BBN INTERNET SERVICES CORPORATION
EXHIBIT 10.3
1994 STOCK OPTION PLAN
1. PURPOSE
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The purpose of this 1994 Stock Option Plan (the "Plan") is to
advance the interests of BBN Internet Services Corporation (the
"Company") by enhancing the ability of the Company and its parent and
subsidiaries to attract and retain able employees, consultants or
advisors to the Company; to reward such individuals for their
contributions; and to encourage such individuals to take into account
the long-term interests of the Company through interests in shares of
the Company's common stock, $.01 par value (the "Stock"). Any
employee, consultant, or advisor selected to receive an award under
the Plan is referred to as a "participant".
Options granted pursuant to the Plan may be incentive stock
options as defined in section 422 of the Internal Revenue Code of 1986
(as from time to time amended, the "Code") (any option that is
intended so to qualify as an incentive stock option being referred to
herein as an "incentive option"), or options that are not incentive
options, or both. Except as otherwise expressly provided with respect
to an option grant, no option granted pursuant to the Plan shall be an
incentive option.
2. ADMINISTRATION
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The Plan shall be administered by the Board of Directors (the
"Board") of the Company. The Board shall have authority, not
inconsistent with the express provisions of the Plan: (a) to grant
awards consisting of options or stock appreciation rights ("SARs"), or
both, to such participants as the Board may select; (b) to determine
the time or times when awards shall be granted and the number of
shares of Stock subject to each award; (c) to determine which options
are, and which options are not, intended to be incentive options; (d)
to determine the terms and conditions of each award; (e) to prescribe
the form or forms of any instruments evidencing awards and any other
instruments required under the Plan and to change such forms from time
to time; (f) to adopt, amend, and rescind rules and regulations for
the administration of the Plan; and (g) to interpret the Plan and to
decide any questions and settle all controversies and disputes that
may arise in connection with the Plan. Such determinations of the
Board shall be conclusive and shall bind all parties. Subject to
Section 8, the Board shall also have the authority, both generally and
in particular instances, to waive compliance by a participant with any
obligation to be performed by the participant under an award, to waive
any condition or provision of an award, and to amend or cancel any
award (and if an award is cancelled, to grant a new award on such
terms as the Board shall specify) except that the Board may not take
any action with respect to an outstanding award that would adversely
affect the rights of the participant under such award without such
participant's consent. Nothing in the preceding sentence shall be
construed as limiting the power of the Board to make adjustments
required by Section 4(c) and Section 6(j).
The Board may, in its discretion, delegate some or all of its
powers with respect to the Plan to a committee (the "Committee"), in
which event all references (as appropriate) to the Board hereunder
shall be deemed to refer to the Committee. The Committee, if one is
appointed, shall consist of at least two directors. A majority of the
members of the Committee shall constitute a quorum, and all
determinations of the Committee shall be made by a majority of its
members. Any determination of the Committee under the Plan may be
made without notice or meeting of the Committee by a writing signed by
a majority of the Committee members. On and after registration of the
Stock under the Securities Exchange Act of 1934 (the "1934 Act"), the
Board shall delegate the power to select directors and officers to
receive awards under the Plan and the timing, pricing, and amount of
such awards to a Committee, all members of which shall be
disinterested persons within the meaning of Rule 16b-3 under the 1934
Act and "outside directors" within the meaning of section
162(m)(4)(c)(i) of the Code.
3. EFFECTIVE DATE AND TERM OF PLAN
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The Plan shall become effective on the date on which it is
approved by the shareholders of the Company. Grants of awards under
the Plan may be made prior to that date (but after Board adoption of
the Plan), subject to approval of the Plan by the shareholders.
No awards shall be granted under the Plan after the completion of
ten years from the date on which the Plan was adopted by the Board,
but awards previously granted may extend beyond that date.
4. SHARES SUBJECT TO THE PLAN
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(a) NUMBER OF SHARES. Subject to adjustment as provided in
Section 4(c), the aggregate number of shares of Stock that may be
delivered upon the exercise of award granted under the Plan shall be
1,200,000. If any award granted under the Plan terminates without
having been exercised in full, or upon exercise is satisfied other
than by delivery of Stock, the number of shares of Stock as to which
such award was not exercised shall be available for future grants
within the limits set forth in this Section 4(a).
(b) SHARES TO BE DELIVERED. Shares delivered under the Plan
shall be authorized but unissued Stock or, if the Board so decides in
its sole discretion, previously issued Stock acquired by the Company
and held in its treasury. No fractional shares of Stock shall be
delivered under the Plan.
(c) CHANGES IN STOCK. In the event of a stock dividend, stock
split, or combination of shares, recapitalization, or other change in
the Company's capital stock, the number and kind of shares of stock or
securities of the Company subject to awards then outstanding or
subsequently granted under the Plan, the exercise price of such
awards, the maximum number of shares or securities that may be
delivered under the Plan, and other relevant provisions shall be
appropriately adjusted by the Board, whose determination shall be
binding on all persons.
The Board may also adjust the number of shares subject to
outstanding awards, the exercise price of outstanding awards, and the
terms of outstanding awards, to take into consideration material
changes in accounting practices or principles, extraordinary
dividends, consolidations or mergers (except as described in Section
6(j)), acquisitions or dispositions of stock or property, or any other
event if it is determined by the Board that such adjustment is
appropriate to avoid distortion in the operation of the Plan, provided
that no such adjustment shall be made in the case of an incentive
option, without the consent of the participant, if it would constitute
a modification, extension, or renewal of the option within the meaning
of section 424(h) of the Code.
5. ELIGIBILITY FOR AWARDS
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Persons eligible to receive awards under the Plan shall be those
employees of the Company, its parent, or subsidiaries, or consultants,
or advisors to any of them, who in the opinion of the Board are in a
position to make a contribution to the Company. Participants shall be
selected by the Board. A parent for purposes of the Plan shall be a
corporation which owns, directly or indirectly, 50% or more of the
total combined voting power of all classes of the Company's stock. A
subsidiary for purposes of the Plan shall be (i) a corporation in
which the Company owns, directly or indirectly, stock possessing 50%
or more of the total combined voting power of all classes of stock, or
(ii) a corporation in which the Company's parent owns, directly or
indirectly, stock possessing 50% or more of the total combined voting
power of all classes of stock. The Board may grant awards covering up
to the entire number of shares available for issuance under the Plan
(as determined under Section 4(a)) to any one participant or to
several participants, in the sole discretion of the Board.
Incentive options shall be granted only to "employees" as defined
in the provisions of the Code or regulations thereunder applicable to
incentive stock options.
6. TERMS AND CONDITIONS OF OPTIONS AND SARs
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(a) EXERCISE PRICE OF OPTIONS. The exercise price of each
option shall be determined by the Board but in the case of an
incentive option shall not be less than 100% (110%, in the case of an
incentive option granted to a ten-percent shareholder) of the fair
market value of the Stock at the time the option is granted; nor shall
the exercise price be less, in the case of an original issue of
authorized stock, than par value. For this purpose, "fair market
value" in the case of incentive options shall have the same meaning as
it does in the provisions of the Code and the regulations thereunder
applicable to incentive options; and "ten-percent shareholder" shall
mean any participant who at the time of grant owns directly, or by
reason of the attribution rules set forth in section 424(d) of the
Code is deemed to own, stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or of any
of its parent or subsidiary corporations.
(b) DURATION OF OPTIONS. An option shall be exercisable during
such period or periods as the Board may specify. The latest date on
which an option may be exercised (the "Final Exercise Date") shall be
the date which is ten years (five years, in the case of an incentive
option granted to a "ten-percent shareholder" as defined in (a) above)
from the date the option was granted or such earlier date as may be
specified by the Board at the time the option is granted.
(c) EXERCISE OF OPTIONS.
(1) An option shall become exercisable at such time or times and
upon such conditions as the Board shall specify. In the case of an
option not immediately exercisable in full, the Board may at any time
accelerate the time at which all or any part of the option may be
exercised.
(2) Any exercise of an option shall be in writing, signed by the
proper person and furnished to the Company, accompanied by (i) such
documents, representations, agreements, and certifications as may be
required by the Board and (ii) payment in full as specified below in
Section 6(d) for the number of shares for which the option is
exercised.
(3) In the case of an option that is not an incentive option, the
Board shall have the right to require that the participant exercising
the option remit to the Company an amount sufficient to satisfy any
federal, state, or local withholding tax requirements (or make other
arrangements satisfactory to the Company with regard to such taxes)
prior to the delivery of any Stock pursuant to the exercise of the
option. If permitted by the Board either at the time of the grant of
the option or the time of exercise, the participant may elect, at such
time and in such manner as the Board may prescribe, to satisfy such
withholding obligation by (i) delivering to the Company Stock owned by
such individual having a fair market value equal to such withholding
obligation, or (ii) requesting that the Company withhold from the
shares of Stock to be delivered upon the exercise a number of shares
of Stock having a fair market value equal to such withholding
obligation.
In the case of an incentive option, the Board may require as a
condition of exercise that the participant exercising the option agree
to inform the Company promptly of any disposition (within the meaning
of section 424(c) of the Code and the regulations thereunder) of Stock
received upon exercise. In addition, if at the time the option is
exercised the Board determines that under applicable law and
regulations the Company could be liable for the withholding of any
federal or state tax with respect to a disposition of the Stock
received upon exercise, the Board may require as a condition of
exercise that the participant exercising the option agree to give such
security as the Board deems adequate to meet the potential liability
of the Company for the withholding of tax, and to augment such
security from time to time in any amount reasonably deemed necessary
by the Board to preserve the adequacy of such security.
(4) If an option is exercised by the executor or administrator of a
deceased participant, or by the person or persons to whom the option
has been transferred by the participant's will or the applicable laws
of descent and distribution, the Company shall be under no obligation
to deliver Stock pursuant to such exercise until the Company is
satisfied as to the authority of the person or persons exercising the
option.
(d) PAYMENT FOR STOCK. Stock purchased upon exercise of an
option under the Plan shall be paid for as follows: (i) in cash,
check acceptable to the Company (determined in accordance with such
guidelines as the Board may prescribe), or money order payable to the
order of the Company, or (ii) if so permitted by the Board (which, in
the case of an incentive option, shall specify such method of payment
at the time of grant), (A) through the delivery of shares of Stock
(which, in the case of Stock acquired from the Company, shall have
been held for at least six months unless the Board specifies a shorter
period) having a fair market value on the date of exercise equal to
the purchase price, or (B) by delivery of a promissory note of the
participant to the Company, such note to be payable on such terms as
are specified by the Board, or (C) by delivery of an unconditional and
irrevocable undertaking by a broker to deliver promptly to the Company
sufficient funds to pay the exercise price, or (D) by any combination
of the permissible forms of payment; provided, that if the Stock
delivered upon exercise of the option is an original issue of
authorized Stock, at least so much of the exercise price as represents
the par value of such Stock shall be paid other than with a personal
check or promissory note of the person exercising the option.
(e) STOCK APPRECIATION RIGHTS. The Board in its discretion may
grant SARs either in tandem with or independent of options awarded
under the Plan. Except as hereinafter provided, each SAR will entitle
the participant to receive upon exercise, with respect to each share
of Stock to which the SAR relates, the excess of (i) the share's value
on the date of exercise, over (ii) the share's fair market value on
the date it was granted. For purposes of clause (i), "value" shall
mean fair market value; provided, that the Board may adjust such value
to take into account dividends on the Stock and may also grant SARs
that provide, in such limited circumstances following a change in
control of the Company (as determined by the Board) as the Board may
specify, that "value" for purposes of clause (i) is to be determined
by reference to an average value for the Stock during a period
immediately preceding the change in control, all as determined by the
Board. The amount payable to a participant upon exercise of an SAR
shall be paid either in cash or in shares of Stock, as the Board
determines. Each SAR shall be exercisable during such period or
periods and on such terms as the Board may specify. No SAR shall be
exercisable after the date which is ten years from the date of grant.
(f) DELIVERY OF STOCK. A participant shall not have the rights
of a shareholder with regard to awards under the Plan except as to
Stock actually received by such participant under the Plan.
The Company shall not be obligated to deliver any shares of Stock
(i) until, in the opinion of the Company's counsel, all applicable
federal and state laws and regulations have been complied with, (ii)
if the outstanding Stock is at the time listed on any stock exchange,
until the shares to be delivered have been listed or authorized to be
listed on such exchange upon official notice of issuance, and (iii)
until all other legal matters in connection with the issuance and
delivery of such shares have been approved by the Company's counsel.
If the sale of Stock has not been registered under the Securities Act
of 1933, as amended, the Company may require, as a condition to
exercise of the award, such representations or agreements as counsel
for the Company may consider appropriate to avoid violation of such
Act and may require that the certificates evidencing such Stock bear
an appropriate legend restricting transfer.
(g) NONTRANSFERABILITY OF AWARDS. No award may be transferred
other than by will or by the laws of descent and distribution, and
during a participant's lifetime an award may be exercised only by him
or her.
(h) DEATH. Except as otherwise provided in an award, if a
participant dies, each award held by the participant immediately prior
to death may be exercised, to the extent it was exercisable
immediately prior to death, by his executor or administrator, or by
the person or persons to whom the award is transferred by will or the
applicable laws of descent and distribution, at any time within the
period ending (i) 180 days after the participant's death (in the event
the participant's employment or other service relationship with the
Company shall terminate by reason of death), or (ii) 120 days after
the participant's death (in the event the participant dies within the
60-day period following termination of the participant's employment or
other service relationship with the Company), or such longer period as
the Committee may determine. In no event shall an award be exercised
beyond the Final Exercise Date. Except as otherwise provided in an
award, all awards held by a participant immediately prior to death
that are not then exercisable shall terminate on the date of death.
(i) OTHER TERMINATION OF SERVICE. Except as otherwise provided
in an award, if a participant's employment or other service
relationship with the Company terminates for any reason other than
death, all awards held by the participant shall terminate to the
extent not exercisable immediately prior to such event. To the extent
exercisable immediately prior to termination of employment or other
service relationship, the award shall continue to be exercisable
thereafter for a period of 60 days (or such longer period as the Board
may determine, but in no event beyond the Final Exercise Date), unless
the participant's employment or other service relationship is
terminated for "cause" as a result of the participant's misconduct
which, in the judgment of the Board, casts discredit on him or her, or
is otherwise harmful to the business, interests, or reputation of the
Company, its parent, or a subsidiary, in which case all awards shall
terminate immediately. The Board may in any award provide for post-
termination exercise provisions different from those expressly set
forth in the preceding two sentences or in (h) above, including
without limitation terms allowing a later exercise by a former
employee, consultant, or advisor (or, in the case of a former
employee, consultant, or advisor who is deceased, the person or
persons to whom the award is transferred by will or the laws of
descent and distribution) as to all or any portion of the award not
exercisable immediately prior to termination or employment or other
service relationship, but in no case may an award be exercised after
the Final Exercise Date. Except as otherwise provided in an award,
after completion of that 60-day or longer period, such awards shall
terminate to the extent not previously exercised, expired, or
terminated. For purposes of this Plan, the service relationship shall
not be considered terminated (i) in the case of sick leave or other
bona fide leave of absence approved for purposes of the Plan by the
Board, so long as the participant's right to reemployment or continued
service is guaranteed either by statute or by contract, or (ii) in the
case of a transfer of employment or service relationship between the
Company and a subsidiary or parent, or between subsidiaries of the
Company or parent (provided the participant's direct or indirect
service to the Company continues), or to the service of a corporation
(or a parent or subsidiary corporation of such corporation) issuing or
assuming an award in a transaction to which section 424(a) of the Code
applies.
(j) MERGERS, ETC. In the event of any merger, consolidation,
dissolution, or liquidation of the Company, the Board in its sole
discretion may, as to any outstanding awards, make such substitution
or adjustment in the aggregate number of shares reserved for issuance
under the Plan and in the number and purchase price (if any) of shares
subject to such awards as it may determine, or accelerate, amend, or
terminate such awards upon such terms and conditions as it shall
provide (which, in the case of the termination of the vested portion
of any award, shall require payment or other consideration which the
Board deems equitable in the circumstances).
The Board may grant awards under the Plan in substitution for
awards held by employees, consultants, or advisors of another
corporation who concurrently become employees, consultants, or
advisors of the Company, its parent, or a subsidiary as the result of
a merger or consolidation of that corporation with the Company, its
parent, or a subsidiary, or as the result of the acquisition by the
Company, its parent, or a subsidiary of property or stock of that
corporation. The Company may direct that substitute awards be granted
on such terms and conditions as the Board considers appropriate in the
circumstances.
(k) CANCELLATION OF AWARDS. The Board may provide in any award
that the award shall be cancelled or rescinded and any associated
shares forfeited, and the participant shall be obligated to pay to the
Company any gain received upon exercise, in the event that the
participant competes with the Company, discloses confidential
information of the Company, or otherwise is not in compliance with
applicable provisions of any award, in each case on such terms and
conditions as the Board considers appropriate in the circumstances.
7. EMPLOYMENT RIGHTS
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Neither the adoption of the Plan nor the grant of awards shall
confer upon any participant any right to continue as an employee of,
or consultant or advisor to, the Company, its parent, or any
subsidiary of either or affect in any way the right of the Company,
its parent, or a subsidiary of either to terminate the participant's
relationship at any time. Except as specifically provided by the
Board in any particular case, the loss of existing or potential profit
in awards granted under this Plan shall not constitute an element of
damages in the event of termination of the relationship of a
participant even if the termination is in violation of an obligation
of the Company, its parent, or a subsidiary of either to the
participant by contract or otherwise.
8. EFFECT, DISCONTINUANCE, CANCELLATION, AMENDMENT, AND TERMINATION
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Neither adoption of the Plan nor the grant of awards to a
participant shall affect the Company's right to make awards to such
participant that are not subject to the Plan, to issue to such
participant Stock as a bonus or otherwise, or to adopt other plans or
arrangements under which Stock may be issued, and shall in no way
affect the Company's right to operate its business at its sole
discretion.
The exercise of certain awards granted under the Plan may be made
contingent upon the closing of an initial public offering of the
Company's Stock. The grant of such awards under the Plan shall in no
way obligate the Company to consummate or consider a public offering
of Stock, and the failure of the Company to close a public offering of
Stock shall not entitle a participant granted such an award to any
substitute award or other benefit, or to any damages.
The Board may at any time discontinue granting awards under the
Plan. With the consent of the participant, the Board may at any time
cancel an existing award in whole or in part and grant another award
for such number of shares as the Board specifies. The Board may at
any time or times amend the Plan or any outstanding award for the
purpose of satisfying the requirements of section 422 of the Code or
of any changes in applicable laws or regulations or for any other
purpose that may at the time be permitted by law, or may at any time
terminate the Plan as to any further grants of awards; except that no
such amendment shall adversely affect the rights of any participant
(without his or her consent) under any award previously granted.