EXHIBIT 4.3
PURPLE RAY, INC.
2000 STOCK PLAN
1. Purposes of the Plan. The purposes of this Stock Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees and Consultants of the Company and
its Subsidiaries and to promote the success of the Company's business. Options
granted under the Plan may be incentive stock options (as defined under Section
422 of the Code) or non-statutory stock options, as determined by the
Administrator at the time of grant of an option and subject to the applicable
provisions of Section 422 of the Code, as amended, and the regulations
promulgated thereunder. Stock purchase rights may also be granted under the
Plan.
2. Definitions. As used herein, the following definitions shall apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees appointed
pursuant to Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any other country or jurisdiction where Options or Stock Purchase Rights are
granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means the Committee, if any, appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means Purple Ray, Inc., a California corporation.
(h) "CONSULTANT" means any person, including an advisor, who is engaged
by the Company or any Parent or Subsidiary to render advisory or consulting
services and is compensated for such services, and any director of the Company
whether compensated for such services or not; provided that if and in the event
the Company registers any class of any equity security pursuant to the Exchange
Act, the term Consultant shall thereafter not include directors who are not
compensated for their services or are paid only a director's fee by the Company.
(i) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of the employment relationship by the Company or any
Subsidiary. Continuous Status as an Employee shall not be considered interrupted
in the case of: (i) sick leave, military leave or any other leave of absence
approved by the Board, provided that such leave is for a period of not more than
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or
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(ii) in the case of transfers between locations of the Company or
between the Company, its Subsidiaries or its successor.
(j) "EMPLOYEE" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is then quoted on the NASDAQ National Market,
its closing price on the NASDAQ National Market on the date of determination
as reported in The Wall Street Journal;
(ii) If the Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of determination
on the principal national securities exchange on which the Common Stock is
listed or admitted to trading as reported in The Wall Street Journal;
(iii) If the Common Stock is publicly traded but is not quoted on the
NASDAQ National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on the
date of determination as reported in The Wall Street Journal; or
(iv) If none of the foregoing is applicable, the Fair Market Value
thereof shall be determined in good faith by the Board.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(n) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify
as an Incentive Stock Option.
(o) "OPTION" means a stock option granted pursuant to the Plan.
(p) "OPTIONED STOCK" means the Common Stock subject to an Option.
(q) "OPTIONEE" means an Employee or Consultant who receives an Option.
(r) "PARENT" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(s) "PLAN" means this Stock Plan, as amended from time to time.
(t) "PURCHASER" means an Employee or Consultant who exercises a Stock
Purchase Right.
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(u) "SERVICE" means the provision of services to the Company or any
Parent or Subsidiary by an individual in the capacity of an Employee, a
non-employee member of the board of directors or a Consultant.
(v) "SHARE" means a share of the Common Stock, as adjusted in accordance
with Section 12 of the Plan.
(w) "STOCK PURCHASE RIGHT" means the right to purchase Restricted Stock
granted pursuant to Section 11 of the Plan.
(x) "SUBSIDIARY" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
(y) "TOUCH UP OPTION" means an Option designated as a "Touch Up Option"
by the Administrator and granted to an existing Optionee from time to time after
the initial grant of Options to such Optionee.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 8,800,000 Shares of Common Stock. The shares may be
authorized, but unissued, or reacquired Common Stock. If an Option or Stock
Purchase Right should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.
4. Administration of the Plan.
(a) Procedure. The Plan shall be administered by the Board or by a
Committee designated by the Board to administer the Plan. Once appointed, such
Committee shall continue to serve in its designated capacity until otherwise
directed by the Board. From time to time the Board may increase the size of the
Committee and appoint additional members thereof, remove members (with or
without cause) and appoint new members in substitution therefor, fill vacancies,
however caused, and remove all members of the Committee and thereafter directly
administer the Plan, all in accordance with the legal requirements relating to
the administration of incentive stock option plans, if any, of California
corporate and securities laws and of the Code (the "Applicable Laws").
(b) Powers of the Administrator. Subject to the provisions of the Plan
and in the case of a Committee, the specific duties delegated by the Board to
such Committee, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2 of the Plan;
(ii) to select the Consultants and Employees to whom Options and
Stock Purchase Rights may from time to time be granted hereunder;
(iii) to determine whether and to what extent Options and Stock
Purchase Rights or any combination thereof, are granted hereunder;
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(iv) to determine the number of shares of Common Stock to be covered
by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder (including, but not
limited to the share price and any restriction or limitation, based in each case
on such factors as the Administrator shall determine, in its sole discretion);
(vii) to determine the terms and restrictions applicable to Stock
Purchase Rights and the Restricted Stock purchased by exercising such Stock
Purchase Rights;
(viii) to prescribe, amend and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
(ix) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be issued upon exercise
of an Option or Stock Purchase Right that number of Shares having a Fair Market
Value equal to the amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined. All elections by Optionees to have Shares
withheld for this purpose shall be made in such form and under such conditions
as the Administrator may deem necessary or advisable;
(x) to provide, in accordance with any policies of the Company, for
suspension or modification of vesting upon an Optionee's status as an Employee
or Consultant, including changes (without limitation) in status from Employee to
Consultant or visa versa and changes in status from full time to part-time
Employee;
(xi) to make any other such determinations with respect to awards
under the Plan as it shall deem appropriate, including (without limitation)
determinations with respect to vesting, exercisability and price adjustments;
and
(xii) to grant additional Touch-Up Options to Optionees, at such
times and in such amounts as the Administrator shall determine, in its sole
discretion.
(c) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and Purchasers and any other holders of any Options or Stock Purchase
Rights.
5. Eligibility for Options.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is otherwise
eligible, be granted an additional Option or Options.
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(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designations, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Optionee during any calendar
year (under all plans of the Company or any Parent or Subsidiary) exceeds
$100,000, such excess Options shall be treated as Nonstatutory Stock Options.
(c) For purposes of Section 5(b), Incentive Stock Options shall be taken
into account in the order in which they were granted, and the Fair Market Value
of the Shares shall be determined as of the time the Option with respect to such
Shares is granted.
(d) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his right or the Company's right to terminate
his employment or consulting relationship at any time, with or without cause.
(e) From time to time and at least annually, the Administrator may
determine that an initial grant of Options to an Optionee is insufficient based
on the level of the Optionee's service to the Company, and that Touch Up Options
should be granted to such Optionees. The Administrator shall have the sole
discretion to grant Touch Up Options on such terms and conditions as shall be
determined by the Administrator, and nothing contained herein shall require the
Administrator to grant any such Options.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in Section 18 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 14 of the
Plan.
7. Term of Option. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that no Option, shall have a term which
ends more than ten (10) years from the date of its grant. In the case of an
Incentive Stock Option granted to an Optionee who, at the time the Option is
granted, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the term of
such Incentive Stock Option shall end no more than five (5) years from the date
of its grant .
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
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(B) granted to any Employee, the per Share exercise price shall
be no less than 100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the voting power
of all classes of stock of the Company or any Parent or Subsidiary, the per
Share exercise price shall be no less than 110% of the Fair Market Value per
Share on the date of the grant.
(B) granted to any person, the per Share exercise price shall
be no less than 85% of the Fair Market Value per Share on the date of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (i) cash, (ii)
check, (iii) other Shares which (x) in the case of Shares acquired upon exercise
of an Option either have been owned by the Optionee for more than six months on
the date of surrender or were not acquired, directly or indirectly, from the
Company, and (y) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option shall be
exercised, (iv) authorization for the Company to retain from the total number of
Shares as to which the Option is exercised that number of Shares having a Fair
Market Value on the date of exercise equal to the exercise price for the total
number of Shares as to which the Option is exercised, (v) delivery of a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company the amount of sale or loan proceeds required to
pay the exercise price, (vi) by delivering an irrevocable subscription agreement
for the Shares which irrevocably obligates the option holder to take and pay for
the Shares not more than twelve months after the date of delivery of the
subscription agreement, (vii) any combination of the foregoing methods of
payment, (viii) or such other consideration and method of payment for the
issuance of Shares to the extent permitted under Applicable Laws. In making its
determination as to the type of consideration to accept, the Board shall
consider if acceptance of such consideration may be reasonably expected to
benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Board, including performance criteria with respect to the
Company and/or the Optionee, and as shall be permissible under the terms of the
Plan.
(i) An Option may not be exercised for a fraction of a Share. An
Option shall be deemed to be exercised when written notice of such exercise has
been given to the Company in accordance with the terms of the Option by the
person entitled to exercise the Option and the Administrator has determined that
payment for the Shares with respect to which the Option is exercised has been
received by the Company. Full payment may, as authorized by the Administrator,
consist of any consideration and method of payment allowable under Section 8(b)
of the Plan. Exercise
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of an Option in any manner shall result in a decrease in the number of Shares
which thereafter may be available, both for purposes of the Plan and for sale
under the Option, by the number of Shares as to which the Option is exercised.
(ii) Until the issuance (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company)
of the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a shareholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option. The Company shall
issue (or cause to be issued) such stock certificate promptly upon exercise of
the Option. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the stock certificate is issued, except as
provided in Section 11 of the Plan.
(iii) The Plan Administrator shall have the discretion to authorize
the issuance of unvested shares of Common Stock under the Plan. Should the
optionee cease Service while holding such unvested shares, the Company shall
have the right to repurchase, at the exercise price paid per share, all or (at
the discretion of the Company) any of those shares which have not vested. The
terms and conditions upon which such repurchase right shall be exercisable
(including the period and procedure for exercise and the appropriate vesting
schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the applicable notice of option grant and stock
purchase agreement. In no event, however, may the Plan Administrator impose a
vesting schedule upon any option granted under the Plan or any shares of Common
Stock subject to the option which is more restrictive than twenty percent (20%)
per year vesting, beginning one (1) year after the grant date.
(b) Termination of Employment. In the event of termination of an
Optionee's consulting relationship or Continuous Status as an Employee with the
Company (as the case may be), such Optionee may, but within no less than thirty
(30) days after the date of such termination (or such other longer period as is
set out by the Administrator in the Option Agreement, but in no event later than
the expiration date of the term of such Option as set forth in the Option
Agreement), exercise the Option to the extent that Optionee was entitled to
exercise it at the date of such termination. To the extent that Optionee was not
entitled to exercise the Option at the date of such termination, or if Optionee
does not exercise such Option to the extent so entitled within the time
specified herein, the Option shall terminate. Notwithstanding anything to the
contrary contained herein, in the event that the Optionee's employment has
terminated for cause (as determined by the Administrator in accordance with the
policies of the Company), the Option shall terminate immediately on the date of
termination of employment.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's consulting relationship
or Continuous Status as an Employee as a result of his disability (as determined
by the Administrator in accordance with the policies of the Company), Optionee
may, but within no less than six (6) months from the date of such termination
(or such other longer period as is set out by the Administrator in the Option
Agreement, but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise the Option to the extent
otherwise entitled to exercise it at the date of such termination. To the extent
that Optionee was not entitled to exercise the Option at the date of
termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate.
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(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised, at any time within twelve (12) months following the
date of death (but in no event later than the expiration date of the term of
such Option as set forth in the Option Agreement), by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent the Optionee was entitled to exercise the
Option at the date of death. To the extent that Optionee was not entitled to
exercise the Option at the date of death, or if Optionee does not exercise such
Option to the extent so entitled within the time specified herein, the Option
shall terminate.
10. Non-Transferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Stock Purchase Rights.
(a) Rights to Purchase Restricted Stock. Stock Purchase Rights may be
issued to Employees and Consultants either alone, in addition to, or in tandem
with other awards granted under the Plan and/or cash awards made outside of the
Plan. After the Administrator determines that it will offer Stock Purchase
Rights under the Plan, it shall advise the offeree in writing of the terms,
conditions and restrictions related to the offer, including the number of Shares
that such person shall be entitled to purchase, the price to be paid, and the
time within which such person must accept such offer, which shall in no event
exceed one-hundred twenty (120) days from the date of grant of the Stock
Purchase Right. For these purposes, the price to be paid shall be no less than
85% of Fair Market Value on the date of grant of the Stock Purchase Right or, in
the case of a greater than 10% shareholder, no less than 100% of the Fair Market
Value on the date of grant. The offer shall be accepted by execution of a
Restricted Stock agreement in the form determined by the Administrator. Shares
purchased pursuant to the grant of a Stock Purchase Right shall be referred to
herein as "Restricted Stock."
(b) Repurchase Option. Unless the Administrator determines otherwise,
the Restricted Stock agreement shall grant the Company a repurchase option
exercisable upon the voluntary or involuntary termination of the Purchaser's
employment with the Company for any reason (including death or Disability). The
purchase price for Shares repurchased pursuant to the Restricted Stock agreement
shall be the original price paid by the Purchaser and may be paid by
cancellation of any indebtedness of the purchaser to the Company. The repurchase
option with respect to the Restricted Stock shall lapse at such rate as the
Committee may determine, but in no event as to less than 20% of the total shares
granted annually.
(c) Other Provisions. The Restricted Stock agreement shall contain such
other terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator in its sole discretion. In addition, the
provisions of Restricted Stock agreements need not be the same with respect to
each purchaser.
(d) Rights as a Shareholder. Once the Stock Purchase Right is exercised,
the Purchaser shall have the rights equivalent to those of a shareholder, and
shall be a shareholder when his or her purchase is entered upon the records of
the duly authorized
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transfer agent of the Company. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Stock Purchase
Right is exercised, except as provided in Section 12 of the Plan.
12. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan upon cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
such outstanding Option or Stock Purchase Right, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option or Stock
Purchase Right.
(b) Corporate Transactions. In the event of the proposed dissolution or
liquidation of the Company, or of a sale or merger in which the survivor
corporation does not agree to assume the Option or Stock Purchase Right or
substitute an equivalent Option or Stock Purchase Right, the Board shall notify
Optionees and Purchasers at least fifteen (15) days prior to such proposed
action and, in its discretion, permit Optionees to exercise their Options to the
extent already vested or make a determination to accelerate vesting of any
outstanding Options or Stock Purchase Rights. To the extent it has not been
previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of such proposed action.
13. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee or
Purchaser under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with Applicable Laws,
the Company shall obtain shareholder approval of any Plan amendment in such a
manner and to such a degree as required.
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(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options and Stock Purchase Rights
already granted and such Options and Stock Purchase Rights shall remain in full
force and effect as if this Plan had not been amended or terminated, unless
mutually agreed otherwise between the Optionee or Purchaser and the Board, which
agreement must be in writing and signed by the Optionee or Purchaser and the
Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option or Stock Purchase Right unless the exercise of such
Option or Stock Purchase Right and the issuance and delivery of such Shares
pursuant thereto shall comply with all relevant provisions of law, including,
without limitation, the Securities Act of 1933, as amended, the Exchange Act,
the rules and regulations promulgated thereunder, and the requirements of any
stock exchange upon which the Shares may then be listed, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance. As a condition to the exercise of an Option or Stock Purchase Right,
the Company may require the person exercising such Option or Stock Purchase
Right to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required by any of the aforementioned relevant
provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan. The inability of the Company
to obtain authority from any regulatory body having jurisdiction, which
authority is deemed by the Company's counsel to be necessary to the lawful
issuance and sale of any Shares hereunder, shall 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.
17. Agreements. Options and Stock Purchase Rights shall be evidenced by
written agreements in such form as the Board shall approve from time to time.
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the degree and manner required under applicable state and federal law.
19. Information to Optionees. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options outstanding,
annual financial statements of the Company. The Company shall not be required to
provide such information if the issuance of Options under the Plan is limited to
key employees whose duties in connection with the Company assure their access to
equivalent information.
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PURPLE RAY, INC.
2000 STOCK PLAN
NOTICE OF STOCK OPTION GRANT
[Optionee's Name]
[Address]
You have been granted an Option, consisting of the Terms and Conditions
of Stock Option Agreement ("Terms and Conditions") attached hereto as Exhibit A
and this Notice of Stock Option Grant (together, the "Option Agreement") to
purchase Common Stock of Purple Ray, Inc., (the "Company") as follows:
Date of Grant [x]
---------------------------
Vesting Commencement Date [x]
---------------------------
Option Price Per Share $ [x]
---------------------------
Total Number of Shares subject to the [x]
Option ("Option Shares")
---------------------------
Total Price of Option Shares $ [x]
---------------------------
Type of Option ___ Incentive Stock Option
___ Nonqualified Stock Option
Term/Expiration Date 10 years/ [x]
-----------------
Exercise Schedule:
-----------------
This Option may be exercised before the expiration of the Termination
Period defined below, subject to the Terms and Conditions, in accordance with
the Vesting Schedule set out below. If the Plan Administrator allows an earlier
exercise of the Option, the Option Shares will vest in accordance with the
Vesting Schedule set out below.
Vesting Schedule
Date of Vesting Number of Vested Shares
--------------- -----------------------
First Anniversary of Vesting Date 25% of Option Shares
Thereafter, monthly on the last day of each month, 1/48 of the
Option Shares until fully vested.
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In the event of fractional Shares, the number of Shares shall be
adjusted accordingly to the nearest whole Share.
Termination Period:
The Option may be exercised before the end of the period ("Termination
Period") expiring thirty (30) days after termination of employment or consulting
relationship, except as set out in Sections 7 and 8 of the Terms and Conditions
(but in no event later than the Expiration Date).
Form of Exercise:
Exercise of this Option shall be made on a form of Exercise Notice
provided by the Company and accompanied by cash or check in the amount of the
exercise price and applicable withholding taxes.
OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THIS OPTION IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL
OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S 2000 STOCK PLAN, WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH THE COMPANY'S RIGHT TO TERMINATE HIS OR HER
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and certain
information related to it and represents that he or she is familiar with the
terms and provisions of the Plan and this Option Agreement. Optionee accepts
this Option Agreement subject to all such terms and provisions. Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Option Agreement.
By your signature and the signature of the Company's representative
below, you and the Company agree that this Option is granted under and governed
by the terms and conditions of the 2000 STOCK PLAN and the Option Agreement,
each of which are attached and made a part of this document.
OPTIONEE: PURPLE RAY, INC.,
a California corporation
________________________________ By ______________________________
Signature
________________________________ Title ___________________________
Print Name
Dated: ___________________, 20__ Dated: ___________________, 20__
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I am unmarried or reside in a separate property state ___.
Spousal consent attached ____.
I am married and have previously filed a spousal consent with the Company._____
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves
the terms and conditions of the Plan and this Option Agreement. In consideration
of the Company's granting his or her spouse the right to purchase Shares as set
forth in the Plan and this Option Agreement, the undersigned hereby agrees to be
irrevocably bound by the terms and conditions of the Plan and this Option
Agreement and any other option in which the undersigned may have an interest and
further agrees that any community property interest shall be similarly bound.
The undersigned hereby appoints the undersigned's spouse as attorney-in-fact for
the undersigned with respect to any amendment or exercise of rights under the
Plan and this Option Agreement and any other option in which the undersigned may
have an interest.
________________________________________
Spouse of Optionee
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PURPLE RAY, INC.
2000 STOCK PLAN
EXHIBIT A TO NOTICE OF STOCK OPTION GRANT
TERMS AND CONDITIONS OF STOCK OPTION AGREEMENT
1. Grant of Option. Purple Ray, Inc., a California corporation
(the "COMPANY"), hereby grants to the Optionee (the "OPTIONEE") named in the
Notice of Stock Option Grant (the "NOTICE OF GRANT"), an option (the "OPTION")
to purchase a number of Shares, as set forth in the Notice of Grant, at the
exercise price per share set forth in the Notice of Grant (the "EXERCISE
Price"), subject to the terms, conditions and definitions of the 2000 Stock Plan
(the "PLAN") adopted by the Company, which is incorporated herein by reference.
Together, the Notice of Grant and these Terms and Conditions of Stock Option
Agreement may be referred to hereinafter as the "OPTION AGREEMENT." In the event
of a conflict between the terms and conditions of the Plan and this Option
Agreement, the Option Agreement shall prevail. Unless otherwise defined herein,
the terms defined in the Plan shall have the same defined meanings in this
Option Agreement.
If designated in the Notice of Grant as an Incentive Stock Option, this
Option is intended to qualify as an Incentive Stock Option under Section 422 of
the Code.
2. Exercise of Option.
(a) Right to Exercise. This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement. In the event of
Optionee's death, Disability or other termination of Optionee's employment or
consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.
(b) Method of Exercise. This Option is exercisable by delivery of an
exercise notice, in the form provided by the Company (the "EXERCISE NOTICE"),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the "EXERCISED SHARES"), and
such other representations and agreements as to the holder's investment intent
with respect to the Exercised Shares as may be required by the Company pursuant
to the provisions of the Plan. The Exercise Notice shall be signed by the
Optionee and, if required by the Company, by the Optionee's spouse, and shall be
delivered in person or by certified mail to the Secretary of the Company. The
Exercise Notice shall be accompanied by payment of the aggregate Exercise Price
as to all Exercised Shares, plus applicable withholding taxes. This Option shall
be deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price and taxes. No
Shares shall be issued pursuant to the exercise of this Option unless such
issuance and exercise complies with all relevant provisions of law and the
requirements of any stock exchange upon which the Shares are then listed.
Assuming such compliance, for income tax purposes the Exercised Shares shall be
considered transferred to the Optionee on the date the Option is exercised with
respect to such Exercised Shares.
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3. Method of Payment. Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the Optionee:
(a) cash; or
(b) check; or
(c) such other consideration as is indicated on the Notice of Grant.
4. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company an Investment
Representation Statement in the form attached as EXHIBIT A to the Exercise
Notice.
5. Restrictions on Exercise. This Option may not be exercised until such
time as the Plan has been approved by the shareholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of this
Option, the Company may require Optionee to make any representation and warranty
to the Company as may be required by any applicable law or regulation.
6. Termination of Relationship. In the event of termination of Optionee's
consulting relationship or Continuous Status as an Employee, Optionee may, to
the extent otherwise so entitled at the date of such termination (the
"TERMINATION DATE"), exercise this Option before the expiration of the
Termination Period set out in the Notice of Grant. To the extent that Optionee
was not entitled to exercise this Option at the Termination Date, or if Optionee
does not exercise this Option within the time specified herein, the Option shall
terminate. In the event that the Optionee is terminated for cause, the Option
shall expire on the Termination Date.
7. Disability of Optionee. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's Continuous Status as an
Employee as a result of disability (as determined by the Board in accordance
with the policies of the Company), Optionee may, but only within six (6) months
from the date of termination of employment (but in no event later than the date
of expiration of the term of this Option as set forth in Section 10 below),
exercise the Option to the extent otherwise so entitled at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of termination, or if Optionee does not exercise such Option (to the
extent otherwise so entitled) within the time specified herein, the Option shall
terminate.
8. Death of Optionee. In the event of the death of Optionee, the Option
may be exercised at any time within twelve (12) months following the date of
death (but in no event later than the date of expiration of the term of this
Option as set forth in Section 10 below), by Optionee's estate or by a person
who acquired the right to exercise the
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Option by bequest or inheritance, but only to the extent the Optionee could
exercise the Option at the date of death.
9. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by him. The terms of this
Option shall be binding upon the executors, administrators, heirs, successors
and assigns of the Optionee.
10. Term of Option. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Option terms and Options granted to more than
ten percent (10%) shareholders shall apply to this Option.
11. Tax Consequences. Some of the federal and California tax consequences
relating to this Option, as of the date of this Option, are set forth below.
THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE
SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING
THIS OPTION OR DISPOSING OF THE SHARES.
(a) Exercising the Option.
(i) Nonqualified Stock Option ("NSO"). If this Option does not
qualify as an ISO, the Optionee may incur regular federal income tax and
California income tax liability upon exercise. The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the fair market value of the Exercised Shares on the
date of exercise over their aggregate Exercise Price. If the Optionee is an
employee, the Company will be required to withhold from his or her compensation
or collect from Optionee and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
(ii) Incentive Stock Option ("ISO"). If this Option qualifies as an
ISO, the Optionee will have no regular federal income tax or California income
tax liability upon its exercise, although the excess, if any, of the fair market
value of the Exercised Shares on the date of exercise over their aggregate
Exercise Price will be treated as an adjustment to the alternative minimum tax
for federal tax purposes and may subject the Optionee to alternative minimum tax
in the year of exercise.
(iii) California ISO's. Employees who meet certain limited-income
requirements may treat a nonqualified stock option granted before January 1,
2002 as a qualified incentive stock option for California purposes only. To
qualify, the employee must have earned income from the Company of $40,000 or
less for the taxable year in which the option is exercised. California ISO
treatment is limited annually to 1,000 shares with a value at the time the
option is issued of less than $100,000.
(b) Disposition of Shares.
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(i) NSO. If the Optionee holds NSO Shares for at least one year, any
gain realized on disposition of the Shares will be treated as long-term capital
gain for federal income tax purposes.
(ii) ISO. If the Optionee holds ISO Shares for at least one year
after exercise AND two years after the grant date, any gain realized on
disposition of the Shares will be treated as long-term capital gain for federal
income tax purposes. If the Optionee disposes of ISO Shares within one year
after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the LESSER OF (A) the difference
between the FAIR MARKET VALUE OF THE SHARES ACQUIRED ON THE DATE OF EXERCISE and
the aggregate Exercise Price, or (B) the difference between the SALE PRICE of
such Shares and the aggregate Exercise Price.
(c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee
sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on
or before the later of (i) the date two years after the grant date, or (ii) the
date one year after the exercise date, the Optionee shall immediately notify the
Company in writing of such disposition. The Optionee agrees that he or she may
be subject to income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in cash or out
of the current earnings paid to the Optionee.
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PURPLE RAY, INC.
2000 STOCK PLAN
EXERCISE NOTICE FOR VESTED SHARES
Attention: Secretary
1. Exercise of Option. Effective as of today, ___________, 20__, the
undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "SHARES") of Purple Ray, Inc. (the
"COMPANY") for $____ per Share under and pursuant to the Company's 2000 Stock
Plan, as amended (the "PLAN"), and the Notice of Stock Option Grant and Terms
and Conditions of Stock Option Agreement dated ________ (together, the "OPTION
AGREEMENT"). The total purchase price with respect to the Shares is
$________________.
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions. Optionee represents that
Optionee is purchasing the Shares for Optionee's own account for investment and
not with a view to, or for sale in connection with, a distribution of any of
such Shares.
3. Compliance with Securities Laws; Federal Restrictions on Transfer.
Optionee has read and executed the Investment Representation Statement attached
as EXHIBIT A hereto. Optionee represents that he or she understands the matters
set forth in the Investment Representation Statement and that he or she is
purchasing the Shares subject to the restrictions and limitations set forth in
that document.
4. Right of First Refusal. Before any Shares held by Optionee or any
transferee (either being sometimes referred to herein as the "HOLDER") may be
sold or otherwise transferred (including transfer by gift or operation of law),
the Company or its assignee(s) shall have a right of first refusal to purchase
the Shares on the terms and conditions set forth in this Section (the "RIGHT OF
FIRST REFUSAL").
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver
to the Company a written notice (the "SALE NOTICE") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("PROPOSED TRANSFEREE"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "OFFERED PRICE"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Bona Fide Transfer. Within ten (10) days after receipt of the Sale
Notice, the Company shall determine the bona fide nature of the proposed
voluntary transfer and give the Optionee written notice of the Company's
determination. If the proposed transfer is deemed not to be bona fide, the
Optionee shall be responsible for providing additional information to the
Company to show the bona fide nature of the proposed transfer. The Company shall
have the right to demand further assurances from the
1
Optionee and the Proposed Transferee (in a form satisfactory to the Company)
that the Sale Notice fully and accurately sets forth all of the terms and
conditions of the proposed transfer, including, without limitation, assurance
that the Sale Notice fully and accurately sets forth the consideration actually
to be paid for the Shares and all transactions, directly or indirectly, between
the parties which may have affected the price the Proposed Transferee was
willing to pay for the Shares.
(c) Exercise of Right of First Refusal by Company. In the event that
the proposed transfer is deemed to be bona fide, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all,
but not less than all (unless the Holder so consents) of the Shares proposed to
be transferred to any one or more of the Proposed Transferees, at the purchase
price determined in accordance with subsection (d) below. Such written notice
may be given within thirty (30) days after receipt of the Sale Notice.
(d) Purchase Price. The purchase price ("PURCHASE PRICE") for the
Shares purchased by the Company or its assignee(s) under this Section shall be
the Offered Price. If the Offered Price includes consideration other than cash,
the cash equivalent value of the non-cash consideration shall be determined by
the Board of Directors of the Company in good faith.
(e) Payment. Payment of the Purchase Price shall be made, at the option
of the Company or its assignee(s), by cash, check, cancellation of all or a
portion of any outstanding indebtedness of the Holder to the Company (or, in the
case of repurchase by an assignee, to the assignee), or by any combination
thereof within sixty (60) days after receipt of the Sale Notice, in the manner
and at the times set forth in such notice.
(f) Holder's Right to Transfer. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s), then the Holder may sell or otherwise transfer
such Shares to that Proposed Transferee at the Offered Price or at a higher
price, provided that such sale or other transfer is consummated within one
hundred twenty (120) days after the date of the Notice and provided further that
any such sale or other transfer is effected in accordance with any applicable
securities laws and the Proposed Transferee agrees in writing that the
provisions of this Section shall continue to apply to the Shares in the hands of
such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(g) Exception for Certain Family Transfers. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
2
(h) Transfers Not Subject to the Right of First Refusal. The Right of
First Refusal shall not apply to any transfer or exchange of the shares acquired
pursuant to the exercise of the Option Agreement if such transfer is in
connection with a Change in Capitalization, as described in Section 12 of the
Plan. If the consideration received pursuant to such transfer or exchange
consists of stock of a Parent or Subsidiary, such consideration shall remain
subject to the Right of First Refusal unless the provisions of paragraph 4(j)
result in a termination of the Right of First Refusal.
(i) Assignment of the Right of First Refusal. The Company shall have the
right to assign the Right of First Refusal at any time, whether or not the
Optionee has attempted a transfer, to one or more persons as may be selected by
the Company.
(j) Early Termination of the Right of Refusal. The other provisions of
this paragraph 4 notwithstanding, the Right of First Refusal shall terminate,
and be of no further force and effect upon (i) a merger of the Company or
transaction in which over 80% of the voting power of the Company is transferred
and following which the shareholders of the Company have less than 20% of the
voting power of the resulting or combined entity and shall not apply with
respect to shares sold in such offering or acquisition, or (ii) 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 (x) such stock is listed on a
national securities exchange (as that term is used in the Exchange Act) or (y)
such stock is traded on the over-the-counter market and prices therefor are
published daily on business days in a recognized financial journal.
5. Rights as Shareholder. Subject to the terms and conditions of this
Agreement, Optionee shall have all of the rights of a shareholder of the Company
with respect to the Shares from and after the date that Optionee delivers full
payment of the Exercise Price until such time as Optionee disposes of the Shares
or the Company and/or its assignee(s) exercises the Right of First Refusal
hereunder. Upon such exercise, Optionee shall have no further rights as a holder
of the Shares so purchased except the right to receive payment for the Shares so
purchased in accordance with the provisions of this Agreement, and Optionee
shall forthwith cause the certificate(s) evidencing the Shares so purchased to
be surrendered to the Company for transfer or cancellation.
6. Tax Consultation. Optionee understands that Optionee may suffer adverse
tax consequences as a result of Optionee's purchase or disposition of the
Shares. Optionee represents that Optionee has consulted with any tax consultants
Optionee deems advisable in connection with the purchase or disposition of the
Shares and that Optionee is not relying on the Company for any tax advice.
7. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED
3
UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE
ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN
THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY
BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER
RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF
THESE SHARES.
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner. In
the event such a restriction is required by the state of California, a copy of
the Commissioner"s Rules will be furnished to Optionee and an additional legend
may be required on the Shares.
(b) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8. Market Standoff Agreement. Optionee hereby agrees that if so requested
by the Company or any representative of the underwriters in connection with any
registration of the offering of any securities of the Company under the 1933
Act, Optionee shall not sell or otherwise transfer any Shares or other
securities of the Company during the 180-day period following the effective date
of a registration statement of the Company filed under the 1933 Act; provided,
however, that such restriction shall only apply to the first registration
statement of the Company to become effective under the 1933 Act which include
securities to be sold on behalf of the Company to the public in an underwritten
public offering under the 1933 Act. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 180-day period.
9. Successors and Assigns. The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
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10. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the Plan
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
the Company and on Optionee.
11. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of California excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
12. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
13. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
14. Delivery of Payment. Optionee herewith delivers to the Company the full
Exercise Price for the Shares.
15. Entire Agreement. The Plan and Option Agreement are incorporated herein
by reference. This Agreement, the Plan and the Option Agreement constitute the
entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and is governed by California law except for that body of
law pertaining to conflict of laws.
Submitted by: Accepted by:
PURCHASER: PURPLE RAY, INC.,
a California corporation
___________________________________ By ______________________________
(Signature)
Its _____________________________
Address
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PURPLE RAY, INC.
2000 STOCK PLAN
EXHIBIT A TO EXERCISE NOTICE
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : PURPLE RAY, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection, Optionee understands
that, in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the securities. Optionee
understands that the certificate evidencing the securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company and any other legend required under applicable state
securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144, each
promulgated under the Securities Act, which, in substance, permit limited public
resale of "restricted securities" acquired, directly or indirectly from the
issuer thereof, in a non-public offering subject to the satisfaction of certain
conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the
time of exercise of the Option by the Optionee,
1
such exercise will be exempt from registration under the Securities Act. In the
event the Company later becomes subject to the reporting requirements of Section
13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter
the securities exempt under Rule 701 may be resold, subject to the satisfaction
of certain of the conditions specified by Rule 144, including among other
things: (1) the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934); and, in the case of an
affiliate, (2) the availability of certain public information about the Company,
and the amount of securities being sold during any three month period not
exceeding the limitations specified in Rule 144(e), if applicable.
In the event that the Company does not qualify under Rule 701 at the time of
exercise of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires among other
things: (1) the resale occurring not less than one year after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than two years, (2) the availability of certain
public information about the Company, (3) the sale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of
1934), and (4) the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable.
(d) Optionee agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise dispose
of any shares of Common Stock of the Company held by Optionee (other than those
shares included in the registration) without the prior written consent of the
Company or the underwriters managing such initial underwritten public offering
of the Company's securities for one hundred eighty (180) days from the effective
date of such registration, and (2) further agrees to execute any agreement
reflecting (1) above as may be requested by the underwriters at the time of the
public offering; provided however that the officers and directors of the Company
who own the stock of the Company also agree to such restrictions.
(e) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
2
(f) Optionee understands that the certificate evidencing the Securities
may be imprinted, if required by the state of California, with a legend which
prohibits the transfer of the Securities without the consent of the Commissioner
of Corporations of California. At the time of exercise, Optionee will be
furnished with a copy of the applicable Commissioner's Rules with respect to
such restriction, if any.
Signature of Optionee:
____________________________________________
Date: ________________, 20__
3
PURPLE RAY, INC.
2000 STOCK PLAN
EXERCISE NOTICE FOR UNVESTED SHARES AND
RESTRICTED STOCK AGREEMENT
Secretary
Purple Ray, Inc.
_______________________
Dear Sir:
1. Exercise of Option. Effective as of today, ___________, 20__, the
undersigned ("OPTIONEE") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "SHARES") of Purple Ray, Inc. (the
"COMPANY") under and pursuant to the Company's Stock Plan, as amended (the
"PLAN") and the Notice of Stock Option Grant and Terms and Conditions of Stock
Option Agreement dated __________,20__ (together, the "OPTION AGREEMENT"). Of
these Shares, Optionee has elected to purchase __________ of those Shares which
have become vested under the Vesting Schedule set out in the Notice of Grant
(the "VESTED SHARES") and __________ Shares which have not yet vested under such
schedule (the "UNVESTED SHARES"). The Purchase Price for the Shares shall be
$______ per Share, as set out in the Notice of Grant, for an aggregate Purchase
Price of $_________.
2. Representations of Optionee. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions. Optionee represents that
Optionee is purchasing the Shares for Optionee's own account for investment and
not with a view to, or for sale in connection with, a distribution of any of
such Shares.
3. Compliance with Securities Laws; Federal Restrictions on Transfer.
Optionee has read and executed the Investment Representation Statement attached
as EXHIBIT A hereto. Optionee represents that he or she understands the matters
set forth in the Investment Representation Statement and that he or she is
purchasing the Shares subject to the restrictions and limitations set forth in
that document.
4. Company's Repurchase Option. The Company or its assignee(s) shall have
the option to repurchase any or all of the Unvested Shares on the terms and
conditions set forth in this section (the "REPURCHASE OPTION") if the Optionee
should cease to be "employed" by the Company (as defined in section 4(a) below)
for any reason or no reason, including without limitation death, disability,
voluntary resignation or termination by the Company with or without cause.
(a) Right of Termination Unaffected. Nothing in this Agreement shall be
construed to limit or otherwise affect in any manner whatsoever the right or
power of the Company to terminate Optionee's employment at any time for any
reason or no reason, with or without cause. Optionee shall be considered to be
employed by the Company if Optionee is an officer, director or full-time
employee of the Company or any Parent or Subsidiary of the Company (as defined
in the Plan) or if the Board of Directors determines that Optionee is rendering
substantial services as a part-time employee, consultant or independent
contractor to the Company or any Parent or Subsidiary of the
4
Company (as defined in the Plan). In case of any dispute, the Board of Directors
of the Company shall have discretion to determine (i) whether Optionee has
ceased to be employed by the Company and (ii) the date on which the employment
relationship ceases (the "TERMINATION DATE").
(b) Exercise of Repurchase Option. At any time within ninety (90) days
after Optionee's Termination Date, the Company or its assignee(s) may elect to
repurchase any or all shares that are Unvested Shares as of the Termination Date
and that were purchased pursuant to the Option Agreement by giving Optionee (or
Optionee's personal representative as the case may be) written notice of
exercise of the Repurchase Option.
(i) Repurchase Price. The Company or its assignee(s) shall have the
option to repurchase from Optionee any or all of the Unvested Shares (or from
Optionee's personal representative as the case may be) at the Exercise Price (as
defined in the Option Agreement), as such price may be adjusted from time to
time to reflect any subsequent stock dividend, stock split, reverse stock split
or recapitalization of the Company (the "REPURCHASE PRICE").
(ii) Payment of Repurchase Price. The Repurchase Price shall be
payable, at the option of the Company or its assignee(s), by cash, check or by
cancellation of all or a portion of any outstanding indebtedness of Optionee to
the Company (or, in the case of repurchase by an assignee, to the assignee) or
any combination thereof. The Repurchase Price shall be paid without interest
within 90 days after the Termination Date.
(iii) Lapse of Repurchase Option. Starting on the Date of Grant and
ending on the Termination Date, all Unvested Shares held by the Optionee shall
be released from the Company's Repurchase Option and cease to be Unvested Shares
according to the Vesting Schedule set out in the Notice of Grant.
5. Right of First Refusal. Before any Shares held by Optionee or any
transferee (either being sometimes referred to herein as the "HOLDER") may be
sold or otherwise transferred (including transfer by gift or operation of law),
the Company or its assignee(s) shall have a right of first refusal to purchase
the Shares on the terms and conditions set forth in this Section (the "RIGHT OF
FIRST REFUSAL").
(a) Notice of Proposed Transfer. The Holder of the Shares shall deliver
to the Company a written notice (the "SALE NOTICE") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer such Shares; (ii) the name of
each proposed purchaser or other transferee ("PROPOSED TRANSFEREE"); (iii) the
number of Shares to be transferred to each Proposed Transferee; and (iv) the
bona fide cash price or other consideration for which the Holder proposes to
transfer the Shares (the "OFFERED PRICE"), and the Holder shall offer the Shares
at the Offered Price to the Company or its assignee(s).
(b) Bona Fide Transfer. Within ten (10) days after receipt of the Sale
Notice, the Company shall determine the bona fide nature of the proposed
voluntary transfer and give the Optionee written notice of the Company's
determination. If the proposed transfer is deemed not to be bona fide, the
Optionee shall be responsible for providing additional information to the
Company to show the bona fide nature of the proposed transfer. The Company shall
have the right to demand further assurances from the
5
Optionee and the Proposed Transferee (in a form satisfactory to the Company)
that the Sale Notice fully and accurately sets forth all of the terms and
conditions of the proposed transfer, including, without limitation, assurance
that the Sale Notice fully and accurately sets forth the consideration actually
to be paid for the Shares and all transactions, directly or indirectly, between
the parties which may have affected the price the Proposed Transferee was
willing to pay for the Shares.
(c) Exercise of Right of First Refusal by Company. In the event that the
proposed transfer is deemed to be bona fide, the Company and/or its assignee(s)
may, by giving written notice to the Holder, elect to purchase any or all of the
Shares proposed to be transferred to any one or more of the Proposed
Transferees, at the purchase price determined in accordance with subsection (c)
below. Such written notice may be given within thirty (30) days after receipt of
the Sale Notice.
(d) Purchase Price. The purchase price ("PURCHASE PRICE") for the Shares
purchased by the Company or its assignee(s) under this Section shall be the
Offered Price. If the Offered Price includes consideration other than cash, the
cash equivalent value of the non-cash consideration shall be determined by the
Board of Directors of the Company in good faith.
(e) Payment. Payment of the Purchase Price shall be made, at the option
of the Company or its assignee(s), by cancellation of all or a portion of any
outstanding indebtedness of the Holder to the Company (or, in the case of
repurchase by an assignee, to the assignee), or by any combination thereof
within sixty (60) days after receipt of the Sale Notice, in the manner and at
the times set forth in such notice.
(f) Holder's Right to Transfer. If all of the Shares proposed in the
Notice to be transferred to a given Proposed Transferee are not purchased by the
Company and/or its assignee(s), then the Holder may sell or otherwise transfer
such Shares to that Proposed Transferee at the Offered Price or at a higher
price, provided that such sale or other transfer is consummated within one
hundred twenty (120) days after the date of the Notice and provided further that
any such sale or other transfer is effected in accordance with any applicable
securities laws and the Proposed Transferee agrees in writing that the
provisions of this Section shall continue to apply to the Shares in the hands of
such Proposed Transferee. If the Shares described in the Notice are not
transferred to the Proposed Transferee within such period, a new Notice shall be
given to the Company, and the Company and/or its assignees shall again be
offered the Right of First Refusal before any Shares held by the Holder may be
sold or otherwise transferred.
(g) Exception for Certain Family Transfers. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all of the
Shares during the Optionee's lifetime or on the Optionee's death by will or
intestacy to the Optionee's immediate family or a trust for the benefit of the
Optionee's immediate family shall be exempt from the provisions of this Section.
"Immediate Family" as used herein shall mean spouse, lineal descendant or
antecedent, father, mother, brother or sister. In such case, the transferee or
other recipient shall receive and hold the Shares so transferred subject to the
provisions of this Section, and there shall be no further transfer of such
Shares except in accordance with the terms of this Section.
6
(h) Transfers Not Subject to the Right of First Refusal. The Right of
First Refusal shall not apply to any transfer or exchange of the shares acquired
pursuant to the exercise of the Option Agreement if such transfer is in
connection with a Change in Capitalization, as described in Section 13 of the
Plan. If the consideration received pursuant to such transfer or exchange
consists of stock of a Parent or Subsidiary, such consideration shall remain
subject to the Right of First Refusal unless the provisions of paragraph 5(j)
result in a termination of the Right of First Refusal.
(i) Assignment of the Right of First Refusal. The Company shall have the
right to assign the Right of First Refusal at any time, whether or not the
Optionee has attempted a transfer, to one or more persons as may be selected by
the Company.
(j) Early Termination of the Right of Refusal. The other provisions of
this paragraph 5 notwithstanding, the Right of First Refusal shall terminate,
and be of no further force and effect upon (i) a merger of the Company or
transaction in which over 80% of the voting power of the Company is transferred
and following which the shareholders of the Company have less than 20% of the
voting power of the resulting or combined entity and shall not apply with
respect to shares sold in such offering or acquisition, or (ii) 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 (x) such stock is listed on a
national securities exchange (as that term is used in the Exchange Act) or (y)
such stock is traded on the over-the-counter market and prices therefor are
published daily on business days in a recognized financial journal.
6. Escrow. As security for the faithful performance of this Agreement,
Optionee agrees, immediately upon receipt of the certificate(s) evidencing the
Shares, to deliver such certificate(s), together with a stock power in the form
of ATTACHMENT 1 attached hereto, executed by Optionee and by Optionee's spouse,
if any (with the date and number of Shares left blank), to the Secretary of the
Company or its designee ("Escrow Holder"), who is hereby appointed to hold such
certificate(s) and stock power in escrow and to take all such actions and to
effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Agreement. Such appointment shall be evidenced
by an executed form of Joint Escrow Instructions, attached hereto as ATTACHMENT
2. Optionee and the Company agree that Escrow Holder shall not be liable to any
party to this Agreement (or to any other party) for any actions or omissions
unless Escrow Holder is grossly negligent relative thereto. The Escrow Holder
may rely upon any letter, notice or other document executed by any signature
purported to be genuine and may rely on advice of counsel and obey any order of
any court with respect to the transactions contemplated herein. The Shares shall
be released from escrow upon termination of both the Repurchase Option and the
Right of First Refusal; provided, however, that such release shall not affect
the rights of the Company with respect to any pledge of Shares to the Company.
7. Rights as Shareholder. Subject to the terms and conditions of this
Agreement, Optionee shall have all of the rights of a shareholder of the Company
with respect to the Shares from and after the date that Optionee delivers full
payment of the Exercise Price until such time as Optionee disposes of the Shares
or the Company and/or its assignee(s) exercises the Repurchase Option or Right
of First Refusal hereunder. Upon such exercise, Optionee shall have no further
rights as a holder of the Shares so purchased except the right to receive
payment for the Shares so purchased in accordance with the provisions of this
Agreement, and Optionee shall forthwith cause
7
the certificate(s) evidencing the Shares so purchased to be surrendered to the
Company for transfer or cancellation.
8. Tax Consequences.
(a) Tax Consultation. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee deems advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
(b) Section 83(b) Election For Alternative Minimum Tax for Incentive
Stock Options. If the Option being exercised is an incentive stock option,
Optionee hereby acknowledges that Optionee has been informed that, with respect
to the exercise of any incentive stock option, unless an election is filed by
the Optionee with the Internal Revenue Service within thirty (30) days of the
purchase of the Shares, electing pursuant to Section 83(b) of the Internal
Revenue Code of 1986, as amended (and similar state tax provisions if
applicable) to be taxed currently for alternative minimum tax purposes on any
difference between the purchase price of the Shares and their fair market value
on the date of purchase, the Optionee will be required to include (for
alternative minimum tax purposes only) an amount equal to the excess, if any, of
the fair market value of the Shares, at the time the Company's Repurchase Option
lapses over the purchase price for such Shares. Optionee represents that
Optionee has consulted any tax consultant(s) Optionee deems advisable in
connection with the purchase of the Shares or the filing of the Election for
alternative minimum tax purposes under Section 83(b) and similar tax provisions.
A form of Election Under Section 83(b) is attached hereto as ATTACHMENT 3 for
reference. OPTIONEE HEREBY ASSUMES ALL RESPONSIBILITY FOR FILING SUCH ELECTION
AND PAYING ANY TAXES RESULTING FROM SUCH ELECTION OR THE LAPSE OF THE REPURCHASE
RESTRICTIONS ON THE SHARES.
(c) Section 83(b) Election For Nonstatutory Stock Options. If the Option
being exercised is a nonstatutory stock option, Optionee hereby acknowledges
that Optionee has been informed that, with respect to the exercise of any
nonstatutory stock option, unless an election is filed by the Optionee with the
Internal Revenue Service within thirty (30) days of the purchase of the Shares,
electing pursuant to Section 83(b) of the Internal Revenue Code of 1986, as
amended (and similar state tax provisions if applicable) to be taxed currently
for income tax purposes on any difference between the purchase price of the
Shares and their fair market value on the date of purchase, the Optionee will be
required to include in income an amount equal to the excess, if any, of the fair
market value of the Shares, at the time the Company's Repurchase Option lapses
over the purchase price for such Shares. Optionee represents that Optionee has
consulted any tax consultant(s) Optionee deems advisable in connection with the
purchase of the Shares or the filing of the Election under Section 83(b) and
similar tax provisions. A form of Election Under Section 83(b) is attached
hereto as ATTACHMENT 3A for reference. OPTIONEE HEREBY ASSUMES ALL
RESPONSIBILITY FOR FILING SUCH ELECTION AND PAYING ANY TAXES RESULTING FROM SUCH
ELECTION OR THE LAPSE OF THE REPURCHASE RESTRICTIONS ON THE SHARES.
8
9. Restrictive Legends and Stop-Transfer Orders.
(a) Legends. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT
OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN
COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF REPURCHASE AND RIGHT OF FIRST REFUSAL
OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE
NOTICE AND RESTRICTED STOCK AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER
OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE
ISSUER. SUCH TRANSFER RESTRICTIONS, RIGHT OF REPURCHASE AND RIGHT OF FIRST
REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES.
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner. In
the event such a restriction is required by the state of California, a copy of
the Commissioner"s Rules will be furnished to Optionee and an additional legend
may be required on the Shares.
(i) Stop-Transfer Notices. Optionee agrees that, in order to ensure
compliance with the restrictions referred to herein, the Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(ii) Refusal to Transfer. The Company shall not be required (A) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (B) to treat as owner of
such Shares or to accord the right to vote or pay dividends to any purchaser or
other transferee to whom such Shares shall have been so transferred.
10. Market Standoff Agreement. Optionee hereby agrees that if so requested
by the Company or any representative of the underwriters in connection with any
registration of the offering of any securities of the Company under the 1933
Act, Optionee shall not sell or otherwise transfer any Shares or other
securities of the Company during the one hundred eighty (180) day period
following the effective date of a registration statement of the Company filed
under the 1933 Act; provided, however, that such restriction shall only apply to
the first registration statement of the Company to become effective under the
9
1933 Act which include securities to be sold on behalf of the Company to the
public in an underwritten public offering under the 1933 Act. The Company may
impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such one hundred eighty (180) day
period.
11. Successors and Assigns. The Company may assign any of its rights under
this Agreement to single or multiple assignees, and this Agreement shall inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer herein set forth, this Agreement shall be binding upon
Optionee and his or her heirs, executors, administrators, successors and
assigns.
12. Interpretation. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the Plan
Administrator which shall review such dispute at its next regular meeting. The
resolution of such a dispute by the Administrator shall be final and binding on
the Company and on Optionee.
13. Governing Law; Severability. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
14. Notices. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
15. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
16. Delivery of Payment. Optionee herewith delivers to the Company the full
Exercise Price for the Shares.
10
17. Entire Agreement. The Plan and Option Agreement are incorporated herein
by reference. This Agreement, the Plan and the Option Agreement constitute the
entire agreement of the parties and supersede in their entirety all prior
undertakings and agreements of the Company and Optionee with respect to the
subject matter hereof, and is governed by California law except for that body of
law pertaining to conflict of laws.
Submitted by: Accepted by:
PURCHASER: PURPLE RAY, INC.
________________________________ By ______________________________________
(Signature)
Its _____________________________________
Address: Address:
11
PURPLE RAY, INC.
2000 STOCK PLAN
EXHIBIT A TO EXERCISE NOTICE
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : PURPLE RAY, INC.
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act").
(b) Optionee acknowledges and understands that the securities constitute
"restricted securities" under the Securities Act and have not been registered
under the Securities Act in reliance upon a specific exemption therefrom, which
exemption depends upon, among other things, the bona fide nature of Optionee's
investment intent as expressed herein. In this connection, Optionee understands
that, in the view of the Securities and Exchange Commission, the statutory basis
for such exemption may be unavailable if Optionee's representation was
predicated solely upon a present intention to hold these Securities for the
minimum capital gains period specified under tax statutes, for a deferred sale,
for or until an increase or decrease in the market price of the Securities, or
for a period of one year or any other fixed period in the future. Optionee
further understands that the Securities must be held indefinitely unless they
are subsequently registered under the Securities Act or an exemption from such
registration is available. Optionee further acknowledges and understands that
the Company is under no obligation to register the securities. Optionee
understands that the certificate evidencing the securities will be imprinted
with a legend which prohibits the transfer of the Securities unless they are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company and any other legend required under applicable state
securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted securities" acquired, directly or indirectly from
the issuer thereof, in a non-
public offering subject to the satisfaction of certain conditions. Rule 701
provides that if the issuer qualifies under Rule 701 at the time of exercise of
the Option by the Optionee, such exercise will be exempt from registration under
the Securities Act. In the event the Company later becomes subject to the
reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, ninety (90) days thereafter the securities exempt under Rule 701 may be
resold, subject to the satisfaction of certain of the conditions specified by
Rule 144, including among other things: (1) the sale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of
1934); and, in the case of an affiliate, (2) the availability of certain public
information about the Company, and the amount of securities being sold during
any three month period not exceeding the limitations specified in Rule 144(e),
if applicable.
In the event that the Company does not qualify under Rule 701 at the time of
exercise of the Option, then the securities may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires among other
things: (1) the resale occurring not less than one year after the party has
purchased, and made full payment for, within the meaning of Rule 144, the
securities to be sold; and, in the case of an affiliate, or of a non-affiliate
who has held the securities less than two years, (2) the availability of certain
public information about the Company, (3) the sale being made through a broker
in an unsolicited "broker's transaction" or in transactions directly with a
market maker (as said term is defined under the Securities Exchange Act of
1934), and (4) the amount of securities being sold during any three month period
not exceeding the specified limitations stated therein, if applicable.
(d) Optionee agrees, in connection with the Company's initial
underwritten public offering of the Company's securities, (1) not to sell, make
short sale of, loan, grant any options for the purchase of, or otherwise dispose
of any shares of Common Stock of the Company held by Optionee (other than those
shares included in the registration) without the prior written consent of the
Company or the underwriters managing such initial underwritten public offering
of the Company's securities for one hundred eighty (180) days from the effective
date of such registration, and (2) further agrees to execute any agreement
reflecting (1) above as may be requested by the underwriters at the time of the
public offering; provided however that the officers and directors of the Company
who own the stock of the Company also agree to such restrictions.
(e) Optionee further understands that in the event all of the applicable
requirements of Rule 701 or 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commission
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that any
such other registration exemption will be available in such event.
(f) Optionee understands that the certificate evidencing the Securities
may be imprinted, if required by the state of California, with a legend which
prohibits the transfer of the Securities without the consent of the Commissioner
of Corporations of
California. At the time of exercise, Optionee will be furnished with a
copy of the applicable Commissioner's Rules with respect to such restriction, if
any.
Signature of Optionee:
________________________________________
Date: ________________, 20__
PURPLE RAY, INC.
2000 STOCK PLAN
ATTACHMENT 1 TO EXERCISE NOTICE
STOCK POWER AND ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED and pursuant to that certain Exercise Notice and Restricted
Stock Agreement dated as of __________, 20__, the undersigned hereby sells,
assigns and transfers unto ___________________________________________,
_______________ shares of the Common Stock of Purple Ray, Inc., a California
corporation, standing in the undersigned's name on the books of said corporation
represented by Certificate No. __________ delivered herewith, and does hereby
irrevocably constitute the Secretary of said corporation as attorney-in-fact,
with full power of substitution, to transfer said stock on the books of said
corporation.
Dated: __________, 20__
____________________________________
(Signature)
____________________________________
(Please Print Name)
____________________________________
(Spouse's Signature, if any)
____________________________________
(Please Print Name)
PURPLE RAY, INC.
2000 STOCK PLAN
ATTACHMENT 2 TO EXERCISE NOTICE
JOINT ESCROW INSTRUCTIONS
___________, 20__
Secretary
Purple Ray, Inc.
Dear Sir:
As Escrow Agent for both Purple Ray, Inc., a California
corporation ("Corporation"), and the undersigned purchaser of stock of the
Corporation ("Purchaser"), you are hereby authorized and directed to hold the
documents delivered to you pursuant to the terms of that certain Restricted
Stock Agreement ("Agreement"), dated as of __________, 20__, to which a copy of
these Joint Escrow Instructions is attached, in accordance with the following
instructions:
1. In the event the Corporation and/or any assignee of the
Corporation (referred to collectively for convenience herein as the
"Corporation") exercises the Repurchase Option set forth in the Agreement, the
Corporation shall give to Purchaser and you a written notice specifying the
number of shares of stock to be purchased, the purchase price, and the time for
a closing hereunder at the principal office of the Corporation. Purchaser and
the Corporation hereby irrevocably authorize and direct you to close the
transaction contemplated by such notice in accordance with the terms of said
notice.
2. At the closing, you are directed (a) to date the stock
assignments necessary for the transfer in question, (b) to fill in the number of
shares being transferred, and (c) to deliver same, together with the certificate
evidencing the shares of stock to be transferred, to the Corporation against the
simultaneous delivery to you of the purchase price (by check or by cancellation
of any debt owed by Purchaser to the Corporation) for the number of shares of
stock being purchased pursuant to the exercise of the Repurchase Option.
3. Purchaser irrevocably authorizes the Corporation to deposit
with you any certificates evidencing shares of stock to be held by you hereunder
and any additions and substitutions to said shares as defined in the Agreement.
Purchaser does hereby irrevocably constitute and appoint you as his
attorney-in-fact and agent for the term of this escrow to execute with respect
to such securities all documents necessary or appropriate to make such
securities negotiable and to complete any transaction herein contemplated,
including but not limited to the filing with the Department of Corporations of
the State of California of an Application for Consent to Transfer Securities
Subject to Legend or Escrow Condition Pursuant to Section 25151 of the
California Corporate Securities Law of 1968. Subject to the provisions of this
paragraph 3, Purchaser shall exercise all rights and privileges of a stockholder
of the Corporation while the stock is held by you.
4. Upon written request of the Purchaser after each successive
one-year period from the date of the Agreement, unless the Repurchase Option has
been exercised, you will deliver to Purchaser a certificate or certificates
representing so many shares of stock as are not then subject to the Repurchase
Option. Ninety days after cessation of Purchaser's service to the Company, you
will deliver to Purchaser a certificate or certificates representing the
aggregate
1
number of shares sold and issued pursuant to the Agreement and not purchased by
the Corporation or its assignees pursuant to exercise of the Repurchase Option.
Notwithstanding the foregoing, none of the certificates
representing the shares of stock deposited under these escrow instructions shall
be released to the Purchaser if the Purchaser's Note given in payment for such
shares has not been paid in full. So long as any Note is outstanding, the shares
shall be held by you as collateral for the obligation under the Note. Subject to
the provisions of this paragraph 4, upon payment of the Note in full the
certificates representing the shares may be released and delivered to the
Purchaser. In the event Purchaser defaults in payment of the Note when due, you
shall, upon written request of the Corporation, deliver the certificate
evidencing the shares of stock and the stock assignments to the Corporation to
enable the Corporation to exercise its rights as a secured party under the
Commercial Code of the State of California.
5. If at the time of termination of this escrow you should have
in your possession any documents, securities, or other property belonging to
Purchaser, you shall deliver all of same to Purchaser and shall be discharged of
all further obligations hereunder.
6. Your duties hereunder may be altered, amended, modified or
revoked only by a writing signed by all of the parties hereto.
7. You shall be obligated only for the performance of such duties
as are specifically set forth herein and may rely and shall be protected in
relying or refraining from acting on any instrument reasonably believed by you
to be genuine and to have been signed or presented by the proper party or
parties. You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact for Purchaser while acting in
good faith and in the exercise of your own good judgment, and any act done or
omitted by you pursuant to the advice of your own attorneys shall be conclusive
evidence of such good faith.
8. You are hereby expressly authorized to disregard any and all
warnings given by any of the parties hereto or by any other person or
corporation, excepting only orders or process of courts of law, and are hereby
expressly authorized to comply with and obey orders, judgments or decrees of any
court. In case you obey or comply with any such order, judgment or decree, you
shall not be liable to any of the parties hereto or to any other person, firm or
corporation by reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified, annulled, set aside,
vacated or found to have been entered without jurisdiction.
9. You shall not be liable in any respect on account of the
identity, authorities or rights of the parties executing or delivering or
purporting to execute or deliver the Agreement or any documents or papers
deposited or called for hereunder.
10. You shall not be liable for the outlawing of any rights under
the Statute of Limitations with respect to these Joint Escrow Instructions or
any documents deposited with you.
11. You shall be entitled to employ such legal counsel and other
experts as you may deem necessary properly to advise you in connection with your
obligations hereunder, may rely upon the advice of such counsel, and may pay
such counsel reasonable compensation therefor.
12. Your responsibilities as Escrow Agent hereunder shall
terminate if you shall cease to be Secretary of the Corporation or if you shall
resign by written notice to each party. In the event of any such termination,
the Corporation shall appoint a successor Escrow Agent.
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13. If you reasonably require other or further instruments in
connection with these Joint Escrow Instructions or obligations in respect
hereto, the necessary parties hereto shall join in furnishing such instruments.
14. It is understood and agreed that should any dispute arise
with respect to the delivery and/or ownership or right of possession of the
securities held by you hereunder, you are authorized and directed to retain in
your possession without liability to anyone all or any part of said securities
until such disputes shall have been settled either by mutual written agreement
of the parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
15. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States Post Office, by registered or certified mail with
postage and fees prepaid, addressed to each of the other parties thereunto
entitled at the following addresses, or at such other addresses as a party may
designate by ten (10) days' advance written notice to each of the other parties
hereto.
CORPORATION: PURPLE RAY, INC.
PURCHASER: ______________________________
______________________________
______________________________
______________________________
ESCROW AGENT: Secretary
PURPLE RAY, INC.
______________________________
16. By signing these Joint Escrow Instructions, you become a
party hereto only for the purpose of said Joint Escrow Instructions; you do not
become a party to the Agreement.
17. This instrument shall be binding upon and inure to the
benefit of the parties hereto, and their respective successors and permitted
assigns.
Very truly yours,
PURPLE RAY, INC.
a California corporation
By _________________________________
Title ______________________________
PURCHASER
____________________________________
ESCROW AGENT
____________________________________
Secretary
3
PURPLE RAY, INC.
2000 STOCK PLAN
ATTACHMENT 3 TO EXERCISE NOTICE
ALTERNATIVE MINIMUM TAX ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE
CODE OF 1986
The undersigned Taxpayer hereby elects, pursuant to the
provisions of Sections 55-56 and 83(b) of the Internal Revenue Code of 1986, as
amended, to include in alternative minimum taxable income for the Taxpayer's
current taxable year, as compensation for services, the excess, if any, of the
fair market value of the property described below at the time of transfer over
the amount paid for such property.
1. Taxpayer's Name: _______________________________________________________
Taxpayer's Address: ____________________________________________________
____________________________________________________
Social Security Number:_________________________________________________
2. The property with respect to which the election is made is described as
follows: ___________ shares of Common Stock of Purple Ray, Inc., a
California corporation (the "Company"), which is Taxpayer's employer or
the corporation for whom the Taxpayer has performed services.
3. The date on which the shares were transferred was ___________, 20__, and
this election is made for calendar year 20__.
4. The shares are subject to the following restrictions:
The Company may repurchase all or a portion of the shares at the
Taxpayer's original purchase price under certain conditions at the time
of Taxpayer's termination of employment or services.
5. The fair market value of the shares (without regard to restrictions
other than restrictions which by their terms will never lapse) was
$_________ per share at the time of transfer.
6. The amount paid for such shares was $________ per share.
7. The Taxpayer has submitted a copy of this statement to the Company as
the Taxpayer's employer or the corporation for whom the Taxpayer has
performed services.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS") (AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS) WITHIN 30 DAYS AFTER
THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR ABOVE STATED. THE ELECTION CANNOT BE
REVOKED WITHOUT THE CONSENT OF THE IRS.
Dated: ______________, 20__ ________________________________
Taxpayer's Signature
________________________________
Spouse's Signature (if any)
4
PURPLE RAY, INC.
2000 STOCK PLAN
ATTACHMENT 3A TO EXERCISE NOTICE
ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986
The undersigned Taxpayer hereby elects, pursuant to the provisions of Section
83(b) of the Internal Revenue Code of 1986, as amended, to include in taxable
income for the Taxpayer's current taxable year, as compensation for services,
the excess, if any, of the fair market value of the property described below at
the time of transfer over the amount paid for such property.
1. Taxpayer's Name: _______________________________________________________
Taxpayer's Address: ____________________________________________________
____________________________________________________
Social Security Number:_________________________________________________
2. The property with respect to which the election is made is described as
follows: ___________ shares of Common Stock of PURPLE RAY, INC., a
California corporation (the "Company"), which is Taxpayer's employer or
the corporation for whom the Taxpayer has performed services.
3. The date on which the shares were transferred was ___________, 20__, and
this election is made for calendar year 20__.
4. The shares are subject to the following restrictions:
The Company may repurchase all or a portion of the shares at the
Taxpayer's original purchase price under certain conditions at the time
of Taxpayer's termination of employment or services.
5. The fair market value of the shares (without regard to restrictions
other than restrictions which by their terms will never lapse) was
$_________ per share at the time of transfer.
6. The amount paid for such shares was $________ per share.
7. The Taxpayer has submitted a copy of this statement to the Company as
the Taxpayer's employer or the corporation for whom the Taxpayer has
performed services.
THIS ELECTION MUST BE FILED WITH THE INTERNAL REVENUE SERVICE ("IRS") (AT THE
OFFICE WHERE THE TAXPAYER FILES ANNUAL INCOME TAX RETURNS) WITHIN 30 DAYS AFTER
THE DATE OF TRANSFER OF THE PROPERTY, AND MUST ALSO BE FILED WITH THE TAXPAYER'S
INCOME TAX RETURNS FOR THE CALENDAR YEAR ABOVE STATED. THE ELECTION CANNOT BE
REVOKED WITHOUT THE CONSENT OF THE IRS.
Dated: ______________, 20__ ________________________________
Taxpayer's Signature
________________________________
Spouse's Signature (if any)