THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN
QUALIFIED WITH THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA
AND THE ISSUANCE OF SUCH SECURITIES OR THE PAYMENT OR RECEIPT OF ANY PART OF
THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL, UNLESS
THE SALE OF SECURITIES IS EXEMPT FROM QUALIFICATION BY SECTION 25100, 25102,
OR 25105 OF THE CALIFORNIA CORPORATIONS CODE. THE RIGHTS OF ALL PARTIES TO
THIS AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING
OBTAINED, UNLESS THE SALE IS SO EXEMPT.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION
THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY
TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES
ACT OF 1933.
PORTOLA COMMUNICATIONS, INC.
IMMEDIATELY EXERCISABLE
NONSTATUTORY STOCK OPTION AGREEMENT
THIS IMMEDIATELY EXERCISABLE NONSTATUTORY STOCK OPTION AGREEMENT (the
"OPTION AGREEMENT") is made and entered into as of _____________, 199___, by
and between Portola Communications, Inc. and __________ (the "OPTIONEE").
The Company has granted to the Optionee pursuant to the Portola
Communications, Inc. 1996 Stock Option Plan (the "PLAN") an option to
purchase certain shares of Stock, upon the terms and conditions set forth in
this Option Agreement (the "OPTION"). The Option shall in all respects be
subject to the terms and conditions of the Plan, the provisions of which are
incorporated herein by reference.
1. DEFINITIONS AND CONSTRUCTION.
1.1 DEFINITIONS. Unless otherwise defined herein, capitalized
terms shall have the meanings assigned to such terms in the Plan. Whenever
used herein, the following terms shall have their respective meanings set
forth below:
(a) "DATE OF OPTION GRANT" means ____________, 199_.
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(b) "NUMBER OF OPTION SHARES" means ___________________ shares
of Stock, as adjusted from time to time pursuant to Section 9.
(c) "EXCHANGE ACT" means the Securities Exchange Act of 1934,
as amended.
(d) "EXERCISE PRICE" means $_____ per share of Stock, as
adjusted from time to time pursuant to Section 9.
(e) "INITIAL EXERCISE DATE" means the later of the Date of
Option Grant or the date the Optionee's Service commences.
(f) "INITIAL VESTING DATE" means the date occurring one (1)
year after (check one):
___ the Date of Option Grant.
___ ____________, 199_, the date the Optionee's Service
commenced.
(g) "VESTED RATIO" means, on any relevant date, the ratio
determined as follows:
VESTED RATIO
------------
Prior to Initial Vesting Date 0
On Initial Vesting Date, 1/4
provided the Optionee's Service
is continuous from the later of
the Date of Option Grant or the
Optionee's Service
commencement date until the
Initial Vesting Date
PLUS
For each full month of the 1/48
Optionee's continuous Service
from the Initial Vesting Date
until the Vested Ratio equals
1/1, an additional
(h) "OPTION EXPIRATION DATE" means the date ten (10) years
after the Date of Option Grant.
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(i) "COMPANY" means Portola Communications, Inc., a California
corporation, or any successor corporation thereto.
(j) "DISABILITY" means the inability of the Optionee, in the
opinion of a qualified physician acceptable to the Company, to perform the
major duties of the Optionee's position with the Participating Company Group
because of the sickness or injury of the Optionee.
(k) "SECURITIES ACT" means the Securities Act of 1933, as
amended.
(l) "SERVICE" means the Optionee's employment or service with
the Participating Company Group, whether in the capacity of an Employee, a
Director or a Consultant. The Optionee's Service shall not be deemed to have
terminated merely because of a change in the capacity in which the Optionee
renders Service to the Participating Company Group or a change in the
Participating Company for which the Optionee renders such Service, provided
that there is no interruption or termination of the Optionee's Service. The
Optionee's Service shall be deemed to have terminated either upon an actual
termination of Service or upon the corporation for which the Optionee
performs Service ceasing to be a Participating Company. Subject to the
foregoing, the Company, in its sole discretion, shall determine whether the
Optionee's Service has terminated and the effective date of such termination.
1.2 CONSTRUCTION. Captions and titles contained herein are for
convenience only and shall not affect the meaning or interpretation of any
provision of this Option Agreement. Except when otherwise indicated by the
context, the singular shall include the plural, the plural shall include the
singular, and the term "or" shall include the conjunctive as well as the
disjunctive.
2. TAX CONSEQUENCES.
2.1 TAX STATUS OF OPTION. This Option is intended to be a
Nonstatutory Stock Option and shall not be treated as an Incentive Stock
Option within the meaning of Section 422(b) of the Code.
2.2 ELECTION UNDER SECTION 83(b) OF THE CODE. If the Optionee
exercises this Option to purchase shares of Stock that are both
nontransferable and subject to a substantial risk of forfeiture, the Optionee
understands that the Optionee should consult with the Optionee's tax advisor
regarding the advisability of filing with the Internal Revenue Service an
election under Section 83(b) of the Code, which must be filed no later than
thirty (30) days after the date on which the Optionee exercises the Option.
Shares acquired upon exercise of the Option are nontransferable and subject
to a substantial risk of forfeiture if, for example, (a) they are unvested
and are subject to a right of the Company to repurchase such shares at the
Optionee's original purchase price if the Optionee's Service terminates, or
(b) the Optionee is subject to a restriction on transfer to comply with
"Pooling-of-Interests Accounting" rules. Failure
3
to file an election under Section 83(b), if appropriate, may result in
adverse tax consequences to the Optionee. The Optionee acknowledges that the
Optionee has been advised to consult with a tax advisor prior to the exercise
of the Option regarding the tax consequences to the Optionee of the exercise
of the Option. AN ELECTION UNDER SECTION 83(b) MUST BE FILED WITHIN 30 DAYS
AFTER THE DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD
CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A
SECTION 83(b) ELECTION IS THE OPTIONEE'S SOLE RESPONSIBILITY, EVEN IF THE
OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON
HIS OR HER BEHALF.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board, including any duly
appointed Committee of the Board. All determinations by the Board shall be
final and binding upon all persons having an interest in the Option. Any
officer of a Participating Company shall have the authority to act on behalf
of the Company with respect to any matter, right, obligation, or election
which is the responsibility of or which is allocated to the Company herein,
provided the officer has apparent authority with respect to such matter,
right, obligation, or election.
4. EXERCISE OF THE OPTION.
4.1 RIGHT TO EXERCISE.
(a) Except as otherwise provided herein, the Option shall be
exercisable on and after the Initial Exercise Date and prior to the
termination of the Option (as provided in Section 6) in an amount not to
exceed the Number of Option Shares less the number of shares previously
acquired upon exercise of the Option, subject to the Optionee's agreement
that any shares purchased upon exercise are subject to the Company's
repurchase rights set forth in Section 11 and Section 12.
4.2 METHOD OF EXERCISE. Exercise of the Option shall be by written
notice to the Company which must state the election to exercise the Option,
the number of whole shares of Stock for which the Option is being exercised
and such other representations and agreements as to the Optionee's investment
intent with respect to such shares as may be required pursuant to the
provisions of this Option Agreement. The written notice must be signed by
the Optionee and must be delivered in person, by certified or registered
mail, return receipt requested, by confirmed facsimile transmission, or by
such other means as the Company may permit, to the Chief Financial Officer of
the Company, or other authorized representative of the Participating Company
Group, prior to the termination of the Option as set forth in Section 6,
accompanied by (i) full payment of the aggregate Exercise Price for the
number of shares of Stock being purchased and (ii) an executed copy, if
required herein, of the then current forms of escrow and security agreement
referenced below. The Option shall be deemed to be exercised upon receipt by
the Company of such written notice, the aggregate Exercise Price, and, if
required by the Company, such executed agreements.
4
4.3 PAYMENT OF EXERCISE PRICE.
(a) FORMS OF CONSIDERATION AUTHORIZED. Except as otherwise
provided below, payment of the aggregate Exercise Price for the number of
shares of Stock for which the Option is being exercised shall be made (i) in
cash, by check, or cash equivalent, (ii) by tender to the Company of whole
shares of Stock owned by the Optionee having a Fair Market Value (as
determined by the Company without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company) not less
than the aggregate Exercise Price, (iii) by means of a Cashless Exercise, as
defined in Section 4.3(c), (iv) in the Company's sole discretion at the time
the Option is exercised, by the Optionee's promissory note for the aggregate
Exercise Price, or (v) by any combination of the foregoing.
(b) TENDER OF STOCK. Notwithstanding the foregoing, the
Option may not be exercised by tender to the Company of shares of Stock to
the extent such tender of Stock would constitute a violation of the
provisions of any law, regulation or agreement restricting the redemption of
the Company's stock. The Option may not be exercised by tender to the
Company of shares of Stock unless such shares either have been owned by the
Optionee for more than six (6) months or were not acquired, directly or
indirectly, from the Company.
(c) CASHLESS EXERCISE. A "CASHLESS EXERCISE" means the
assignment in a form acceptable to the Company of the proceeds of a sale or
loan with respect to some or all of the shares of Stock acquired upon the
exercise of the Option pursuant to a program or procedure approved by the
Company (including, without limitation, through an exercise complying with
the provisions of Regulation T as promulgated from time to time by the Board
of Governors of the Federal Reserve System). The Company reserves, at any
and all times, the right, in the Company's sole and absolute discretion, to
decline to approve or terminate any such program or procedure.
(d) PAYMENT BY PROMISSORY NOTE. No promissory note shall be
permitted if an exercise of the Option using a promissory note would be a
violation of any law. The promissory note permitted in clause (iv) of
Section 4.3(a) shall be a full recourse note in a form satisfactory to the
Company, with principal payable no more than four (4) years after the date
the Option is exercised. Interest on the principal balance of the promissory
note shall be payable in annual installments at the minimum interest rate
necessary to avoid imputed interest pursuant to all applicable sections of
the Code. Such recourse promissory note shall be secured by the shares of
Stock acquired pursuant to the then current form of security agreement as
approved by the Company. At any time the Company is subject to the
regulations promulgated by the Board of Governors of the Federal Reserve
System or any other governmental entity affecting the extension of credit in
connection with the Company's securities, any promissory note shall comply
with such applicable regulations, and the Optionee shall pay the unpaid
principal and accrued interest, if any, to the extent necessary to comply
with such applicable
5
regulations. Except as the Company in its sole discretion shall determine,
the Optionee shall pay the unpaid principal balance of the promissory note
and any accrued interest thereon upon termination of the Optionee's Service
with the Participating Company Group for any reason, with or without cause.
4.4 TAX WITHHOLDING. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the
Optionee hereby authorizes withholding from payroll and any other amounts
payable to the Optionee, and otherwise agrees to make adequate provision for
(including by means of a Cashless Exercise to the extent permitted by the
Company), any sums required to satisfy the federal, state, local and foreign
tax withholding obligations of the Participating Company Group, if any, which
arise in connection with the Option, including, without limitation,
obligations arising upon (i) the exercise, in whole or in part, of the
Option, (ii) the transfer, in whole or in part, of any shares acquired upon
exercise of the Option, (iii) the operation of any law or regulation
providing for the imputation of interest, or (iv) the lapsing of any
restriction with respect to any shares acquired upon exercise of the Option.
The Optionee is cautioned that the Option is not exercisable unless the tax
withholding obligations of the Participating Company Group are satisfied.
Accordingly, the Optionee may not be able to exercise the Option when desired
even though the Option is vested, and the Company shall have no obligation to
issue a certificate for such shares or release such shares from any escrow
provided for herein.
4.5 CERTIFICATE REGISTRATION. Except in the event the Exercise
Price is paid by means of a Cashless Exercise, the certificate for the shares
as to which the Option is exercised shall be registered in the name of the
Optionee, or, if applicable, in the names of the heirs of the Optionee.
4.6 RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES.
The grant of the Option and the issuance of shares of Stock upon exercise of
the Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option
may not be exercised if the issuance of shares of Stock upon exercise would
constitute a violation of any applicable federal, state or foreign securities
laws or other law or regulations or the requirements of any stock exchange or
market system upon which the Stock may then be listed. In addition, the
Option may not be exercised unless (i) a registration statement under the
Securities Act shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable
exemption from the registration requirements of the Securities Act. THE
OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE
FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE
TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. The
inability of the Company to obtain from any regulatory body having
jurisdiction the authority, if any, deemed by the Company's legal counsel to
be necessary to the lawful issuance and sale of any shares subject to the
Option shall
6
relieve the Company of any liability in respect of the failure to issue or
sell such shares as to which such requisite authority shall not have been
obtained. As a condition to the exercise of the Option, the Company may
require the Optionee to satisfy any qualifications that may be necessary or
appropriate, to evidence compliance with any applicable law or regulation and
to make any representation or warranty with respect thereto as may be
requested by the Company.
4.7 FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NONTRANSFERABILITY OF THE OPTION. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or transferred in
any manner except by will or by the laws of descent and distribution.
Following the death of the Optionee, the Option, to the extent provided in
Section 7, may be exercised by the Optionee's legal representative or by any
person empowered to do so under the deceased Optionee's will or under the
then applicable laws of descent and distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may
no longer be exercised on the first to occur of (a) the Option Expiration
Date, (b) the last date for exercising the Option following termination of
the Optionee's Service as described in Section 7, or (c) a Transfer of
Control to the extent provided in Section 8.
7. EFFECT OF TERMINATION OF SERVICE.
7.1 OPTION EXERCISABILITY.
(a) DISABILITY. If the Optionee's Service with the
Participating Company Group is terminated because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date
on which the Optionee's Service terminated, may be exercised by the Optionee
(or the Optionee's guardian or legal representative) at any time prior to the
expiration of six (6) months after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.
(b) DEATH. If the Optionee's Service with the Participating
Company Group is terminated because of the death of the Optionee, the Option,
to the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee (or the Optionee's legal
representative, or other person who acquired the right to exercise the Option
by reason of the Optionee's death) at any time prior to the expiration of six
(6) months after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date. The Optionee's Service
shall be deemed to have terminated on account of death if the Optionee dies
within thirty (30) days after the Optionee's termination of Service (other
than due to a Termination For Cause).
7
(c) TERMINATION AFTER TRANSFER OF CONTROL. If the Optionee's
Service with the Participating Company Group is terminated because of a
Termination After Transfer of Control (as defined below), (i) the Option, to
the extent unexercised and exercisable on the date on which the Optionee's
Service terminated, may be exercised by the Optionee (or the Optionee's
guardian or legal representative) at any time prior to the expiration of six
(6) months after the date on which the Optionee's Service terminated, but in
any event no later than the Option Expiration Date, and (ii) solely for
purposes of computing the Vested Ratio, the Optionee shall be given credit
for an additional twelve (12) months of continuous Service; provided,
however, that in no event shall the Vested Ratio exceed 1/1.
(d) OTHER TERMINATION OF SERVICE. If the Optionee's Service
with the Participating Company Group terminates for any reason, except
Disability, death, or Termination After Transfer of Control, the Option, to
the extent unexercised and exercisable by the Optionee on the date on which
the Optionee's Service terminated, may be exercised by the Optionee within
thirty (30) days (or such other longer period of time as determined by the
Board, in its sole discretion) after the date on which the Optionee's Service
terminated, but in any event no later than the Option Expiration Date.
7.2 CERTAIN DEFINITIONS.
(a) "TERMINATION AFTER TRANSFER OF CONTROL" shall mean either
of the following events occurring within twelve (12) months after a Transfer
of Control (as defined in Section 8.1(b) below):
(i) termination by the Participating Company Group of
the Optionee's Service with the Participating Company Group for any reason
other than a Termination For Cause; or
(ii) the Optionee's resignation from Service with the
Participating Company Group within a reasonable period of time following any
Constructive Termination (as defined below).
Notwithstanding any provision herein to the contrary, Termination After
Transfer of Control shall not include any termination of the Optionee's
Service with the Participating Company Group which (1) is a Termination For
Cause; (2) is a result of the Optionee's death or Disability; (3) is a result
of the Optionee's voluntary termination of Service other than upon
Constructive Termination (as defined below); or (4) occurs prior to the
effectiveness of a Transfer of Control.
(b) "TERMINATION FOR CAUSE" shall mean termination by the
Participating Company Group of the Optionee's Service with the Participating
Company Group for any of the following reasons: (i) theft, dishonesty, or
falsification of any Participating Company records; (ii) improper use or
disclosure of a Participating Company's confidential or proprietary
information; (iii) any action by the Optionee which has a detrimental effect
on a Participating Company's reputation
8
or business; (iv) the Optionee's failure or inability to perform any
reasonable assigned duties after written notice from the Participating
Company Group of, and a reasonable opportunity to cure, such failure or
inability; (v) any material breach by the Optionee of any employment
agreement between the Optionee and the Participating Company Group, which
breach is not cured pursuant to the terms of such agreement; or (vi) the
Optionee's conviction of any criminal act which impairs the Optionee's
ability to perform his or her duties with the Participating Company Group.
(c) "CONSTRUCTIVE TERMINATION" shall mean any one or more of
the following:
(i) without the Optionee's express written consent, the
assignment to the Optionee of any duties, or any limitation of the Optionee's
responsibilities, substantially inconsistent with the Optionee's positions,
duties, responsibilities and status with the Participating Company Group
immediately prior to the date of the Transfer of Control;
(ii) without the Optionee's express written consent, the
relocation of the principal place of the Optionee's employment to a location
that is more than fifty (50) miles from the Optionee's principal place of
employment immediately prior to the date of the Transfer of Control, or the
imposition of travel requirements substantially more demanding of the
Optionee than such travel requirements existing immediately prior to the date
of the Transfer of Control;
(iii) any failure by the Participating Company Group to
pay, or any material reduction by the Participating Company Group of, (1) the
Optionee's base salary in effect immediately prior to the date of the
Transfer of Control (unless reductions comparable in amount and duration are
concurrently made for all other employees of the Participating Company Group
with responsibilities organizational level and title comparable to the
Optionee's), or (2) the Optionee's bonus compensation, if any, in effect
immediately prior to the date of the Transfer of Control (subject to
applicable performance requirements with respect to the actual amount of
bonus compensation earned by the Optionee); or
(iv) any failure by the Participating Company Group to
(1) continue to provide the Optionee with the opportunity to participate, on
terms no less favorable than those in effect for the benefit of any employee
group which customarily includes a person holding the employment position or
a comparable position with the Participating Company Group then held by the
Optionee, in any benefit or compensation plans and programs, including, but
not limited to, the Participating Company Group's life, disability, health,
dental, medical, savings, profit sharing, stock purchase and retirement
plans, if any, in which the Optionee was participating immediately prior to
the date of the Transfer of Control, or their equivalent, or (2) provide the
Optionee with all other fringe benefits (or their equivalent) from time to
time in effect for the benefit of any employee group which
9
customarily includes a person holding the employment position or a comparable
position with the Participating Company Group then held by the Optionee.
7.3 ADDITIONAL LIMITATIONS ON OPTION EXERCISE. Notwithstanding the
provisions of Section 7.1, the Option may not be exercised after the
Optionee's termination of Service to the extent that the shares to be
acquired upon exercise of the Option would be subject to the Unvested Share
Repurchase Option as provided in Section 11. Except as the Company and the
Optionee otherwise agree, exercise of the Option pursuant to Section 7.1
following termination of the Optionee's Service may not be made by delivery
of a promissory note as provided in Section 43(a).
7.4 EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods
set forth in Section 7.1 is prevented by the provisions of Section 4.6, the
Option shall remain exercisable until three (3) months after the date the
Optionee is notified by the Company that the Option is exercisable, but in
any event no later than the Option Expiration Date.
7.5 EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b).
Notwithstanding the foregoing, if a sale within the applicable time periods
set forth in Section 7.1 of shares acquired upon the exercise of the Option
would subject the Optionee to suit under Section 16(b) of the Exchange Act,
the Option shall remain exercisable until the earliest to occur of (i) the
tenth (10th) day following the date on which a sale of such shares by the
Optionee would no longer be subject to such suit, (ii) the one hundred and
ninetieth (190th) day after the Optionee's termination of Service, or (iii)
the Option Expiration Date.
7.6 LEAVE OF ABSENCE. For purposes of Section 7.1, the Optionee's
Service with the Participating Company Group shall not be deemed to terminate
if the Optionee takes any military leave, sick leave, or other bona fide
leave of absence approved by the Company of ninety (90) days or less. In the
event of a leave of absence in excess of ninety (90) days, the Optionee's
Service shall be deemed to terminate on the ninety-first (91st) day of such
leave unless the Optionee's right to reemployment with the Participating
Company Group remains guaranteed by statute or contract. Notwithstanding the
foregoing, unless otherwise designated by the Company (or required by law), a
leave of absence shall not be treated as Service for purposes of determining
the Optionee's Vested Ratio.
8. TRANSFER OF CONTROL.
8.1 DEFINITIONS.
(a) An "OWNERSHIP CHANGE EVENT" shall be deemed to have
occurred if any of the following occurs with respect to the Company:
10
(i) the direct or indirect sale or exchange in a single
or series of related transactions by the shareholders of the Company of more
than fifty percent (50%) of the voting stock of the Company;
(ii) a merger or consolidation in which the Company is a
party; or
(iii) the sale, exchange, or transfer of all or
substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A "TRANSFER OF CONTROL" shall mean an Ownership Change
Event or a series of related Ownership Change Events (collectively, the
"TRANSACTION") wherein the shareholders of the Company immediately before the
Transaction do not retain immediately after the Transaction, in substantially
the same proportions as their ownership of shares of the Company's voting
stock immediately before the Transaction, direct or indirect beneficial
ownership of more than fifty percent (50%) of the total combined voting power
of the outstanding voting stock of the Company or the corporation or
corporations to which the assets of the Company were transferred (the
"TRANSFEREE CORPORATION(S)"), as the case may be. For purposes of the
preceding sentence, indirect beneficial ownership shall include, without
limitation, an interest resulting from ownership of the voting stock of one
or more corporations which, as a result of the Transaction, own the Company
or the Transferee Corporation(s), as the case may be, either directly or
through one or more subsidiary corporations. The Board shall have the right
to determine whether multiple sales or exchanges of the voting stock of the
Company or multiple Ownership Change Events are related, and its
determination shall be final, binding and conclusive.
8.2 EFFECT OF TRANSFER OF CONTROL ON OPTION. In the event of a Transfer
of Control, the surviving, continuing, successor, or purchasing corporation
or parent corporation thereof, as the case may be (the "Acquiring
Corporation"), may either assume the Company's rights and obligations under
the Option or substitute for the Option a substantially equivalent option for
the Acquiring Corporation's stock. The Option shall terminate and cease to
be outstanding effective as of the date of the Transfer of Control to the
extent that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of
the date of the Transfer of Control. Notwithstanding the foregoing, shares
acquired upon exercise of the Option prior to the Transfer of Control and any
consideration received pursuant to the Transfer of Control with respect to
such shares shall continue to be subject to all applicable provisions of this
Option Agreement except as otherwise provided herein. Furthermore,
notwithstanding the foregoing, if the corporation the stock of which is subject
to the Option immediately prior to an Ownership Change Event described in
Section 8.1(a)(i) constituting a Transfer of Control is the surviving or
continuing corporation and immediately after such Ownership Change Event less
than fifty percent (50%) of the total combined voting power of its voting
stock is held by another corporation or by other corporations that
11
are members of an affiliated group within the meaning of Section 1504(a) of
the Code without regard to the provisions of Section 1504(b) of the Code, the
Option shall not terminate unless the Board otherwise provides in its sole
discretion.
9. ADJUSTMENTS FOR CHANGES IN CAPITAL STRUCTURE. In the event of any
stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification, or similar change in the capital structure of
the Company, appropriate adjustments shall be made in the number, Exercise
Price and class of shares of stock subject to the Option. If a majority of
the shares which are of the same class as the shares that are subject to the
Option are exchanged for, converted into, or otherwise become (whether or not
pursuant to an Ownership Change Event) shares of another corporation (the
"NEW SHARES"), the Board may unilaterally amend the Option to provide that
the Option is exercisable for New Shares. In the event of any such
amendment, the Number of Option Shares and the Exercise Price shall be
adjusted in a fair and equitable manner, as determined by the Board, in its
sole discretion. Notwithstanding the foregoing, any fractional share
resulting from an adjustment pursuant to this Section 9 shall be rounded up
or down to the nearest whole number, as determined by the Board, and in no
event may the Exercise Price be decreased to an amount less than the par
value, if any, of the stock subject to the Option. The adjustments
determined by the Board pursuant to this Section 9 shall be final, binding
and conclusive.
10. RIGHTS AS A SHAREHOLDER, EMPLOYEE OR CONSULTANT. The Optionee shall
have no rights as a shareholder with respect to any shares covered by the
Option until the date of the issuance of a certificate for the shares for
which the Option has been exercised (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the
Company). No adjustment shall be made for dividends, distributions or other
rights for which the record date is prior to the date such certificate is
issued, except as provided in Section 9. Nothing in this Option Agreement
shall confer upon the Optionee any right to continue in the Service of a
Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Optionee's Service as an
Employee or Consultant, as the case may be, at any time.
11. UNVESTED SHARE REPURCHASE OPTION.
11.1 GRANT OF UNVESTED SHARE REPURCHASE OPTION. In the event
the Optionee's Service with the Participating Company Group is terminated for
any reason or no reason, with or without cause, or, if the Optionee, the
Optionee's legal representative, or other holder of shares acquired upon
exercise of the Option attempts to sell, exchange, transfer, pledge, or
otherwise dispose of (other than pursuant to an Ownership Change Event) any
shares acquired upon exercise of the Option which exceed the Vested Shares as
defined in Section 11.2 below (the "UNVESTED SHARES"), the Company shall have
the right to repurchase the Unvested Shares under the terms and subject to
the conditions set forth in this Section 11 (the "UNVESTED SHARE REPURCHASE
OPTION").
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11.2 VESTED SHARES AND UNVESTED SHARES DEFINED. The "VESTED
SHARES" shall mean, on any given date, a number of shares of Stock equal to
the Number of Option Shares multiplied by the Vested Ratio determined as of
such date and rounded down to the nearest whole share. On such given date,
the "UNVESTED SHARES" shall mean the number of shares of Stock acquired upon
exercise of the Option which exceed the Vested Shares determined as of such
date.
11.3 EXERCISE OF UNVESTED SHARE REPURCHASE OPTION. The Company
may exercise the Unvested Share Repurchase Option by written notice delivered
personally or forwarded by first class mail to the Optionee within sixty (60)
days after (a) termination of the Optionee's Service (or exercise of the
Option, if later) or (b) the Company has received notice of the attempted
disposition of Unvested Shares. If the Company fails to give notice within
such sixty (60) day period, the Unvested Share Repurchase Option shall
terminate unless the Company and the Optionee have extended the time for the
exercise of the Unvested Share Repurchase Option. The Unvested Share
Repurchase Option must be exercised, if at all, for all of the Unvested
Shares, except as the Company and the Optionee otherwise agree.
11.4 PAYMENT FOR SHARES AND RETURN OF SHARES TO COMPANY. The
purchase price per share being repurchased by the Company shall be an amount
equal to the Optionee's original cost per share, as adjusted pursuant to
Section 9 (the "REPURCHASE PRICE"). The Company shall pay the aggregate
Repurchase Price to the Optionee in cash within thirty (30) days after the
date of personal delivery or mailing of the written notice of the Company's
exercise of the Unvested Share Repurchase Option. For purposes of the
foregoing, cancellation of any indebtedness of the Optionee to any
Participating Company shall be treated as payment to the Optionee in cash to
the extent of the unpaid principal and any accrued interest canceled. The
shares being repurchased shall be delivered to the Company by the Optionee at
the same time as the delivery of the Repurchase Price to the Optionee.
11.5 ASSIGNMENT OF UNVESTED SHARE REPURCHASE OPTION. The
Company shall have the right to assign the Unvested Share Repurchase Option
at any time, whether or not such option is then exercisable, to one or more
persons as may be selected by the Company.
11.6 OWNERSHIP CHANGE EVENT. Upon the occurrence of an
Ownership Change Event, any and all new, substituted or additional securities
or other property to which the Optionee is entitled by reason of the
Optionee's ownership of Unvested Shares shall be immediately subject to the
Unvested Share Repurchase Option and included in the terms "Stock" and
"Unvested Shares" for all purposes of the Unvested Share Repurchase Option
with the same force and effect as the Unvested Shares immediately prior to
the Ownership Change Event. While the aggregate Repurchase Price shall remain
the same after such Ownership Change Event, the Repurchase Price per Unvested
Share upon exercise of the Unvested Share Repurchase Option following such
Ownership Change Event shall be adjusted as appropriate. For purposes of
determining the Vested Ratio following an Ownership Change Event, credited
Service shall include all Service with any corporation which is a
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Participating Company at the time the Service is rendered, whether or not
such corporation is a Participating Company both before and after the
Ownership Change Event.
12. RIGHT OF FIRST REFUSAL.
12.1 GRANT OF RIGHT OF FIRST REFUSAL. Except as provided in
Section 12.7 below, in the event the Optionee, the Optionee's legal
representative, or other holder of shares acquired upon exercise of the
Option proposes to sell, exchange, transfer, pledge, or otherwise dispose of
any Vested Shares (the "TRANSFER SHARES") to any person or entity, including,
without limitation, any shareholder of the Participating Company Group, the
Company shall have the right to repurchase the Transfer Shares under the
terms and subject to the conditions set forth in this Section 12 (the "RIGHT
OF FIRST REFUSAL").
12.2 NOTICE OF PROPOSED TRANSFER. Prior to any proposed
transfer of the Transfer Shares, the Optionee shall give a written notice
(the "TRANSFER NOTICE") to the Company describing fully the proposed
transfer, including the number of Transfer Shares, the name and address of
the proposed transferee (the "PROPOSED TRANSFEREE") and, if the transfer is
voluntary, the proposed transfer price, and containing such information
necessary to show the bona fide nature of the proposed transfer. In the
event of a bona fide gift or involuntary transfer, the proposed transfer
price shall be deemed to be the Fair Market Value of the Transfer Shares, as
determined by the Board in good faith. If the Optionee proposes to transfer
any Transfer Shares to more than one Proposed Transferee, the Optionee shall
provide a separate Transfer Notice for the proposed transfer to each Proposed
Transferee. The Transfer Notice shall be signed by both the Optionee and the
Proposed Transferee and must constitute a binding commitment of the Optionee
and the Proposed Transferee for the transfer of the Transfer Shares to the
Proposed Transferee subject only to the Right of First Refusal.
12.3 BONA FIDE TRANSFER. If the Company determines that the
information provided by the Optionee in the Transfer Notice is insufficient
to establish the bona fide nature of a proposed voluntary transfer, the
Company shall give the Optionee written notice of the Optionee's failure to
comply with the procedure described in this Section 12, and the Optionee
shall have no right to transfer the Transfer Shares without first complying
with the procedure described in this Section 12. The Optionee shall not be
permitted to transfer the Transfer Shares if the proposed transfer is not
bona fide.
12.4 EXERCISE OF RIGHT OF FIRST REFUSAL. If the Company
determines the proposed transfer to be bona fide, the Company shall have the
right to purchase all, but not less than all, of the Transfer Shares (except
as the Company and the Optionee otherwise agree) at the purchase price and on
the terms set forth in the Transfer Notice by delivery to the Optionee of a
notice of exercise of the Right of First Refusal within thirty (30) days
after the date the Transfer Notice is delivered to the Company. The
Company's exercise or failure to exercise the Right of First Refusal
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with respect to any proposed transfer described in a Transfer Notice shall
not affect the Company's right to exercise the Right of First Refusal with
respect to any proposed transfer described in any other Transfer Notice,
whether or not such other Transfer Notice is issued by the Optionee or issued
by a person other than the Optionee with respect to a proposed transfer to
the same Proposed Transferee. If the Company exercises the Right of First
Refusal, the Company and the Optionee shall thereupon consummate the sale of
the Transfer Shares to the Company on the terms set forth in the Transfer
Notice within sixty (60) days after the date the Transfer Notice is delivered
to the Company (unless a longer period is offered by the Proposed
Transferee); provided, however, that in the event the Transfer Notice
provides for the payment for the Transfer Shares other than in cash, the
Company shall have the option of paying for the Transfer Shares by the
present value cash equivalent of the consideration described in the Transfer
Notice as reasonably determined by the Company. For purposes of the
foregoing, cancellation of any indebtedness of the Optionee to any
Participating Company shall be treated as payment to the Optionee in cash to
the extent of the unpaid principal and any accrued interest canceled.
12.5 FAILURE TO EXERCISE RIGHT OF FIRST REFUSAL. If the
Company fails to exercise the Right of First Refusal in full (or to such
lesser extent as the Company and the Optionee otherwise agree) within the
period specified in Section 12.4 above, the Optionee may conclude a transfer
to the Proposed Transferee of the Transfer Shares on the terms and conditions
described in the Transfer Notice, provided such transfer occurs not later
than ninety (90) days following delivery to the Company of the Transfer
Notice. The Company shall have the right to demand further assurances from
the Optionee and the Proposed Transferee (in a form satisfactory to the
Company) that the transfer of the Transfer Shares was actually carried out on
the terms and conditions described in the Transfer Notice. No Transfer
Shares shall be transferred on the books of the Company until the Company has
received such assurances, if so demanded, and has approved the proposed
transfer as bona fide. Any proposed transfer on terms and conditions
different from those described in the Transfer Notice, as well as any
subsequent proposed transfer by the Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by the Optionee with the
procedure described in this Section 12.
12.6 TRANSFEREES OF TRANSFER SHARES. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to all of the terms and
conditions of this Option Agreement, including this Section 12 providing for
the Right of First Refusal with respect to any subsequent transfer. Any sale
or transfer of any shares acquired upon exercise of the Option shall be void
unless the provisions of this Section 12 are met.
12.7 TRANSFERS NOT SUBJECT TO RIGHT OF FIRST REFUSAL. The
Right of First Refusal shall not apply to any transfer or exchange of the
shares acquired upon exercise of the Option if such transfer or exchange is
in connection with an
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Ownership Change Event. If the consideration received pursuant to such
transfer or exchange consists of stock of a Participating Company, such
consideration shall remain subject to the Right of First Refusal unless the
provisions of Section 12.9 below result in a termination of the Right of
First Refusal.
12.8 ASSIGNMENT OF RIGHT OF FIRST REFUSAL. The Company shall
have the right to assign the Right of First Refusal at any time, whether or
not there has been an attempted transfer, to one or more persons as may be
selected by the Company.
12.9 EARLY TERMINATION OF RIGHT OF FIRST REFUSAL. The other
provisions of this Option Agreement notwithstanding, the Right of First
Refusal shall terminate and be of no further force and effect upon (a) the
occurrence of a Transfer of Control, unless the Acquiring Corporation assumes
the Company's rights and obligations under the Option or substitutes a
substantially equivalent option for the Acquiring Corporation's stock for the
Option, or (b) the existence of a public market for the class of shares
subject to the Right of First Refusal. A "PUBLIC MARKET" shall be deemed to
exist if (i) such stock is listed on a national securities exchange (as that
term is used in the Exchange Act) or (ii) such stock is traded on the
over-the-counter market and prices therefor are published daily on business
days in a recognized financial journal.
13. ESCROW.
13.1 ESTABLISHMENT OF ESCROW. To ensure that shares subject to
the Unvested Share Repurchase Option or the Right of First Refusal or
securing any promissory note will be available for repurchase, the Company
may require the Optionee to deposit the certificate evidencing the shares
which the Optionee purchases upon exercise of the Option with an agent
designated by the Company under the terms and conditions of escrow and
security agreements approved by the Company. If the Company does not require
such deposit as a condition of exercise of the Option, the Company reserves
the right at any time to require the Optionee to so deposit the certificate
in escrow. Upon the occurrence of an Ownership Change Event or a change, as
described in Section 9, in the character or amount of any of the outstanding
stock of the corporation the stock of which is subject to the provisions of
this Option Agreement, any and all new, substituted or additional securities
or other property to which the Optionee is entitled by reason of the
Optionee's ownership of shares of Stock acquired upon exercise of the Option
that remain, following such Ownership Change Event or change described in
Section 9, subject to the Unvested Share Repurchase Option, the Right of
First Refusal or any security interest held by the Company shall be
immediately subject to the escrow to the same extent as such shares of Stock
immediately before such event. The Company shall bear the expenses of the
escrow.
13.2 DELIVERY OF SHARES TO OPTIONEE. As soon as practicable
after the expiration of the Unvested Share Repurchase Option and the Right of
First Refusal and after full repayment of any promissory note secured by the
shares or other property in escrow, but not more frequently than twice each
calendar year, the
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escrow agent shall deliver to the Optionee the shares and any other property
no longer subject to such restrictions and no longer securing any promissory
note.
13.3 NOTICES AND PAYMENTS. In the event the shares and any
other property held in escrow are subject to the Company's exercise of the
Unvested Share Repurchase Option or the Right of First Refusal, the notices
required to be given to the Optionee shall be given to the escrow agent, and
any payment required to be given to the Optionee shall be given to the escrow
agent. Within thirty (30) days after payment by the Company, the escrow
agent shall deliver the shares and any other property which the Company has
purchased to the Company and shall deliver the payment received from the
Company to the Optionee.
14. STOCK DISTRIBUTIONS SUBJECT TO OPTION AGREEMENT. If, from time to
time, there is any stock dividend, stock split or other change, as described
in Section 9, in the character or amount of any of the outstanding stock of
the corporation the stock of which is subject to the provisions of this
Option Agreement, then in such event any and all new, substituted or
additional securities to which the Optionee is entitled by reason of the
Optionee's ownership of the shares acquired upon exercise of the Option shall
be immediately subject to the Unvested Share Repurchase Option, the Right of
First Refusal, and any security interest held by the Company with the same
force and effect as the shares subject to the Unvested Share Repurchase
Option, the Right of First Refusal, and such security interest immediately
before such event.
15. LEGENDS. The Company may at any time place legends referencing the
Unvested Share Repurchase Option, the Right of First Refusal, and any
applicable federal, state or foreign securities law restrictions on all
certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly
present to the Company any and all certificates representing shares acquired
pursuant to the Option in the possession of the Optionee in order to carry
out the provisions of this Section. Unless otherwise specified by the
Company, legends placed on such certificates may include, but shall not be
limited to, the following:
15.1 "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS
MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY
RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY
SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT."
15.2 Any legend required to be placed thereon by the
Commissioner of Corporations of the State of California.
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15.3 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
AN UNVESTED SHARE REPURCHASE OPTION IN FAVOR OF THE CORPORATION OR ITS
ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED
HOLDER, OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE
AT THE PRINCIPAL OFFICE OF THIS CORPORATION."
15.4 "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE
SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER,
OR SUCH HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICE OF THIS CORPORATION."
16. PUBLIC OFFERING. The Optionee hereby agrees that in the event of
any underwritten public offering of stock, including an initial public
offering of stock, made by the Company pursuant to an effective registration
statement filed under the Securities Act, the Optionee shall not offer, sell,
contract to sell, pledge, hypothecate, grant any option to purchase or make
any short sale of, or otherwise dispose of any shares of stock of the Company
or any rights to acquire stock of the Company for such period of time from
and after the effective date of such registration statement as may be
established by the underwriter for such public offering; provided, however,
that such period of time shall not exceed one hundred eighty (180) days from
the effective date of the registration statement to be filed in connection
with such public offering. The foregoing limitation shall not apply to
shares registered in the public offering under the Securities Act. The
Optionee shall be subject to this Section provided and only if the officers
and directors of the Company are also subject to similar arrangements.
17. BINDING EFFECT. Subject to the restrictions on transfer set forth
herein, this Option Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
18. TERMINATION OR AMENDMENT. The Board may terminate or amend the Plan
or the Option at any time; provided, however, that except as provided in
Section 8.2 in connection with a Transfer of Control, no such termination or
amendment may adversely affect the Option or any unexercised portion hereof
without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation. No
amendment or addition to this Option Agreement shall be effective unless in
writing.
19. INTEGRATED AGREEMENT. This Option Agreement and the Plan constitute
the entire understanding and agreement of the Optionee and the Participating
Company Group with respect to the subject matter contained herein and therein
and there are no agreements, understandings, restrictions, representations,
or warranties among the Optionee and the Participating Company Group with
respect to such subject matter other than those as set forth or provided for
herein or therein. To the
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extent contemplated herein or therein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
20. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the
State of California.
PORTOLA COMMUNICATIONS, INC.
By:
--------------------------------
Title:
-----------------------------
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Unvested Share Repurchase
Option set forth in Section 11 and the Right of First Refusal set forth in
Section 12, and hereby accepts the Option subject to all of the terms and
provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Option Agreement. The undersigned acknowledges
receipt of a copy of the Plan.
OPTIONEE
Date:
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