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Exhibit 10.3
THE SECURITIES OFFERED BY THIS INSTRUMENT HAVE NOT BEEN REGISTERED OR QUALIFIED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE, AND ANY SALE OF SUCH SECURITIES IS SUBJECT TO COMPLIANCE WITH, OR THE
AVAILABILITY OF EXEMPTIONS FROM COMPLIANCE WITH, THE REGISTRATION AND
QUALIFICATION REQUIREMENTS OF SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
THIS INSTRUMENT DOES NOT CONSTITUTE AN OFFER OR SOLICITATION TO ANY PERSON IN
ANY JURISDICTION WHERE SUCH OFFER OR SOLICITATION MAY NOT LAWFULLY BE MADE.
TRANSFER OF THIS INSTRUMENT AND THE SECURITIES OFFERED HEREBY IS RESTRICTED AS
PROVIDED IN SECTIONS 7, 8, 9 AND 10 BELOW.
STOCK OPTION AGREEMENT
THIS STOCK OPTION AGREEMENT (this "Agreement") is entered into effective as
of _______________, 19__ the "Grant Date"), by PROGRESSIVE NETWORKS, INC., a
Washington corporation (the "Company") and _______________ (the "Holder").
R E C I T A L S
A. The Company has adopted the Progressive Networks, Inc. 1996 Stock Option
Plan, as amended and restated (the "Plan"), a copy of which is attached as
Exhibit A (capitalized terms that are used but not defined in this Agreement
will have the meanings given those terms in the Plan).
B. The Holder is an employee of the Company, and has been designated by the
Administrative Committee to receive a stock option under the Plan.
NOW, THEREFORE, the Company and the Holder covenant and agree as follows:
1. GRANT OF THE OPTION.
(a) The Company hereby grants to the Holder a stock option (the
"Option") to acquire from the Company ____________ (______) shares of the Series
B Common Stock, no par value, of the Company (the "Common Stock"), at the price
of $____ per share (the "Option Price"). The Option is not intended to qualify
as an "incentive stock option," as that term is defined in Section 422 of the
Internal Revenue Code of 1986, as amended.
(b) The Holder acknowledges that: (i) a copy of the Company's Articles
of Incorporation, as amended and currently in effect as of the Grant Date (the
"Articles"), is attached as Exhibit B; (ii) the Articles, as amended from time
to time, define the rights of the Common Stock; (iii) although this Option is
currently an option to purchase shares of Series B Common Stock, such shares
will automatically convert into shares of Series C Common Stock, or Common
Stock, upon the occurrence of certain events, as described in the Articles, and,
accordingly, the shares issued upon exercise of this Option may be shares of
Series B Common Stock, shares of Series C Common Stock or shares of Common
Stock.
2. TERM OF THE OPTION. Unless earlier terminated in accordance with the
provisions of the Plan, the Option will terminate on the earliest to occur of
(a) the expiration of twenty (20) years from the Grant Date; (b) the expiration
of ninety (90) days following termination of the Holder's employment with the
Company for any reason other than death, Disability or cause (as defined in
Section 7.2(b) of the Plan); (c) the expiration of one (1) year following
termination of the Holder's employment with the Company on account of death or
Disability; and (d) the date of termination of the Holder's employment with the
Company for cause (as defined in Section 7.2(b) of the Plan).
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3. VESTING. The vesting schedule applicable to the Option shall commence on
_________, 19__ (the "Vest Date"). The Option shall vest and become exercisable
in accordance with the following schedule:
Cumulative Number
Date of Shares Vested (Percent)
---- ---------------- ---------
12 months after Vest Date _________ (20%)
18 months after Vest Date _________ (30%)
24 months after Vest Date _________ (40%)
30 months after Vest Date _________ (50%)
36 months after Vest Date _________ (60%)
42 months after Vest Date _________ (70%)
48 months after Vest Date _________ (80%)
54 months after Vest Date _________ (90%)
60 months after Vest Date _________ (100%)
provided, however, that, if the Holder's employment with the Company terminates
for any reason, the Option will not vest further following such termination. To
the extent the Option is vested, it shall be exercisable at any time and from
time to time prior to its termination as provided in Section 2.
4. OTHER LIMITATIONS ON THE OPTION. The Option is subject to all of the
provisions of the Plan, including but not limited to Section 4.2 (which permits
adjustments to the Option upon the occurrence of certain corporate events such
as stock dividends, extraordinary cash dividends, reclassifications,
recapitalizations, reorganizations, split-ups, spin-offs, combinations,
exchanges of shares, and warrants or rights offerings), Section 6.10 (which
provides that the Company may repurchase any and all shares of Common Stock
issued upon exercise of the Option in the event the Holder's employment is
terminated for "cause"), and Section 7.1 (which applies in the event of an
Approved Transaction or Control Purchase).
5. EXERCISE OF THE OPTION. To exercise the Option, the Holder must do the
following:
(a) deliver to the Company a written notice, in the form attached to
this Agreement as Exhibit C, specifying the number of shares of Common Stock for
which the Option is being exercised;
(b) surrender this Agreement to the Company;
(c) tender payment of the aggregate Option Price for the shares for
which the Option is being exercised, which payment may be made (i) in cash or by
check; or (ii) by such other means as the Administrative Committee, in its sole
discretion, shall permit at the time of exercise;
(d) pay, or make arrangements satisfactory to the Administrative
Committee for payment to the Company of all federal, state and local taxes, if
any, required to be withheld by the Company in connection with the exercise of
the Option;
(e) if requested by the Administrative Committee, deliver to the
Company, at the Holder's expense, a legal opinion, satisfactory in form and
substance to the Company, of legal counsel designated by the Holder and
satisfactory to the Company, to the effect that exercise of the Option by the
Holder, and the acquisition of shares of Common Stock pursuant thereto, may be
effected without registration or
Option No. NQ-___
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qualification of such shares under the Securities Act of 1933, as amended (the
"1933 Act"), or any applicable state securities laws;
(f) if not already a party to the Shareholders' Buy-Sell Agreement (as
defined in Section 9), execute and become a party to that agreement (as required
by Section 9) by delivering to the Company an executed Consent to Be Bound by
Shareholders' Buy-Sell Agreement in the form attached to this Agreement as
Exhibit D; and
(g) execute and deliver to the Company the documents required by the
Plan and any other documents required from time to time by the Administrative
Committee in order to promote compliance with the Plan, the 1933 Act, applicable
state securities laws, or any other applicable law, rule or regulation.
6. DELIVERY OF SHARE CERTIFICATE. As soon as practicable after the Option
has been duly exercised, the Company will deliver to the Holder a certificate
for the shares of Common Stock for which the Option was exercised. Unless the
Option has expired or been exercised in full, the Company and the Holder agree
to execute a new Stock Option Agreement, covering the remaining shares of Common
Stock that may be acquired upon exercise of the Option, which will be identical
to this Agreement except as to the number of shares of Common Stock subject
thereto. In lieu of replacing this Agreement in such manner, the Company may
affix to this Agreement an appropriate notation indicating the number of shares
for which the Option was exercised and return this Agreement to the Holder.
7. NONTRANSFERABILITY. The Option is not transferable other than by will or
the laws of descent and distribution, and the Option may be exercised during the
lifetime of the Holder only by the Holder or the Holder's court appointed legal
representative.
8. WARRANTIES AND REPRESENTATIONS OF THE HOLDER. By executing this
Agreement, the Holder accepts the Option and represents and warrants to the
Company and covenants and agrees with the Company as follows:
(a) The Holder agrees to comply with all of the provisions of this
Agreement and the Plan.
(b) The Holder recognizes, agrees and acknowledges that no
registration statement under the 1933 Act, or under any state securities laws,
has been or will be filed with respect to the Option or any shares of Common
Stock that may be acquired upon exercise of the Option.
(c) The Holder warrants and represents that the Option and any shares
of Common Stock acquired upon exercise of the Option will be acquired and held
by the Holder for the Holder's own account, for investment purposes only, and
not with a view towards the distribution or public offering thereof nor with any
present intention of reselling or distributing the same at any particular future
time.
(d) The Holder agrees not to sell, transfer or otherwise dispose of
any shares of Common Stock that may be acquired upon exercise of the Option
unless (i) there is an effective registration statement under the 1933 Act
covering the proposed disposition and compliance with governing state securities
laws, (ii) the Holder delivers to the Company, at the Holder's expense, a
"no-action" letter or similar interpretative opinion, satisfactory in form and
substance to the Company, from the staff of each appropriate securities agency,
to the effect that such shares may be disposed of by the Holder in the manner
proposed, or (iii) the Holder delivers to the Company, at the Holder's expense,
a legal opinion, satisfactory in form and substance to the Company, of legal
counsel designated by the Holder and satisfactory to the Company, to the effect
that the proposed disposition is exempt from registration under the 1933 Act and
governing state securities laws.
(e) The Holder acknowledges and consents to the appearance of the
restrictive legends, in the form required by Section 6.8 of the Plan, on each
certificate representing shares of Common Stock issued upon exercise of the
Option.
Option No. NQ-___
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(f) The Holder agrees not to sell, transfer or otherwise dispose of
the Option or any shares of Common Stock acquired upon exercise of the Option,
except as specifically permitted by this Agreement, the Plan and any applicable
securities laws.
9. SHAREHOLDERS AGREEMENT. The Holder shall be required, as a condition to
the issuance of any shares of Common Stock upon the exercise of the Option, to
execute and deliver to the Company a shareholders agreement in such form as may
be in use by the Company at the time of such exercise, or a counterpart thereof,
together with, unless the Holder is unmarried, a spousal consent in the form
required thereby, unless the Holder has previously executed and delivered such
documents and they are in effect at the time the shares are to be issued.
10. PROCEDURES UPON PERMITTED TRANSFER. Prior to any sale, transfer or
other disposition of any of the shares of Common Stock acquired upon exercise of
the Option, the Holder agrees to give written notice to the Company of the
Holder's intention to effect such disposition. The notice must describe the
circumstances of the proposed transfer in reasonable detail and must specify the
manner in which the requirements of Section 8(d) above will be satisfied in
connection with the proposed disposition. After (a) legal counsel to the Company
has determined that the requirements of Section 8(d) above will be satisfied,
(b) the Holder has executed such documentation as may be necessary to effect the
proposed disposition, and (c) the Holder has paid, or made arrangements
satisfactory to the Administrative Committee for the payment of, all federal,
state and local taxes, if any, required to be withheld by the Company in
connection with the proposed disposition, the Company will, as soon as
practicable, transfer such shares in accordance with the terms of the notice.
Any stock certificate issued upon such transfer will bear the restrictive
legends, in the form required by Section 6.8 of the Plan, unless in the opinion
of legal counsel to the Company such legends are not required. Compliance with
the foregoing procedures are in addition to compliance with any separate
requirements applicable to the Holder under the Company's Articles of
Incorporation or otherwise.
11. RIGHTS AS SHAREHOLDER. The Holder will have no rights as a shareholder
of the Company on account of the Option or on account of shares of Common Stock
which will be acquired upon exercise of the Option (but with respect to which no
certificates have been delivered to the Holder).
12. TAX WITHHOLDING. The Holder agrees to pay, or to make arrangements
satisfactory to the Administrative Committee for payment to the Company of, all
federal, state and local income and employment taxes, if any, required to be
withheld by the Company in connection with the exercise of the Option or any
sale, transfer or other disposition of any shares of Common Stock acquired upon
exercise of the Option. If the Holder fails to do so, then the Holder hereby
authorizes the Company to deduct all or any portion of such taxes from any
payment of any kind otherwise due to the Holder.
13. FURTHER ASSURANCES. The Holder agrees from time to time to execute such
additional documents as the Company may reasonably require to effectuate the
purposes of the Plan and this Agreement.
14. BINDING EFFECT. This Agreement shall be binding upon the Holder and the
Holder's heirs, successors and assigns.
15. ENTIRE AGREEMENT; MODIFICATIONS. This Agreement, together with the Plan
and agreements referenced in this Agreement and/or the Plan, constitutes the
entire agreement and understanding between the Company and the Holder regarding
the subject matter hereof. Except as otherwise provided in the Plan, no
modification of the Option or this Agreement, or waiver of any provision of this
Agreement or the Plan, shall be valid unless in writing and duly executed by the
Company and the Holder. The failure of any party to enforce any of that party's
rights against the other party for breach of any of the terms of this Agreement
shall not be construed as a waiver of such rights as to any continued or
subsequent breach.
Option No. NQ-___
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16. COST OF LITIGATION. In any action at law or in equity to enforce any of
the provisions or rights under this Agreement, the unsuccessful party to such
litigation, as determined by the court in a final judgment or decree, shall pay
the successful party or parties all costs, expenses and reasonable attorneys'
fees incurred by the successful party or parties (including without limitation
costs, expenses and fees in any appellate proceedings), and if the successful
party recovers judgment in any such action or proceeding, such costs, expenses
and attorneys' fees shall be included as part of the judgment.
17. GOVERNING LAW. This Agreement shall be governed by the laws of the
State of Washington.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
"COMPANY" PROGRESSIVE NETWORKS, INC.
BY
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ITS CHIEF FINANCIAL OFFICER
"HOLDER"
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Option No. NQ-___
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EXHIBIT A
(ATTACH AMENDED AND RESTATED 1996 STOCK OPTION PLAN)
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EXHIBIT B
(ATTACH AMENDED AND RESTATED ARTICLES OF INCORPORATION)
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FORM OF EXERCISE OF OPTION
To: Progressive Networks, Inc.
1111 Third Avenue, Suite 2900
Seattle, WA 98101
The undersigned holds Option Number NQ-___ (the "Option"), represented by a
Stock Option Agreement dated effective as of ________________ (the "Agreement"),
granted to the undersigned pursuant to the Progressive Networks, Inc. 1996 Stock
Option Plan as Amended (the "Plan"). The undersigned hereby exercises the Option
and elects to purchase _______________ shares (the "Shares") of Series B Common
Stock (or shares of Common Stock) of Progressive Networks, Inc. (the "Company")
pursuant to the Option. This notice is accompanied by full payment of the Option
Price of $____ per share for the Shares in cash or by check or in another manner
permitted by Section 5(c) of the Agreement. The undersigned has also paid, or
made arrangements satisfactory to the Administrative Committee administering the
Plan for payment of, all federal, state and local taxes, if any, required to be
withheld by the Company in connection with the exercise of the Option.
The undersigned acknowledges that no registration statement under the 1933
Act, or under any state securities laws, has been or will be filed with respect
to the Shares. The undersigned warrants and represents that the undersigned is
acquiring and will hold the Shares for the undersigned's own account, for
investment purposes only, and not with a view towards the distribution or public
offering of the Shares nor with any present intention of reselling or
distributing the Shares at any particular future time. The undersigned consents
to the appearance of restrictive legends, in the form required by Section 6.8 of
the Plan, on the certificate for the Shares. The undersigned agrees not to sell,
transfer or otherwise dispose of the Shares except as specifically permitted by
the Agreement, the Plan and any applicable securities laws.
Date:
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Signature of Holder
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EXHIBIT C
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CONSENT TO BE BOUND BY
SHAREHOLDERS' BUY-SELL AGREEMENT
In consideration of the issuance, sale, pledge or other transfer to the
undersigned of shares of the capital stock of Progressive Networks, Inc., a
Washington corporation (the "Company"), the undersigned (the "Shareholder")
consents and agrees to the terms of, and does hereby execute and become a party
to, the Shareholders' Buy-Sell Agreement dated March 31, 1995 (the "Agreement")
among the Company and certain of the Company's shareholders, as such may be
amended from time to time as provided in the Agreement. The undersigned
acknowledges receipt of a copy of the Agreement and agrees that all Shares (as
defined in the Agreement) of the undersigned shall be held in accordance with
and restricted by the terms of the Agreement.
The execution of this Consent by the spouse of the Shareholder signifies
that the spouse authorizes, ratifies, confirms and approves the execution of
this Consent and, therefore, the Agreement, by the Shareholder, and he or she
further authorizes and appoints the Shareholder as his or her attorney-in-fact
to exercise all rights he or she may have with respect to the ownership of any
Shares of the Company, including the encumbrance and disposition of such Shares.
DATED:
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BY SIGNING BELOW, I ACKNOWLEDGE THAT I HAVE READ AND
UNDERSTOOD THE SHAREHOLDERS' BUY-SELL AGREEMENT AND HAVE
BEEN ENCOURAGED TO RETAIN SEPARATE COUNSEL
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Shareholder:
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Address:
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Social Security Number
BY SIGNING BELOW, I ACKNOWLEDGE THAT I HAVE READ AND
UNDERSTOOD THE SHAREHOLDERS' BUY-SELL AGREEMENT,
INCLUDING SECTION 10 AND HAVE BEEN ENCOURAGED
TO RETAIN SEPARATE COUNSEL
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Shareholder's Spouse
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Social Security Number
EXHIBIT D