PATH 1 NETWORK TECHNOLOGIES INC.
STOCK OPTION AGREEMENT
RECITALS
A. The Board has adopted the Plan for the purpose of retaining the services
of selected Employees, non-employee members of the Board or the board of
directors of any Parent or Subsidiary and consultants and other independent
advisors in the service of the Corporation (or any Parent or Subsidiary).
B. Optionee is to render valuable services to the Corporation (or a Parent
or Subsidiary), and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Corporation's grant
of an option to Optionee.
C. All capitalized terms in this Agreement shall have the meaning assigned
to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of the
Grant Date, an option to purchase up to the number of Option Shares specified in
the Grant Notice. The Option Shares shall be purchasable from time to time
during the option term specified in Paragraph 2 at the Exercise Price.
2. Option Term. This option shall (unless otherwise specified in the Grant
Notice) have a term of ten (10) years measured from the earlier of the vesting
commencement date specified in the Grant Notice or from the Grant Date and shall
accordingly expire at the close of business on the Expiration Date, unless
sooner terminated in accordance with Paragraph 5 or 6.
3. Limited Transferability. During Optionee's lifetime, this option shall
be exercisable only by Optionee and shall not be assignable or transferable
other than by will or by the laws of descent and distribution following
Optionee's death.
4. Dates of Exercise. This option shall become exercisable for the Option
Shares in one or more installments as specified in the Grant Notice. As the
option becomes exercisable for such installments, those installments shall
accumulate, and the option shall remain exercisable for the accumulated
installments until the Expiration Date or sooner termination of the option term
under Paragraph 5 or 6.
5. Cessation of Service. The option term specified in Paragraph 2 shall
terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable (unless
the Grant Notice expressly provides that this Section 5 is inapplicable):
(a) Should Optionee cease to remain in Service for any reason (other
than death, Disability or Misconduct) while this option is outstanding,
then Optionee shall have a period of three (3) months (commencing with the
date of such cessation of Service) during which to exercise this option,
but in no event shall this option be exercisable at any time after the
Expiration Date.
(b) Should Optionee die while this option is outstanding, then the
personal representative of Optionee's estate or the person or persons to
whom the option is transferred pursuant to Optionee's will or in accordance
with the laws of inheritance shall have the right to exercise this option.
Such right shall lapse, and this option shall cease to be outstanding, upon
the earlier of (i) the expiration of the twelve (12)-month period measured
from the date of Optionee's death or (ii) the Expiration Date.
(c) Should Optionee cease Service by reason of Disability while this
option is outstanding, then Optionee shall have a period of twelve (12)
months (commencing with the date of such cessation of Service) during which
to exercise this option. In no event shall this option be exercisable at
any time after the Expiration Date.
Note: Exercise of this option on a date later than three (3)
months following cessation of Service due to Disability will
result in loss of favorable Incentive Option treatment,
unless such Disability constitutes Permanent Disability. In
the event that Incentive Option treatment is not available,
this option will be taxed as a Non-Statutory Option upon
exercise.
(d) During the limited period of post-Service exercisability, this
option may not be exercised in the aggregate for more than the number of
Option Shares in which Optionee is, at the time of Optionee's cessation of
Service, vested pursuant to the Vesting Schedule specified in the Grant
Notice or the special vesting acceleration provisions of Paragraph 6. Upon
the expiration of such limited exercise period or (if earlier) upon the
Expiration Date, this option shall terminate and cease to be outstanding
for any vested Option Shares for which the option has not been exercised.
To the extent Optionee is not vested in one or more Option Shares at the
time of Optionee's cessation of Service, this option shall immediately
terminate and cease to be outstanding with respect to those shares.
(e) Should Optionee's Service be terminated for Misconduct, then this
option shall terminate immediately and cease to remain outstanding.
6. Accelerated Vesting.
(a) In the event of any Corporate Transaction, the Option Shares at
the time subject to this option but not otherwise vested shall
automatically vest in full so that this option shall, immediately prior to
the effective date of the Corporate Transaction, become exercisable for all
of the Option Shares as fully-vested shares and may be exercised for any or
all of those Option Shares as vested shares. However, the Option Shares
shall not vest on such an accelerated basis if and to the extent: (i) this
option is assumed by the successor corporation (or parent thereof) in the
Corporate Transaction and the Corporation's repurchase rights with respect
to the unvested Option Shares are assigned to such successor corporation
(or parent thereof) or (ii) this option is to be replaced with a cash
incentive program of the successor corporation which preserves the spread
existing on the unvested Option Shares at the time of the Corporate
Transaction (the excess of the Fair Market Value of those Option Shares
over the Exercise Price payable for such shares) and provides for
subsequent payout in accordance with the same Vesting Schedule applicable
to those unvested Option Shares as set forth in the Grant Notice.
(b) Immediately following the Corporate Transaction, this option shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately
after such Corporate Transaction, to apply to the number and class of
securities which would have been issuable to Optionee in consummation of
such Corporate Transaction had the option been exercised immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be
made to the Exercise Price, provided the aggregate Exercise Price shall
remain the same.
(d) The Option Shares may also vest upon an accelerated basis in
accordance with the terms and conditions of any special addendum attached
to this Agreement.
(e) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
7. Adjustment in Option Shares. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the total number
and/or class of securities subject to this option and (ii) the Exercise Price in
order to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. Stockholder Rights. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become the record holder
of the purchased shares.
9. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take
the following actions:
(i) Execute and deliver to the Corporation a written notice of
exercise, in the form attached hereto, for the Option Shares for which
the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased shares in
one or more of the following forms:
(A) cash or check made payable to the Corporation; or
(B) a promissory note payable to the Corporation, but only
to the extent authorized by the Plan Administrator in accordance
with Paragraph 13.
Should the Common Stock be registered under Section 12 of
the 1934 Act at the time the option is exercised, then the
Exercise Price may also be paid as follows:
(C) in shares of Common Stock held by Optionee (or any other
person or persons exercising the option) for the requisite period
necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on
the Exercise Date; or
(D) to the extent the option is exercised for vested Option
Shares, through a special sale and remittance procedure pursuant
to which Optionee (or any other person or persons exercising the
option) shall concurrently provide irrevocable instructions (a)
to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
date, sufficient funds to cover the aggregate Exercise Price
payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) to
the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the
sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the written notice of exercise
delivered to the Corporation in connection with the option
exercise.
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(iv) Execute and deliver to the Corporation such written
representations as may be requested by the Corporation in order for it
to comply with the applicable requirements of Federal and state
securities laws.
(v) Make appropriate arrangements with the Corporation (or Parent
or Subsidiary employing or retaining Optionee) for the satisfaction of
all Federal, state and local income and employment tax withholding
requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares, with
the appropriate legends affixed thereto.
(c) In no event may this option be exercised for any fractional
shares.
10. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of the Option Shares
upon such exercise shall be subject to compliance by the Corporation and
Optionee with all applicable requirements of law relating thereto and with
all applicable regulations of any stock exchange (or the Nasdaq National
Market, if applicable) on which the Common Stock may be listed for trading
at the time of such exercise and issuance.
(b) The inability of the Corporation to obtain approval from any
regulatory body having authority deemed by the Corporation to be necessary
to the lawful issuance and sale of any Common Stock pursuant to this option
shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall
not have been obtained. The Corporation, however, shall use its best
efforts to obtain all such approvals.
11. Successors and Assigns. Except to the extent otherwise provided in
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.
12. Notices. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
13. Financing. The Plan Administrator may, in its absolute discretion and
without any obligation to do so, permit Optionee to pay the Exercise Price for
the purchased Option Shares by delivering a full-recourse, interest-bearing
promissory note secured by those Option Shares. The payment schedule in effect
for any such promissory note shall be established by the Plan Administrator in
its sole discretion.
14. Construction. This Agreement and the option evidenced hereby are made
and granted pursuant to the Plan and are in all respects limited by and subject
to the terms of the Plan. All decisions of the Plan Administrator with respect
to any question or issue arising under the Plan or this Agreement shall be
conclusive and binding on all persons having an interest in this option.
15. Governing Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of California without
regard to that State's conflict-of-laws rules.
16. Stockholder Approval. If the Option Shares covered by this Agreement
exceed, as of the Grant Date, the number of shares of Common Stock which may be
issued under the Plan as last approved by the stockholders, then this option
shall be void with respect to such excess shares, unless stockholder approval of
an amendment sufficiently increasing the number of shares of Common Stock
issuable under the Plan is obtained in accordance with the provisions of the
Plan.
17. Additional Terms Applicable to an Incentive Option. In the event this
option is designated an Incentive Option in the Grant Notice, the following
terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax treatment as
an Incentive Option if (and to the extent) this option is exercised for one
or more Option Shares: (i) more than three (3) months after the date
Optionee ceases to be an Employee for any reason other than death or
Permanent Disability or (ii) more than twelve (12) months after the date
Optionee ceases to be an Employee by reason of Permanent Disability.
(b) This option shall not become exercisable in the calendar year in
which granted if (and to the extent) the aggregate Fair Market Value
(determined at the Grant Date) of the Common Stock for which this option
would otherwise first become exercisable in such calendar year would, when
added to the aggregate value (determined as of the date of grant) of the
Common Stock and any other securities for which one or more other Incentive
Options granted to Optionee prior to the Grant Date (whether under the Plan
or any other option plan of the Corporation or any Parent or Subsidiary)
first become exercisable during the same calendar year, exceed One Hundred
Thousand Dollars ($100,000) in the aggregate. To the extent the
exercisability of this option is deferred by reason of the foregoing
limitation, the deferred portion shall become exercisable in the first
calendar year or years thereafter in which the One Hundred Thousand Dollar
($100,000) limitation of this Paragraph 17(b) would not be contravened, but
such deferral shall in all events end immediately prior to the effective
date of a Corporate Transaction in which this option is not to be assumed,
whereupon the option shall become immediately exercisable as a
Non-Statutory Option for the deferred portion of the Option Shares.
(c) Should Optionee hold, in addition to this option, one or more
other options to purchase Common Stock which become exercisable for the
first time in the same calendar year as this option, then the foregoing
limitations on the exercisability of such options as Incentive Options
shall be applied on the basis of the order in which such options are
granted.
PATH 1 NETWORK TECHNOLOGIES INC.
NOTICE OF EXERCISE
To be Executed by the Optionee
In Order to Exercise Options
The undersigned Optionee hereby delivers $_____ and irrevocably elects to
exercise options for _________ Option Shares, and requests that certificates for
such Option Shares shall be issued (bearing appropriate legends) in the name of
such Optionee as follows:
(Please Insert Name and Social Security or Other Identifying Number)
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and be delivered to such Optionee at
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Date Name (Printed)
Signature
Address
Social Security No.
Signature Guaranteed
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Code shall mean the Internal Revenue Code of 1986, as amended.
D. Common Stock shall mean the Corporation's Class A Common Stock.
E. Corporate Transaction shall mean either of the following stockholder-
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or
persons different from the persons holding those securities
immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or substantially all of
the Corporation's assets in complete liquidation or dissolution of the
Corporation.
F. Corporation shall mean Path 1 Network Technologies Inc., a Delaware
corporation.
G. Disability shall mean the inability of Optionee to engage in any
substantial gainful activity by reason of any medically determinable
physical or mental impairment and shall be determined by the Plan
Administrator on the basis of such medical evidence as the Plan
Administrator deems warranted under the circumstances. Disability shall be
deemed to constitute Permanent Disability in the event that such Disability
is expected to result in death or has lasted or can be expected to last for
a continuous period of twelve (12) months or more.
H. Employee shall mean an individual who is in the employ of the Corporation
(or any Parent or Subsidiary), subject to the control and direction of the
employer entity as to both the work to be performed and the manner and
method of performance.
I. Exercise Date shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.
J. Exercise Price shall mean the exercise price payable per Option Share as
specified in the Grant Notice.
K. Expiration Date shall mean the date on which the option expires as
specified in the Grant Notice.
L. Fair Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the closing selling price
per share of Common Stock on the date in question, as the price is
reported by the National Association of Securities Dealers on the
Nasdaq National Market. If there is no closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange, then
the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question on the Stock Exchange determined
by the Plan Administrator to be the primary market for the Common
Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no closing selling price
for the Common Stock on the date in question, then the Fair Market
Value shall be the closing selling price on the last preceding date
for which such quotation exists.
(iii)If the Common Stock is at the time neither listed on any Stock
Exchange nor traded on the Nasdaq National Market, then the Fair
Market Value shall be determined by the Plan Administrator after
taking into account such factors as the Plan Administrator shall deem
appropriate.
X. Xxxxx Date shall mean the date of grant of the option as specified in the
Grant Notice.
X. Xxxxx Notice shall mean the Notice of Grant of Stock Option accompanying
the Agreement, pursuant to which Optionee has been informed of the basic
terms of the option evidenced hereby.
O. Incentive Option shall mean an option which satisfies the requirements of
Code Section 422.
P. Misconduct shall mean the commission of any act of fraud, embezzlement or
dishonesty by Optionee, any unauthorized use or disclosure by Optionee of
confidential information or trade secrets of the Corporation (or any Parent
or Subsidiary), or any other intentional misconduct by Optionee adversely
affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not be
deemed to be inclusive of all the acts or omissions which the Corporation
(or any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of Optionee or any other individual in the Service of the
Corporation (or any Parent or Subsidiary).
Q. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
R. Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.
S. Option Shares shall mean the number of shares of Common Stock subject to
the option.
T. Optionee shall mean the person to whom the option is granted as specified
in the Grant Notice.
U. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the
time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
V. Plan shall mean the Corporation's 2000 Stock Option/Stock Issuance Plan.
W. Plan Administrator shall mean either the Board or a committee of the Board
acting in its capacity as administrator of the Plan.
X. Service shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or an independent consultant.
Y. Stock Exchange shall mean the American Stock Exchange or the New York Stock
Exchange.
Z. Subsidiary shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain
owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in
one of the other corporations in such chain.
AA. Vesting Schedule shall mean the vesting schedule specified in the Grant
Notice pursuant to which the Optionee is to vest in the Option Shares in a
series of installments over his or her period of Service.
