consolidation 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 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, adopted child or grandchild of
Purchaser or Purchaser's spouse, or the spouse of any child, adopted child,
grandchild or adopted grandchild of Purchaser or Purchaser's spouse or Spousal
Equivalent, as defined herein. As used herein, a person is deemed to be a
"SPOUSAL EQUIVALENT" provided the following circumstances are true: (i)
irrespective of whether or not the Purchaser and the Spousal Equivalent are the
same sex, they are the sole spousal equivalent of the other for the last twelve
(12) months, (ii) they intend to remain so indefinitely, (iii) neither are
married to anyone else, (iv) both are at least 18 years of age and mentally
competent to consent to contract, (v) they are not related by blood to a degree
of closeness that which would prohibit legal marriage in the state in which they
legally reside, (vi) they are jointly responsible for each other's common
welfare and financial obligations, and (vii) they reside together in the same
residence for the last twelve (12) months and intend to do so indefinitely.
5
9.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of
First Refusal will terminate as to all Shares on the effective date of 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 under the
Securities Act (other than a registration statement relating solely to the
issuance of Common Stock pursuant to a business combination or an employee
incentive or benefit plan).
10. RIGHTS AS SHAREHOLDER. Subject to the terms and
conditions of this Agreement, Purchaser will have all of the rights of a
shareholder of the Company with respect to the Shares from and after the date
that the 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 Right of First
Refusal. Upon an exercise of the 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 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 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 Agreement. Purchaser and the Company
agree that Escrow Holder will not be liable to any party to this 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 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 Agreement. The Shares will be released from
escrow upon termination of 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 federal securities laws, the Company's Articles 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 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
FIRST REFUSAL OPTIONS HELD BY THE ISSUER AND/OR ITS
ASSIGNEE(S) AS SET FORTH IN A RESTRICTED STOCK PURCHASE
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 FIRST REFUSAL ARE
BINDING ON TRANSFEREES OF THESE SHARES.
6
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 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 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. 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 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.
14. SUCCESSORS AND ASSIGNS. The Company may assign any of
its rights under this Agreement, including its right to repurchase Shares under
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 herein set forth, this Agreement will be binding upon
Purchaser and Purchaser's heirs, executors, administrators, legal
representatives, successors and assigns.
15. GOVERNING LAW; SEVERABILITY. This 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, excluding that body
of laws pertaining to conflict of laws. 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.
16. 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.
17. 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 Agreement.
18. HEADINGS. The captions and headings of this Agreement
are included for ease of reference only and will be disregarded in interpreting
or construing this Agreement. All references herein to Sections will refer to
Sections of this Agreement.
19. ENTIRE AGREEMENT. The Plan and this Agreement, together
with all its Exhibits, constitute the entire agreement and understanding of the
parties with respect to the subject matter of this Agreement, and supersede all
prior understandings and agreements, whether oral or written, between the
parties hereto with respect to the specific subject matter hereof.
7
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate by its duly authorized representative and Purchaser has
executed this Agreement in duplicate as of the Effective Date.
CLOUDSCAPE, INC. PURCHASER
By:
-------------------------------- ---------------------------------
(Signature)
Xxx Xxxx
----------------------------------- ---------------------------------
(Please print name) (Please print name)
President and CEO
-----------------------------------
(Please print title)
[SIGNATURE PAGE TO CLOUDSCAPE, INC. RESTRICTED
STOCK PURCHASE AGREEMENT]
8
LIST OF EXHIBITS
EXHIBIT 1: Stock Power and Assignment Separate from Stock Certificate
EXHIBIT 2: Spouse Consent
9
EXHIBIT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
10
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock
Purchase Agreement No. ___ dated as of __________________, 19___, (the
"AGREEMENT"), the undersigned hereby sells, assigns and transfers unto
___________________________, shares of the Common Stock of Cloudscape, Inc., a
California 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 THE 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 a default under Purchaser's Secured Full Recourse
Promissory Note, if any, and to exercise of its "Right of First Refusal" set
forth in the Agreement without requiring additional signatures on the part of
the Purchaser or Purchaser's Spouse.
11
EXHIBIT 2
SPOUSE CONSENT
12
SPOUSE CONSENT
The undersigned spouse of ___________ ("PURCHASER") has read,
understands, and hereby approves the Restricted Stock Purchase 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 the
Agreement, the undersigned hereby agrees to be irrevocably bound by the
Agreement and further agrees that any community property interest shall
similarly be bound by the Agreement. The undersigned hereby appoints Purchaser
as my attorney-in-fact with respect to any amendment or exercise of any rights
under the Agreement.
Date: _______________________
----------------------------------
Print Name of Purchaser's Spouse
----------------------------------
Signature of Purchaser's Spouse
Address:
----------------------------------
----------------------------------
13
NO.________
CLOUDSCAPE, INC.
1996 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement ("AGREEMENT") is made and entered
into as of the date of grant set forth below (the "DATE OF GRANT") by and
between Cloudscape, Inc., a California corporation (the "COMPANY"), and the
participant named below ("PARTICIPANT"). Capitalized terms not defined herein
shall have the meaning ascribed to them in the Company's 1996 Equity Incentive
Plan (the "PLAN").
PARTICIPANT:
---------------------------------------------
SOCIAL SECURITY NUMBER:
---------------------------------------------
ADDRESS:
---------------------------------------------
TOTAL OPTION SHARES:
---------------------------------------------
EXERCISE PRICE PER SHARE:
---------------------------------------------
DATE OF GRANT:
---------------------------------------------
FIRST VESTING DATE:
---------------------------------------------
EXPIRATION DATE:
---------------------------------------------
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to
Participant an option (the "OPTION") to purchase the total number of shares of
Common Stock of the Company set forth above (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. If designated as an Incentive
Stock Option above, the Option is intended to qualify as an "incentive stock
option" ("ISO") within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "CODE").
2. EXERCISE PERIOD.
2.1 EXERCISE PERIOD OF OPTION. This Option is
immediately exercisable although the Shares issued upon exercise of the Option
will be subject to the repurchase option and right of first refusal set forth in
Sections 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 ___________, 199_ (the "FIRST VESTING DATE") and
thereafter at the end of each full succeeding month after the First Vesting Date
an additional two and eighty-three one thousandths percent (2.083%) of the
Shares will become vested until the Shares are vested with respect to 100% of
the Shares, provided that if application of the vesting percentage causes a
fractional shares, such share shall be rounded up to the nearest whole share. In
addition, immediately before: (i) a consolidation or merger of the Company with
or into any other corporation or corporations in which the holders of the
Company's outstanding shares immediately before such consolidation or merger
will not, immediately after such consolidation or merger, retain stock
representing a majority of the voting power of the surviving corporation of such
consolidation or merger; or (ii) a sale of all or
substantially all of the assets of the Company, an additional twenty-five
percent (25%) of the Shares will become vested, provided that if application of
the vesting percentage causes a fractional shares, such share shall be rounded
up to the nearest whole share. 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.
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." Unvested Shares may not be sold or otherwise transferred by
Participant without the Company's prior written consent.
2.3 EXPIRATION. The Option shall expire on the
Expiration Date set forth above and must be exercised, if at all, on or before
the Expiration Date.
3. TERMINATION.
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH,
DISABILITY. If Participant is Terminated for any reason, except death,
Disability of Participant (or Participant dies within three (3) months after
Termination other than because of Participant's death or Disability), 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, 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 (a) 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 (b) twelve (12) months after the Termination Date when the termination
is for Participant's death or disability, within the meaning of Section 22(e)(3)
of the Code, is deemed to be an NQSO.
3.3 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 Company from time to time (the "EXERCISE AGREEMENT"), which
shall set forth, INTER ALIA, Participant's election to exercise the Option, the
number of Shares being purchased, any restrictions imposed on the Shares and 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 that such person has the right to exercise the Option.
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.
2
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 cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's Common Stock
that either: (1) have been owned by Participant for
more than six (6) months and have been paid for
within the meaning of SEC Rule 144 (and, if such
shares were purchased from the Company by use of a
promissory note, such note has been fully paid with
respect to such shares); or (2) were obtained by
Participant in the open public market; and (3) are
clear of all liens, claims, encumbrances or security
interests;
(c) 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 Sections 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;
(d) by waiver of compensation due or accrued to
Participant for services rendered;
(e) provided that a public market for the Company's stock
exists, (1) 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 to pay for the Exercise Price and
whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise Price
directly to the Company, OR (2) 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
Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company;
or
(f) 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 Shares with a
Fair Market Value equal to the minimum amount of taxes required to be withheld.
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 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 (a) the date
two (2) years after the Date of Grant, and (b) 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.
3
6. COMPLIANCE WITH LAWS AND REGULATIONS. The Plan and
this Agreement are intended to comply with Section 25102(o) of the California
Corporations Code. Any provision of this 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
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 Securities and Exchange
Commission, 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. 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 this Section (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 exercisable.
8.1 TERMINATION AND TERMINATION DATE. In case of
any dispute as to whether Participant is Terminated, the Committee shall have
discretion to determine whether Participant 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 Termination Date, the Company, or its
assignee, may elect to repurchase the Participant's Unvested Shares by giving
Participant 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
Participant (or from Participant's personal representative as the case may be)
the Unvested Shares at Participant'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.
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 of
Participant 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 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 Participant'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 Participant without the Company's prior
written consent. Before any Vested Shares held by Participant 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 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").
4
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) of 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 Company's
Board of Directors.
9.4 PAYMENT. Payment of the purchase price for
Offered Shares 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 purchase 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 Participant's lifetime by gift or on Participant's death by
will or intestacy to Participant's "immediate family" (as defined below) or to a
trust for the benefit of Participant or Participant'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 and Repurchase Option will
continue to apply thereafter to such Vested Shares, in which case the surviving
corporation of such merger or consolidation 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 Participant's spouse, the lineal descendant or
antecedent, father, mother, brother or sister, adopted child or grandchild of
the Participant or the Participant's spouse, or the spouse of any child, adopted
child, grandchild or adopted grandchild of Participant or the Participant's
spouse.
5
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. TAX CONSEQUENCES. Set forth below is a brief summary
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. If 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. If
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 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.
6
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:
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 deposit with any return receipt express courier (prepaid); or 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 repurchase Shares under
the Repurchase Option and the Right of First Refusal. However, if the Company
assigns its right to repurchase Shares under the Repurchase Option for Unvested
Shares, the assignee (unless the assignee is a one hundred percent (100%) owned
subsidiary of the Company or is the parent of the Company owning one hundred
percent (100%) of the Company) will pay to the Company upon assignment of such
right, the excess of the Fair Market Value of the Shares at the time of
assignment over the Exercise Price. 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. 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
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 as of the Date of Grant.
CLOUDSCAPE, INC. PARTICIPANT
By:
------------------------------ ----------------------------------
(Signature)
Xxxxxx Xxxx
--------------------------------- ----------------------------------
(Please print name) (Please print name)
President and Ceo
--------------------------------- ----------------------------------
(Please print title)
8
EXHIBIT A
STOCK OPTION EXERCISE AGREEMENT
9
NO.
-------
CLOUDSCAPE, INC.
1996 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement ("AGREEMENT") is made and entered
into as of the date of grant set forth below (the "DATE OF GRANT") by and
between Cloudscape, Inc., a California corporation (the "COMPANY"), and the
participant named below ("PARTICIPANT"). Capitalized terms not defined herein
shall have the meaning ascribed to them in the Company's 1996 Equity Incentive
Plan (the "PLAN").
PARTICIPANT:
------------------------------------------
SOCIAL SECURITY NUMBER:
------------------------------------------
ADDRESS:
------------------------------------------
------------------------------------------
TOTAL OPTION SHARES:
------------------------------------------
EXERCISE PRICE PER SHARE:
------------------------------------------
DATE OF GRANT:
------------------------------------------
FIRST VESTING DATE:
------------------------------------------
EXPIRATION DATE:
------------------------------------------
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an
option (the "OPTION") to purchase the total number of shares of Common Stock of
the Company set forth above (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. If designated as an Incentive Stock Option
above, the Option is intended to qualify as an "incentive stock option" ("ISO")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "CODE").
2. EXERCISE PERIOD.
2.1 EXERCISE PERIOD OF OPTION. This Option is immediately
exercisable although the Shares issued upon exercise of the Option will be
subject to the repurchase option and right of first refusal set forth in
Sections 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 ___________, 199_ (the "FIRST VESTING DATE") and
thereafter at the end of each full succeeding month after the First Vesting Date
an additional two and eighty-three one thousandths percent (2.083%) of the
Shares will become vested until the Shares are vested with respect to 100% of
the Shares, provided that if application of the vesting percentage causes a
fractional shares, such share shall be rounded up to the nearest whole share. In
addition, immediately before: (i) a consolidation or merger of the Company with
or into any other corporation or corporations in which the holders of the
Company's outstanding shares immediately before such consolidation or merger
will not, immediately after such consolidation or merger, retain stock
representing a majority of the voting power of the surviving corporation of such
consolidation or merger; or (ii) a sale of all or
NO. ______
CLOUDSCAPE, INC.
1996 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement ("AGREEMENT") is made and entered into as of
the date of grant set forth below (the "DATE OF GRANT") by and between
Cloudscape, Inc., a California corporation (the "COMPANY"), and the participant
named below ("PARTICIPANT"). Capitalized terms not defined herein shall have
the meaning ascribed to them in the Company's 1996 Equity Incentive Plan (the
"PLAN").
PARTICIPANT:
---------------------------------------------
SOCIAL SECURITY NUMBER:
---------------------------------------------
ADDRESS:
---------------------------------------------
TOTAL OPTION SHARES:
---------------------------------------------
EXERCISE PRICE PER SHARE:
---------------------------------------------
DATE OF GRANT:
---------------------------------------------
FIRST VESTING DATE:
---------------------------------------------
EXPIRATION DATE:
---------------------------------------------
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an
option (the "OPTION") to purchase the total number of shares of Common Stock of
the Company set forth above (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. If designated as an Incentive Stock Option
above, the Option is intended to qualify as an "incentive stock option" ("ISO")
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "CODE").
2. EXERCISE PERIOD.
2.1 EXERCISE PERIOD OF OPTION. This Option is immediately
exercisable although the Shares issued upon exercise of the Option will be
subject to the repurchase option and right of first refusal set forth in
Sections 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 two and
eighty-three one thousandths percent (2.083%) of the Shares on ___________, 199_
(the "FIRST VESTING DATE") and thereafter at the end of each full succeeding
month after the First Vesting Date an additional two and eighty-three one
thousandths percent (2.083%) of the Shares will become vested until the Shares
are vested with respect to 100% of the Shares, provided that if application of
the vesting percentage causes a fractional shares, such share shall be rounded
up to the nearest whole share. In addition, immediately before: (i) a
consolidation or merger of the Company with or into any other corporation or
corporations in which the holders of the Company's outstanding shares
immediately before such consolidation or merger will not, immediately after such
consolidation or merger,
retain stock representing a majority of the voting power of the surviving
corporation of such consolidation or merger; or (ii) a sale of all or
substantially all of the assets of the Company, all Unvested Shares will become
Vested Shares. 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.
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."
Unvested Shares may not be sold or otherwise transferred by Participant without
the Company's prior written consent.
2.3 EXPIRATION. The Option shall expire on the Expiration Date
set forth above and must be exercised, if at all, on or before the Expiration
Date.
3. TERMINATION.
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH, DISABILITY. If
Participant is Terminated for any reason, except death, Disability of
Participant (or Participant dies within three (3) months after Termination other
than because of Participant's death or Disability), 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, 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 (a) 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 (b) twelve (12) months after the Termination Date when the termination
is for Participant's death or disability, within the meaning of Section 22(e)(3)
of the Code, is deemed to be an NQSO.
3.3 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
Company from time to time (the "EXERCISE AGREEMENT"), which shall set forth,
INTER ALIA, Participant's election to exercise the Option, the number of Shares
being purchased, any restrictions imposed on the Shares and 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 that
such person has the right to exercise the Option.
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:
2
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of shares of the Company's Common Stock that either:
(1) have been owned by Participant for more than six (6) months
and have been paid for within the meaning of SEC Rule 144 (and, if
such shares were purchased from the Company by use of a promissory
note, such note has been fully paid with respect to such shares);
or (2) were obtained by Participant in the open public market; and
(3) are clear of all liens, claims, encumbrances or security
interests;
(c) 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 Sections 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;
(d) by waiver of compensation due or accrued to Participant for
services rendered;
(e) provided that a public market for the Company's stock exists, (1)
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 to pay for the Exercise Price and whereby
the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company, OR (2) 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 Exercise Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the Exercise Price
directly to the Company; or
(f) 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 Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld. 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 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 (a) the date two (2)
years after the Date of Grant, and (b) 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.
3
6. COMPLIANCE WITH LAWS AND REGULATIONS. The Plan and this Agreement
are intended to comply with Section 25102(o) of the California Corporations
Code. Any provision of this 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 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 Securities and Exchange
Commission, 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. 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 this Section (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 exercisable.
8.1 TERMINATION AND TERMINATION DATE. In case of any dispute
as to whether Participant is Terminated, the Committee shall have discretion to
determine whether Participant 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 Termination Date, the Company, or its assignee, may elect to
repurchase the Participant's Unvested Shares by giving Participant 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 Participant (or
from Participant's personal representative as the case may be) the Unvested
Shares at Participant'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.
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 of Participant
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 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 Participant'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 Participant without the Company's prior
written consent. Before any Vested Shares held by Participant 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 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").
4
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) of 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 Company's Board of
Directors.
9.4 PAYMENT. Payment of the purchase price for Offered Shares
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
purchase 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 Participant's lifetime by gift or on Participant's death by will or
intestacy to Participant's "immediate family" (as defined below) or to a trust
for the benefit of Participant or Participant'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 and Repurchase Option will
continue to apply thereafter to such Vested Shares, in which case the surviving
corporation of such merger or consolidation 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 Participant's spouse, the lineal descendant or
antecedent, father, mother, brother or sister, adopted child or grandchild of
the Participant or the Participant's spouse, or the spouse of any child, adopted
child, grandchild or adopted grandchild of Participant or the Participant'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.
5
10. TAX CONSEQUENCES. Set forth below is a brief summary 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. If 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. If 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 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.
6
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: 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 deposit
with any return receipt express courier (prepaid); or 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 repurchase Shares under the
Repurchase Option and the Right of First Refusal. However, if the Company
assigns its right to repurchase Shares under the Repurchase Option for Unvested
Shares, the assignee (unless the assignee is a one hundred percent (100%) owned
subsidiary of the Company or is the parent of the Company owning one hundred
percent (100%) of the Company) will pay to the Company upon assignment of such
right, the excess of the Fair Market Value of the Shares at the time of
assignment over the Exercise Price. 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. 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
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 as of the Date of Grant.
CLOUDSCAPE, INC. PARTICIPANT
By:
------------------------------ ---------------------------------
(Signature)
Xxx Xxxx
--------------------------------- ---------------------------------
(Please print name) (Please print name)
President and CEO
---------------------------------
(Please print title)
8
EXHIBIT A
STOCK OPTION EXERCISE AGREEMENT
9
NO. ________
CLOUDSCAPE, INC.
1996 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement ("AGREEMENT") is made and entered into as of
the date of grant set forth below (the "DATE OF GRANT") by and between
Cloudscape, Inc., a California corporation (the "COMPANY"), and the participant
named below ("PARTICIPANT"). Capitalized terms not defined herein shall have
the meaning ascribed to them in the Company's 1996 Equity Incentive Plan (the
"PLAN").
PARTICIPANT:
---------------------------------------------
SOCIAL SECURITY NUMBER:
---------------------------------------------
ADDRESS:
---------------------------------------------
---------------------------------------------
TOTAL OPTION SHARES:
---------------------------------------------
EXERCISE PRICE PER SHARE:
---------------------------------------------
DATE OF GRANT:
---------------------------------------------
FIRST VESTING DATE:
---------------------------------------------
EXPIRATION DATE:
---------------------------------------------
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an option
(the "OPTION") to purchase the total number of shares of Common Stock of the
Company set forth above (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. If designated as an Incentive Stock Option above, the
Option is intended to qualify as an "incentive stock option" ("ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"CODE").
2. EXERCISE PERIOD.
2.1 EXERCISE PERIOD OF OPTION. This Option is immediately
exercisable although the Shares issued upon exercise of the Option will be
subject to the repurchase option and right of first refusal set forth in
Sections 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 ___________, 199_ (the "FIRST VESTING DATE") and
thereafter at the end of each full succeeding month after the First Vesting Date
an additional two and eighty-three one thousandths percent (2.083%) of the
Shares will become vested until the Shares are vested with respect to 100% of
the Shares, provided that if application of the vesting percentage causes a
fractional shares, such share shall be rounded up to the nearest whole share.
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.
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."
Unvested Shares may not be sold or otherwise transferred by Participant without
the Company's prior written consent.
2.3 EXPIRATION. The Option shall expire on the Expiration Date set
forth above and must be exercised, if at all, on or before the Expiration Date.
3. TERMINATION.
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH, DISABILITY. If
Participant is Terminated for any reason, except death, Disability of
Participant (or Participant dies within three (3) months after Termination other
than because of Participant's death or Disability), 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, 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 (a) 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 (b) twelve (12) months after the Termination Date when the termination
is for Participant's death or disability, within the meaning of Section 22(e)(3)
of the Code, is deemed to be an NQSO.
3.3 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
Company from time to time (the "EXERCISE AGREEMENT"), which shall set forth,
INTER ALIA, Participant's election to exercise the Option, the number of Shares
being purchased, any restrictions imposed on the Shares and 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 that
such person has the right to exercise the Option.
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 cancellation of indebtedness of the Company to the
Participant;
2
(b) by surrender of shares of the Company's Common Stock that
either: (1) have been owned by Participant for more than
six (6) months and have been paid for within the meaning
of SEC Rule 144 (and, if such shares were purchased from
the Company by use of a promissory note, such note has
been fully paid with respect to such shares); or (2) were
obtained by Participant in the open public market; and
(3) are clear of all liens, claims, encumbrances or
security interests;
(c) by waiver of compensation due or accrued to Participant
for services rendered;
(d) provided that a public market for the Company's stock
exists, (1) 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 to pay for the Exercise Price and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the
Company, OR (2) 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 Exercise Price, and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; 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 Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld. 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 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 (a) the date two (2)
years after the Date of Grant, and (b) 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.
Any provision of this 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 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 Securities and Exchange Commission, any
state securities commission or any stock exchange to effect such compliance.
3
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. 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 this Section (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 exercisable.
8.1 TERMINATION AND TERMINATION DATE. In case of any dispute as to
whether Participant is Terminated, the Committee shall have discretion to
determine whether Participant 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 Termination Date, the Company, or its assignee, may elect to
repurchase the Participant's Unvested Shares by giving Participant 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 Participant (or from
Participant's personal representative as the case may be) the Unvested Shares at
Participant'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.
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 of Participant
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 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
Participant'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 Participant without the Company's prior written
consent. Before any Vested Shares held by Participant 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 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
4
all (or, with the consent of the Holder, less than all) of 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 Company's Board of
Directors.
9.4 PAYMENT. Payment of the purchase price for Offered Shares 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 purchase
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 Participant's lifetime by gift or on Participant's death by will or
intestacy to Participant's "immediate family" (as defined below) or to a trust
for the benefit of Participant or Participant'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 and Repurchase Option will
continue to apply thereafter to such Vested Shares, in which case the surviving
corporation of such merger or consolidation 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 Participant's spouse, the lineal descendant or
antecedent, father, mother, brother or sister, adopted child or grandchild of
the Participant or the Participant's spouse, or the spouse of any child, adopted
child, grandchild or adopted grandchild of Participant or the Participant'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. TAX CONSEQUENCES. Set forth below is a brief summary 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. If 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
5
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. If 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 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
6
to time to the Company. All notices shall be deemed to have been given or
delivered 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 deposit with any return receipt express courier (prepaid); or
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 repurchase Shares under the
Repurchase Option and the Right of First Refusal. However, if the Company
assigns its right to repurchase Shares under the Repurchase Option for Unvested
Shares, the assignee (unless the assignee is a one hundred percent (100%) owned
subsidiary of the Company or is the parent of the Company owning one hundred
percent (100%) of the Company) will pay to the Company upon assignment of such
right, the excess of the Fair Market Value of the Shares at the time of
assignment over the Exercise Price. 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. 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.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
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 as of the Date of Grant.
CLOUDSCAPE, INC. PARTICIPANT
By:
----------------------------- -----------------------------
(Signature)
Xxxxxx Xxxx
--------------------------------- -----------------------------
(Please print name) (Please print name)
President and CEO
--------------------------------- -----------------------------
(Please print title)
8
EXHIBIT A
STOCK OPTION EXERCISE AGREEMENT
9
NO. __________
CLOUDSCAPE, INC.
1996 EQUITY INCENTIVE PLAN
STOCK OPTION EXERCISE AGREEMENT
This Exercise Agreement is made and entered into as of ______________,
199__ (the "EFFECTIVE DATE") by and between Cloudscape, Inc., a California
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 1996 Equity Incentive Plan (the "PLAN").
PURCHASER:
-----------------------------------
SOCIAL SECURITY NUMBER:
-----------------------------------
ADDRESS:
-----------------------------------
-----------------------------------
TOTAL NUMBER OF SHARES:
-----------------------------------
EXERCISE PRICE PER SHARE:
-----------------------------------
TOTAL EXERCISE PRICE:
-----------------------------------
OPTION NO. ___ DATE OF GRANT:
-----------------------------------
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 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 at the Exercise Price Per Share
set forth above ("EXERCISE PRICE"). As used in this 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.
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
[ ] Alone or with spouse as trustee(s) of the
following trust (including date):
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[ ] Other; please specify:
1.3 PAYMENT. Purchaser hereby delivers payment of the Exercise
Price in the manner permitted in the Stock Option Agreement as follows (check
and complete as appropriate):
[ ] in cash in the amount of $____________, receipt of which is
acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company to Purchaser in the
amount of $__________;
[ ] by surrender of _________ fully-paid, nonassessable and vested
shares of the Common Stock of the Company owned by Purchaser for
at least six (6) months prior to the date hereof which have been
paid for within the meaning of SEC Rule 144, (if purchased by use
of a promissory note, such note has been fully paid with respect
to such vested shares), or obtained by Purchaser in the open
public market, and owned free and clear of all liens, claims,
encumbrances or security interests, valued at the current Fair
Market Value of $___________ per share;
[ ] by the waiver hereby of compensation due or accrued for services
rendered in the amount of $_________.
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 executed by Purchaser's spouse, and (iv) the Exercise
Price.
2.2 DELIVERIES BY THE COMPANY. Upon its receipt of the
Exercise Price 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 11 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:
2
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 of 1933, as amended (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 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 FEDERAL SECURITIES LAWS. Purchaser
understands and acknowledges that the Shares have not been registered with the
Securities and Exchange Commission ("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 Agreement are intended to comply with Section
25102(o) of the California Corporations Code. Any provision of this 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
3
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.
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 two
years, and in certain cases three 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) 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 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 the Company's Right of First Refusal, except as permitted
by this 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 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
the Company's Right of First Refusal granted hereunder and (ii) the market
standoff provisions of Section 7, to the same extent such Shares would be so
subject if retained by the Purchaser.
4
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 exercisable.
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 Termination Date, 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 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.
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 of 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 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
5
purchase 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 Company's Board of
Directors.
9.4 PAYMENT. Payment of the purchase price for Offered Shares
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
purchase 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 and Repurchase Option will continue to
apply thereafter to such Vested Shares, in which case the surviving corporation
of such merger or consolidation 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, adopted child or 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 or Spousal Equivalent,
as defined herein. As used herein, a person is deemed to be a "SPOUSAL
EQUIVALENT" provided the following circumstances are true: (i) irrespective of
whether or not the Participant and the Spousal Equivalent are the same sex, they
are the sole spousal equivalent of the other for the last twelve (12) months,
(ii) they intend to remain so indefinitely, (iii) neither are married to anyone
else, (iv) both are at least 18 years of age and mentally competent to consent
to contract, (v) they are not related by blood to a degree of closeness that
which would prohibit legal marriage in the state in which they legally reside,
(vi) they are jointly responsible for each other's common welfare and financial
obligations, and (vii) they reside together in the same residence for the last
twelve (12) months and intend to do so indefinitely.
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 SHAREHOLDER. Subject to the terms and conditions of
this Exercise Agreement, Purchaser will have all of the rights of a shareholder
of the Company with respect to the Shares from and after the date that Shares
are issued to Purchaser, Purchaser delivers payment of the Exercise Price until
such time as
6
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 the 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
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 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 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 federal securities laws, the Company's Restated Articles
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 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 AND TRANSFER, 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,
7
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 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 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: (i) THAT PURCHASER HAS CONSULTED WITH ANY
TAX ADVISER THAT PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR
DISPOSITION OF THE SHARES AND (ii) 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 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 HIS OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR
DISPOSING OF THE SHARES.
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 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.
8
(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 Purchaser's compensation or collect from the Purchaser 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 4 for reference.
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 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 Agreement, including its rights to repurchase Shares under the
Repurchase Option and the Right of First Refusal. However, if the Company
assigns its right to repurchase Shares under the Repurchase Option for Unvested
Shares, the assignee (unless the assignee is a one hundred percent (100%) owned
subsidiary of the Company or is the parent of the Company owning one hundred
percent (100%) of the Company) will pay to the Company upon assignment of such
right, the excess of the Fair Market Value of the Shares at the time of
assignment over the Exercise Price. 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 herein set forth, this Agreement will be binding
upon Purchaser and Purchaser's heirs, executors, administrators, legal
representatives, successors and assigns.
16. GOVERNING LAW; SEVERABILITY. This 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
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 Agreement.
19. HEADINGS. The captions and headings of this Agreement are
included for ease of reference only and will be disregarded in interpreting or
construing this Agreement. All references herein to Sections will refer to
Sections of this Agreement.
9
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 Agreement, and supersede all prior understandings and agreements, whether
oral or written, between the parties hereto with respect to the specific subject
matter hereof.
10
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed
in duplicate by its duly authorized representative and Purchaser has executed
this Agreement in duplicate as of the Effective Date.
CLOUDSCAPE, INC. PURCHASER
By:
------------------------------- --------------------------------
(Signature)
----------------------------------
(Please print name) --------------------------------
(Please print name)
----------------------------------
(Please print title)
[SIGNATURE PAGE TO CLOUDSCAPE, INC. STOCK OPTION EXERCISE AGREEMENT]
11
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 4: 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 of Cloudscape, Inc.,
a California 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 THE 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
permit the exercise of its "Repurchase Option" and/or "Right of First Refusal"
set forth in the 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 the Agreement, the undersigned
hereby agrees to be irrevocably bound by the Agreement and further agrees that
any community property interest shall similarly be bound by the Agreement. The
undersigned hereby appoints Purchaser as my attorney-in-fact with respect to any
amendment or exercise of any rights under the Agreement.
Date:
------------------- --------------------------------
Signature of Purchaser's Spouse
Address: --------------------------------
--------------------------------
/ / Check this box if you do not have a spouse.
EXHIBIT 3
COPY OF PURCHASER'S CHECK
EXHIBIT 4
SECTION 83(b) ELECTION
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: ___________________________________________________
TAXPAYER'S ADDRESS: ________________________________________________
SOCIAL SECURITY NUMBER: ____________________________________________
2. The property with respect to which the election is made is described as
follows: ________ shares of Common Stock of Cloudscape, Inc., a California
corporation which were transferred upon exercise of an option (the "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 ________, 199__ and this election is made for calendar year
199___.
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:
--------------------
Taxpayer's Signature
----------------------------------
NO. _______
CLOUDSCAPE, INC.
1996 EQUITY INCENTIVE PLAN
RESTRICTED STOCK PURCHASE AGREEMENT
This Restricted Stock Purchase Agreement ("AGREEMENT") is made and
entered into as of ________, 199__ (the "EFFECTIVE DATE") by and between
Cloudscape, Inc., a California 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 1996 Equity Incentive Plan (the
"PLAN").
PURCHASER:
---------------------------------
SOCIAL SECURITY NUMBER:
---------------------------------
ADDRESS:
---------------------------------
---------------------------------
TOTAL NUMBER OF SHARES:
---------------------------------
PURCHASE PRICE PER SHARE:
---------------------------------
TOTAL PURCHASE PRICE:
---------------------------------
1. PURCHASE OF SHARES.
1.1 PURCHASE OF SHARES. On the Effective Date
and subject to the terms and conditions of this Agreement and the Plan,
Purchaser hereby purchases from the Company, and the Company hereby sells to
Purchaser, the Total Number of Shares set forth above of the Company's Common
Stock at the Purchase Price Per Share as set forth above (the "PURCHASE PRICE
PER SHARE") for a Total Purchase Price as set forth above (the "PURCHASE
PRICE"). As used in this Agreement, the term "SHARES" refers to the Shares
purchased under this Agreement and includes all securities received (a) in
replacement of the Shares, (b) as a result of stock dividends or stock splits in
respect of the Shares, and (c) in replacement of the Shares in a merger,
recapitalization, reorganization or similar corporate transaction.
1.2 TITLE TO SHARES. The exact spelling of the
name(s) under which Purchaser will take title to the Shares is:
--------------------------------------------------------------
--------------------------------------------------------------
Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[ ] Alone or with spouse as trustee(s) of the following trust
(including date):
----------------------------------------------------
----------------------------------------------------
[ ] Other; please specify:
-----------------------------------
----------------------------------------------------
1.3 PAYMENT. Purchaser hereby delivers payment
of the Purchase Price as follows (check and complete as appropriate):
[ ] in cash (by check) in the amount of $_____________,
receipt of which is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company to
Purchaser in the amount of $_________;
[ ] by delivery of _________ fully-paid, nonassessable
and vested shares of the Common Stock of the Company
owned by Purchaser for at least six (6) months prior
to the date hereof (and which have been paid for
within the meaning of SEC Rule 144 and, if purchased
by use of a promissory note, such note has been fully
paid with respect to such vested shares), or obtained
by Purchaser in the open public market, and owned
free and clear of all liens, claims, encumbrances or
security interests, valued at the current Fair Market
Value of $________ per share;
[X] by the waiver hereby of compensation due or accrued
for services rendered in the amount of
$_______________.
2. DELIVERY.
2.1 DELIVERIES BY PURCHASER. Purchaser hereby
delivers to the Company (i) this 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 Purchase Price.
2.2 DELIVERIES BY THE COMPANY. Upon its receipt
of the Purchase Price 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 11.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER.
Purchaser represents and warrants to the Company that:
3.1 AGREES TO TERMS OF THE PLAN AND THIS
AGREEMENT. Purchaser has received a copy of the Plan and this Agreement, has
read and understands the terms of the Plan and this Agreement, and agrees to be
bound by their terms and conditions. Purchaser acknowledges that there may be
adverse tax consequences upon purchase and disposition of the Shares, and that
Purchaser should consult a tax adviser prior to such purchase 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 of 1933, as
amended (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 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
2
(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 FEDERAL SECURITIES LAWS.
Purchaser understands and acknowledges that the Shares have not been registered
with the Securities and Exchange Commission ("SEC") under the Securities Act and
that, notwithstanding any other provision of this 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 AND THIS AGREEMENT ARE INTENDED TO COMPLY WITH SECTION 25102(o) OF
THE INCONSISTANT CALIFORNIA CORPORATIONS CODE. ANY PROVISION OF THIS
AGREEMENT WHICH IS INCONSISTENT WITH SECTION 25102(o) SHALL, WITHOUT FUTHER
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 TRANSFERS UNLESS REGISTERED OR EXEMPT.
Purchaser understands that Purchaser may not transfer any Shares unless such
Shares are registered under the Securities Act and 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.
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 year, and in certain cases two years, after they
have been purchased AND PAID FOR (within the meaning of Rule 144), before they
may be resold under 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) 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 Agreement or any other agreement entered into by Purchaser. Affiliates
must comply with the provisions (other than the holding period requirements) of
Rule 144.
3
6. RESTRICTIONS ON TRANSFERS.
6.1 DISPOSITION OF SHARES. Purchaser hereby
agrees that Purchaser will make no disposition of the Shares (other than a
permitted transfer under Section 9.6) unless and until:
(a) Purchaser has notified the Company of
the proposed disposition and provided a written summary of the terms and
conditions of the proposed disposition;
(b) Purchaser has complied with all
requirements of this Agreement applicable to the disposition of the Shares;
(c) Purchaser has 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 has 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 Right of First Refusal, except as permitted by this 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 Section 9.6 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 Agreement and that the transferred
shares are subject to: (i) the Company's 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.
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 registered 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
managing underwriters, as the case may be, for a 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
managing underwriters may specify.
8. VESTED SHARES. On the effective date all Shares shall
be vested shares.
9. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Shares
held by Purchaser or any transferee of such 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
to purchase the 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 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.
4
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
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 in accordance
with Section 9.3 below.
9.3 PURCHASE PRICE. The purchase price for the
Offered Shares purchased under this Section will be equal to 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
Company's Board of Directors.
9.4 PAYMENT. Payment of the purchase price for
the Offered Shares 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 purchase 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 Shares will be
exempt from the Right of First Refusal: (i) the transfer of any or all of the
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
Shares in the hands of such transferee or other recipient; (ii) any transfer of
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 Shares, in which case
the surviving corporation of such merger or consolidation 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 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, adopted child or grandchild of
Purchaser or Purchaser's spouse, or the spouse of any child, adopted child,
grandchild or adopted grandchild of Purchaser or Purchaser's spouse or Spousal
Equivalent, as defined herein. As used herein, a person is deemed to be a
"SPOUSAL EQUIVALENT" provided the following circumstances are true: (i)
irrespective of whether or not the Purchaser and the Spousal Equivalent are the
same sex, they are the sole spousal equivalent of the other for the last twelve
(12) months, (ii) they intend to remain so indefinitely, (iii) neither are
married to anyone else, (iv) both are at least 18 years of age and mentally
competent to consent to contract, (v) they are not related by blood to a degree
of closeness that which would prohibit legal marriage in the state in which they
legally reside, (vi) they are jointly responsible for each other's common
welfare and financial obligations, and (vii) they reside together in the same
residence for the last twelve (12) months and intend to do so indefinitely.
9.7 TERMINATION OF RIGHT OF FIRST REFUSAL. The
Right of First Refusal will terminate as to all Shares on the effective date of
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 under the
Securities Act (other than a registration statement relating solely to the
issuance of Common Stock pursuant to a business combination or an employee
incentive or benefit plan).
5
10. RIGHTS AS SHAREHOLDER. Subject to the terms and
conditions of this Agreement, Purchaser will have all of the rights of a
shareholder of the Company with respect to the Shares from and after the date
that the 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 Right of First
Refusal. Upon an exercise of the 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 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 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 Agreement. Purchaser and the Company
agree that Escrow Holder will not be liable to any party to this 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 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 Agreement. The Shares will be released from
escrow upon termination of 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 federal securities laws, the Company's Articles
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 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
FIRST REFUSAL OPTIONS HELD BY THE ISSUER AND/OR ITS
ASSIGNEE(S) AS SET FORTH IN A RESTRICTED STOCK PURCHASE
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 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
6
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
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 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. 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 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.
14. SUCCESSORS AND ASSIGNS. The Company may assign any of
its rights under this Agreement, including its right to repurchase Shares under
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 herein set forth, this Agreement will be binding upon
Purchaser and Purchaser's heirs, executors, administrators, legal
representatives, successors and assigns.
15. GOVERNING LAW; SEVERABILITY. This 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, excluding that body
of laws pertaining to conflict of laws. 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.
16. 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.
17. 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 Agreement.
18. HEADINGS. The captions and headings of this Agreement
are included for ease of reference only and will be disregarded in interpreting
or construing this Agreement. All references herein to Sections will refer to
Sections of this Agreement.
19. ENTIRE AGREEMENT. The Plan and this Agreement,
together with all its Exhibits, constitute the entire agreement and
understanding of the parties with respect to the subject matter of this
Agreement, and supersede all prior understandings and agreements, whether oral
or written, between the parties hereto with respect to the specific subject
matter hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
IN WITNESS WHEREOF, the Company has caused this Agreement to
be executed in duplicate by its duly authorized representative and Purchaser has
executed this Agreement in duplicate as of the Effective Date.
CLOUDSCAPE, INC. PURCHASER
By:
------------------------------- --------------------------------------
(Signature)
Xxxxxx Xxxx
---------------------------------- --------------------------------------
(Please print name) (Please print name)
President and Ceo
---------------------------------- --------------------------------------
(Please print title)
[SIGNATURE PAGE TO CLOUDSCAPE, INC. RESTRICTED
STOCK PURCHASE AGREEMENT]
8
LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
EXHIBIT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
10
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Restricted Stock
Purchase Agreement No. ___ dated as of __________________, 19___, (the
"AGREEMENT"), the undersigned hereby sells, assigns and transfers unto
___________________________, shares of the Common Stock of Cloudscape, Inc., a
California 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 THE 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
exercise of its "Right of First Refusal" set forth in the Agreement without
requiring additional signatures on the part of the Purchaser or Purchaser's
Spouse.
11
EXHIBIT 2
SPOUSE CONSENT
12
SPOUSE CONSENT
The undersigned spouse of ___________ ("PURCHASER") has read,
understands, and hereby approves the Restricted Stock Purchase 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 the
Agreement, the undersigned hereby agrees to be irrevocably bound by the
Agreement and further agrees that any community property interest shall
similarly be bound by the Agreement. The undersigned hereby appoints Purchaser
as my attorney-in-fact with respect to any amendment or exercise of any rights
under the Agreement.
Date:
-------------------------------- ------------------------------------
Print Name of Purchaser's Spouse
------------------------------------
Signature of Purchaser's Spouse
Address: ------------------------------------
------------------------------------
13
No. ________
CLOUDSCAPE, INC.
1996 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement ("AGREEMENT") is made and entered into as of
the date of grant set forth below (the "DATE OF GRANT") by and between
Cloudscape, Inc., a California corporation (the "COMPANY"), and the participant
named below ("PARTICIPANT"). Capitalized terms not defined herein shall have
the meaning ascribed to them in the Company's 1996 Equity Incentive Plan (the
"PLAN").
PARTICIPANT:
---------------------------------------------
SOCIAL SECURITY NUMBER:
---------------------------------------------
ADDRESS:
---------------------------------------------
---------------------------------------------
TOTAL OPTION SHARES:
---------------------------------------------
EXERCISE PRICE PER SHARE:
---------------------------------------------
DATE OF GRANT:
---------------------------------------------
FIRST VESTING DATE:
---------------------------------------------
EXPIRATION DATE:
---------------------------------------------
TYPE OF STOCK OPTION
(CHECK ONE): [ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an option
(the "OPTION") to purchase the total number of shares of Common Stock of the
Company set forth above (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. If designated as an Incentive Stock Option above, the
Option is intended to qualify as an "incentive stock option" ("ISO") within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"CODE").
2. EXERCISE PERIOD.
2.1 EXERCISE PERIOD OF OPTION. This Option is immediately
exercisable although the Shares issued upon exercise of the Option will be
subject to the repurchase option and right of first refusal set forth in
Sections 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 ___________, 199_ (the "FIRST VESTING DATE") and
thereafter at the end of each full succeeding month after the First Vesting Date
an additional two and eighty-three one thousandths percent (2.083%) of the
Shares will become vested until the Shares are vested with respect to 100% of
the Shares, provided that if application of the vesting percentage causes a
fractional shares, such share shall be rounded up to the nearest whole share. In
addition, immediately before: (i) a consolidation or merger of the Company with
or into any other corporation or corporations in which the holders of the
Company's outstanding shares immediately before such consolidation or merger
will not, immediately after such consolidation or merger, retain stock
representing a majority of the voting power of the surviving corporation of such
consolidation or merger; or (ii) a sale of all or
substantially all of the assets of the Company, fifty percent (50%) of the then
Unvested Shares will become vested, provided that if application of the vesting
percentage causes a fractional shares, such share shall be rounded up to the
nearest whole share. 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.
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."
Unvested Shares may not be sold or otherwise transferred by Participant without
the Company's prior written consent.
2.3 EXPIRATION. The Option shall expire on the Expiration Date set
forth above and must be exercised, if at all, on or before the Expiration Date.
3. TERMINATION.
3.1 TERMINATION FOR ANY REASON EXCEPT DEATH, DISABILITY. If
Participant is Terminated for any reason, except death, Disability of
Participant (or Participant dies within three (3) months after Termination other
than because of Participant's death or Disability), 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, 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 (a) 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 (b) twelve (12) months after the Termination Date when the termination
is for Participant's death or disability, within the meaning of Section 22(e)(3)
of the Code, is deemed to be an NQSO.
3.3 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
Company from time to time (the "EXERCISE AGREEMENT"), which shall set forth,
INTER ALIA, Participant's election to exercise the Option, the number of Shares
being purchased, any restrictions imposed on the Shares and 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 that
such person has the right to exercise the Option.
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.
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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 cancellation of indebtedness of the Company to the
Participant;
(b) by surrender of shares of the Company's Common Stock that
either: (1) have been owned by Participant for more than
six (6) months and have been paid for within the meaning
of SEC Rule 144 (and, if such shares were purchased from
the Company by use of a promissory note, such note has
been fully paid with respect to such shares); or (2) were
obtained by Participant in the open public market; and
(3) are clear of all liens, claims, encumbrances or
security interests;
(c) 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 Sections 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;
(d) by waiver of compensation due or accrued to Participant
for services rendered;
(e) provided that a public market for the Company's stock
exists, (1) 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 to pay for the Exercise Price and whereby
the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the
Company, OR (2) 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 Exercise Price, and whereby the NASD
Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company; or
(f) 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 Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld. 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 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 (a) the date two (2)
years after the Date of Grant, and (b) 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.
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6. COMPLIANCE WITH LAWS AND REGULATIONS. The Plan and this Agreement are
intended to comply with Section 25102(o) of the California Corporations Code.
Any provision of this 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 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 Securities and Exchange Commission, 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. 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 this Section (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 exercisable.
8.1 TERMINATION AND TERMINATION DATE. In case of any dispute as to
whether Participant is Terminated, the Committee shall have discretion to
determine whether Participant 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 Termination Date, the Company, or its assignee, may elect to
repurchase the Participant's Unvested Shares by giving Participant 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 Participant (or from
Participant's personal representative as the case may be) the Unvested Shares at
Participant'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.
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 of Participant
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 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
Participant'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 Participant without the Company's prior written
consent. Before any Vested Shares held by Participant 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 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").
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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) of 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 Company's Board of
Directors.
9.4 PAYMENT. Payment of the purchase price for Offered Shares 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 purchase
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 Participant's lifetime by gift or on Participant's death by will or
intestacy to Participant's "immediate family" (as defined below) or to a trust
for the benefit of Participant or Participant'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 and Repurchase Option will
continue to apply thereafter to such Vested Shares, in which case the surviving
corporation of such merger or consolidation 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 Participant's spouse, the lineal descendant or
antecedent, father, mother, brother or sister, adopted child or grandchild of
the Participant or the Participant's spouse, or the spouse of any child, adopted
child, grandchild or adopted grandchild of Participant or the Participant's
spouse.
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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. TAX CONSEQUENCES. Set forth below is a brief summary 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. If 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. If 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 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.
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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: 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 deposit
with any return receipt express courier (prepaid); or 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 repurchase Shares under the
Repurchase Option and the Right of First Refusal. However, if the Company
assigns its right to repurchase Shares under the Repurchase Option for Unvested
Shares, the assignee (unless the assignee is a one hundred percent (100%) owned
subsidiary of the Company or is the parent of the Company owning one hundred
percent (100%) of the Company) will pay to the Company upon assignment of such
right, the excess of the Fair Market Value of the Shares at the time of
assignment over the Exercise Price. 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. 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.
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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 as of the Date of Grant.
CLOUDSCAPE, INC. PARTICIPANT
By:
----------------------------- -----------------------------
(Signature)
Xxxxxx Xxxx
--------------------------------- -----------------------------
(Please print name) (Please print name)
President and CEO
---------------------------------
(Please print title)
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EXHIBIT A
STOCK OPTION EXERCISE AGREEMENT
9
