RAY DREAM, INC.
1992 STOCK OPTION PLAN
Amended by the Board of Directors on May 25, 1994
Approved by the Shareholders on October 5, 1995
Amended by the Board of Directors on May 23, 1995
1. PURPOSE. The Ray Dream, Inc. 1992 Stock Option Plan (the "Plan") is
established to attract, retain and reward persons providing services to Ray
Dream, Inc. and any successor corporation thereto (collectively referred to as
the "Company"), and any present or future parent and/or subsidiary corporations
of such corporation (all of whom along with the Company being individually
referred to as a "Participating Company" and collectively referred to as the
"Participating Company Group"), and to motivate such persons to contribute to
the growth and profits of the Participating Company Group in the future. For
purposes of the Plan, a parent corporation and a subsidiary corporation shall be
as defined in sections 424(e) and 424(f) of the Internal Revenue Code of 1986,
as amended (the "Code").
2. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company (the "Board") and/or by a duly appointed committee of
the Board having such powers as shall be specified by the Board. Any subsequent
references herein to the Board shall also mean the committee if such committee
has been appointed and, unless the powers of the committee have been
specifically limited, the committee shall have all of the powers of the Board
granted herein, including, without limitation, the power to terminate or amend
the Plan at any time, subject to the terms of the Plan and any applicable
limitations imposed by law. All questions of interpretation of the Plan or of
any options granted under the Plan (an "Option") shall be determined by the
Board, and such determinations shall be final and binding upon all persons
having an interest in the Plan and/or any Option. Options may be either
incentive stock options as defined in section 422 of the Code ("Incentive Stock
Options") or nonqualified stock options. Any officer of a Participating Company
shall have the authority to act on behalf of the Company with respect to any
matter, right, obligation, or election which is the responsibility of or which
is allocated to the Company herein, provided the officer has apparent authority
with respect to such matter, right, obligation, or election.
3. ELIGIBILITY. Options may be granted only to employees (including
officers) and directors of the Participating Company Group or to individuals who
are rendering services as consultants, advisors, or other independent
contractors to the Participating Company Group. The Board shall, in its sole
discretion, determine which persons shall be granted Options (an "Optionee"). A
director of the Company may only be granted a nonqualified stock option unless
the director is also an employee of the Company. An individual who is rendering
services as a consultant, advisor, or other independent contractor may only be
granted a nonqualified stock option. Eligible persons may be granted more than
one (1) Option.
4. SHARES SUBJECT TO OPTION. Options shall be for the purchase of shares
of the authorized but unissued common stock of the Company (the "Stock"),
subject to adjustment as
provided in paragraph 9 below. The maximum number of shares of Stock which
may be issued under the Plan shall be Five Hundred Six Thousand Two Hundred
Eighty (506,280) shares. In the event that any outstanding Option for any
reason expires or is terminated or canceled and/or shares of Stock subject to
repurchase are repurchased by the Company, the shares allocable to the
unexercised portion of such Option, or such repurchased shares, may again be
subject to an Option grant.
5. TIME FOR GRANTING OPTIONS. All Options shall be granted, if at all,
within ten (10) years from the earlier of the date the Plan is adopted by the
Board or the date the Plan is duly approved by the shareholders of the Company.
6. TERMS, CONDITIONS AND FORM OF OPTIONS. Subject to the provisions of
the Plan, the Board shall determine for each Option (which need not be
identical) the number of shares of Stock for which the Option shall be granted,
the option exercise price of the Option, the timing and terms of exercisability
and vesting of the Option, whether the Option is to be treated as an Incentive
Stock Option or as a nonqualified stock option and all other terms and
conditions of the Option not inconsistent with the Plan. Options granted
pursuant to the Plan shall be evidenced by written agreements specifying the
number of shares of Stock covered thereby, in such form as the Board shall from
time to time establish, which agreements may incorporate all or any of the terms
of the Plan by reference and shall comply with and be subject to the following
terms and conditions:
(A) OPTION EXERCISE PRICE. The option exercise price for each Option
shall be established in the sole discretion of the Board; provided, however,
that (i) the option exercise price per share for an Incentive Stock Option shall
be not less than the fair market value, as determined by the Board, of a share
of Stock on the date of the granting of the Option, (ii) the option exercise
price per share for a nonqualified stock option shall not be less than eighty-
five percent (85 %) of the fair market value, as determined by the Board, of a
share of Stock on the date of the granting of the Option and (iii) no Option
granted to an Optionee who at the time the Option is granted owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of a Participating Company within the meaning of section
422(b)(6) of the Code and/or ten percent (10%) of the total combined value of
all classes of stock of a Participating Company (a "Ten Percent Owner Optionee")
shall have an option exercise price per share less than one hundred ten percent
(110%) of the fair market value, as determined by the Board, of a share of Stock
on the date of the granting of the Option. Notwithstanding the foregoing, an
Option (whether an Incentive Stock Option or a nonqualified stock option) may be
granted with an option exercise price lower than the minimum exercise price set
forth above if such Option is granted pursuant to an assumption or substitution
for another option in a manner qualifying with the provisions of section 424(a)
of the Code.
(B) EXERCISE PERIOD OF OPTIONS. The Board shall have the power to
set the time or times within which each Option shall be exercisable or the event
or events upon the occurrence of which all or a portion of each Option shall be
exercisable and the term of each Option; provided, however, that (i) no Option
shall be exercisable after the expiration of ten (10) years after the date such
Option is granted and (ii) no Option granted to a Ten Percent Owner
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Optionee shall be exercisable after the expiration of five (5) years after
the date such Option is granted.
(C) PAYMENT OF OPTION EXERCISE PRICE. Payment of the option exercise
price for the number of shares of Stock being purchased pursuant to any Option
shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the
Company of shares of the Company's stock owned by the Optionee having a value,
as determined by the Board (but without regard to any restrictions on
transferability applicable to such stock by reason of federal or state
securities laws or agreements with an underwriter for the Company), not less
than the option exercise price, (iii) by the Optionee's recourse promissory
note, (iv) by the assignment of the proceeds of a sale of some or all of the
shares being acquired upon the exercise of the Option (including, without
limitation, through an exercise complying with the provisions of Regulation T as
promulgated from time to time by the Board of Governors of the Federal Reserve
System), or (v) by any combination thereof. The Board may at any time or from
time to time, by adoption of or by amendment to the form of Standard Option
Agreement described in paragraph 7 below, or by other means, grant Options which
do not permit all of the foregoing forms of consideration to be used in payment
of the option exercise price and/or which otherwise restrict one (1) or more
forms of consideration. Notwithstanding the foregoing, an Option may not be
exercised by tender to the Company of shares of the Company's stock to the
extent such tender of stock would constitute a violation of the provisions of
any law, regulation and/or agreement restricting the redemption of the Company's
stock. Furthermore, no promissory note shall be permitted if an exercise using
a promissory note would be a violation of any law. Any permitted promissory
note shall be due and payable not more than five (5) years after the Option is
exercised, and interest shall be payable at least annually and be at least equal
to the minimum interest rate necessary to avoid imputed interest pursuant to all
applicable sections of the Code. The Board shall have the authority to permit
or require the Optionee to secure any promissory note used to exercise an Option
with the shares of Stock acquired on exercise of the Option and/or with other
collateral acceptable to the Company.
(i) Unless otherwise provided by the Board, an Option may not be
exercised by tender to the Company of shares of the Company's stock unless such
shares of the Company's stock either have been owned by the Optionee for more
than six (6) months or were not acquired, timely or indirectly, from the
Company.
(ii) Unless otherwise provided by the Board, in the event the
Company at any time becomes subject to the regulations promulgated by the Board
of Governors of the Federal Reserve System or any other governmental entity
affecting the extension of credit in connection with the Company's securities,
any promissory note shall comply with such applicable regulations, and the
Optionee shall pay the unpaid principal and accrued interest, if any, to the
extent necessary to comply with such applicable regulations.
(iii) The Company reserves, at any and all times, the right,
in the Company's sole and absolute discretion, to establish, decline to approve
and/or terminate any program and/or procedures for the exercise of Options by
means of an assignment of the proceeds of a sale of some or all of the shares of
Stock to be acquired upon such exercise.
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7. STANDARD FORM OF STOCK OPTION AGREEMENT. Unless otherwise provided
for by the Board at the time an Option is granted or as otherwise provided for
by this paragraph 7, all Options shall comply with and be subject to the terms
and conditions set forth in the stock option agreement attached hereto as
Exhibit A and incorporated herein by reference (the "Standard Option
Agreement").
(A) MODIFICATIONS FOR NONQUALIFIED STOCK OPTIONS. In the event the
Option is designated as a nonqualified stock option, the Standard Option
Agreement for such Option shall be the Standard Option Agreement as modified as
set forth below unless otherwise specified by the Board:
(i) The title and paragraph 2 of the Standard Option Agreement
shall reflect the Option's status as a nonqualified stock option.
(ii) Paragraph 2 of the Standard Option Agreement shall be
modified to delete therefrom the third sentence referring to whether the entire
option qualifies on an Incentive Stock Option.
(iii) A new paragraph 7(f) shall be added to the Standard
Option Agreement providing that, in the event an Optionee is a director or
consultant or advisor but not an employee of a Participating Company at the time
the Option is granted, termination of the Optionee's status as a director or
consultant or advisor of the Participating Company shall be deemed to be
termination of the Optionee's employment for purposes of the Standard Option
Agreement.
(iv) Paragraph 14 of the Standard Option Agreement providing,
among other things, that the Optionee give the Company notice of sales upon
disqualifying dispositions of Incentive Stock Options shall be deleted and shall
not apply to the Option.
(v) Paragraph 16(d) of the Standard Option Agreement regarding
the stock certificate legend applicable to Incentive Stock Options shall be
deleted and shall not apply to the Option.
(vi) Paragraph 19 of the Standard Option Agreement shall be
modified to delete the provision that amendments to the Standard Option
Agreement may be made without the Optionee's consent if such amendments are
required to enable an Option designated as an Incentive Stock Option to qualify
as an Incentive Stock Option.
(vii) The remaining paragraphs of such modified Standard
Option Agreement for nonqualified stock options shall be renumbered accordingly.
(B) STANDARD TERM FOR OPTIONS. Unless otherwise provided for by the
Board in the grant of an Option, any Option granted hereunder shall be
exercisable for a term of ten (10) years.
8. AUTHORITY TO VARY TERMS. The Board shall have the authority from time
to time to vary the terms of the Standard Option Agreement described in
paragraph 7 above either in
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connection with the grant of an individual Option or in connection with the
authorization of a new standard form or forms; provided, however, that the
terms and conditions of such revised or amended standard form or forms of
stock option agreement shall be in accordance with the terms of the Plan.
Such authority shall include, but not by way of limitation, the authority to
grant Options which are immediately exercisable subject to the Company's
right to repurchase any shares of Stock acquired by an Optionee on exercise
of an Option in the event such Optionee's employment with the Participating
Company Group is terminated for any reason, with or without cause.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO PLAN. Appropriate adjustments
shall be made in the number and class of shares of Stock subject to the Plan and
to any outstanding Options and in the option exercise price of any outstanding
Options in the event of a stock dividend, stock split, reverse stock split,
combination, reclassification, or like change in the capital structure of the
Company.
10. TRANSFER OF CONTROL. A "Transfer of Control" shall be deemed to have
occurred in the event any of the following occurs with respect to the Company:
(a) the direct or indirect sale or exchange by the shareholders of
the Company of all or substantially all of the stock of the Company where the
shareholders of the Company before such sale or exchange do not retain, timely
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such sale or exchange;
(b) a merger or consolidation in which the Company is not the
surviving corporation;
(c) a merger or consolidation in which the Company is the surviving
corporation where the shareholders of the Company before such merger or
consolidation do not retain, directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company after such merger or
consolidation;
(d) the sale, exchange, or transfer of all or substantially all of
the assets of the Company (other than a sale, exchange, or transfer to one (1)
or more subsidiary corporations (as defined in paragraph 1 above) of the
Company); or
(e) A liquidation or dissolution of the Company.
In the event of a Transfer of Control, the Board, in its sole discretion,
may arrange with the surviving, continuing, successor, or purchasing corporation
or parent corporation thereof, as the case may be (the "Acquiring Corporation"),
for the Acquiring Corporation to either assume the Company's rights and
obligations under outstanding Options or substitute options for the Acquiring
Corporation's stock for such outstanding Options. Any Options which are neither
assumed or substituted for by the Acquiring Corporation in connection with the
Transfer of Control nor exercised as of the date of the Transfer of Control
shall terminate and cease to be outstanding effective as of the date of the
Transfer of Control.
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11. PROVISION OF INFORMATION. Each Optionee and purchaser of shares of
Stock upon the exercise of an Option shall receive, at least annually, copies of
the Company's balance sheet and income statement, or substantially equivalent
financial information for the just completed fiscal year. The Company shall not
be required to deliver such information to persons whose duties in connection
with the Company assure their access to equivalent information.
12. OPTIONS NON-TRANSFERABLE. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee. No Option shall be assignable
or transferable by the Optionee, except by will or by the laws of descent and
distribution.
13. TRANSFER OF COMPANY'S RIGHTS. In the event any Participating Company
assigns, other than by operation of law, to a third person, other than another
Participating Company, any of the Participating Company's rights to repurchase
any shares of Stock acquired on the exercise of an Option, the assignee shall
pay to the assigning Participating Company the value of such right as determined
by the Company in the Company's sole discretion. Such consideration shall be
paid in cash. In the event such repurchase right is exercisable at the time of
such assignment, the value of such right shall be not less than the fair market
value of the shares of Stock which may be repurchased under such right (as
determined by the Company) minus the repurchase price of such shares. The
requirements of this paragraph 13 regarding the minimum consideration to be
received by the assigning Participating Company shall not inure to the benefit
of the Optionee whose shares of Stock are being repurchased. Failure of a
Participating Company to comply with the provisions of this paragraph 13 shall
not constitute a defense or otherwise prevent the exercise of the repurchase
right by the assignee of such right.
14. TERMINATION OR AMENDMENT OF PLAN. The Board, including any duly
appointed committee of the Board, may terminate or amend the Plan at any time;
provided, however, that without the approval of the Company's shareholders,
there shall be (a) no increase in the total number of shares of Stock covered by
the Plan (except by operation of the provisions of paragraph 9 above), (b) no
change in the class of persons eligible to receive Incentive Stock Options and
(c) no expansion in the class of persons eligible to receive nonqualified stock
options. In any event, no amendment may adversely affect any then outstanding
Option or any unexercised portion thereof, without the consent of the Optionee,
unless such amendment is required to enable an Option designated as an Incentive
Stock Option to qualify as an Incentive Stock Option.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Ray Dream, Inc. 1992 Stock Option Plan was duly adopted by
the Board of Directors of the Company on the 19th day of March, 1992; amended
by the Board of Directors on May 25, 1994; and amended by the Board of
Directors on May 23, 1995.
/s/ John Stockholm
--------------------------------
John Stockholm
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Date:_______________
NONQUALIFIED STOCK OPTION
EXERCISE FORM
Ray Dream, Inc.
1804 N. Shoreline Boulevard
Mountain View, CA 94043
Attention: Chief Financial Officer
Gentlemen:
The undersigned optionee (the "Optionee ") was granted a nonqualified stock
option (the "Option") to purchase shares of the common stock of Ray Dream, Inc.
(the "Company") pursuant to the Company's 1992 Stock Option Plan (the "Plan")
and pursuant to the Nonqualified Stock Option Agreement dated __________, 199__
(the "Option Agreement"). The Optionee hereby elects to exercise the Option as
to __________ shares of the common stock of the Company (the "Shares").
Enclosed herewith is full payment for the Shares in the manner set forth in
the Option Agreement. The Optionee will make adequate provision for foreign,
federal and state tax withholding obligations of the Company, if any, as more
fully set forth in the Option Agreement.
The Optionee represents and warrants that the Optionee is over eighteen
(18) years of age and that the Optionee is purchasing the Shares solely for the
Optionee's own account, and not on behalf of any other person or as a nominee,
for investment and not with a view to, or for sale in connection with, any
distribution of the Shares, other than a sale of the Shares in connection with
the Company's initial public offering of common stock.
The Optionee further represents that the Optionee does not have any present
intention of selling, offering to sell, or otherwise disposing of or
distributing the Shares or any portion thereof, other than a sale of the Shares
in connection with the Company's initial public offering of common stock; and
that the entire legal and beneficial interest in the Shares the Optionee is
purchasing is being purchased for, and will be held for the account of, the
Optionee only and neither in whole nor in part for any other person.
The Optionee acknowledges and understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and that consequently the Shares must be held indefinitely unless they are
subsequently registered under the Securities Act, an exemption from such
registration is available, or they are sold in accordance with Rule 144 or Rule
701. The Optionee further acknowledges and understands that the Company is
under no obligation to register the Shares and that, in the absence of
registration, the Shares may not be transferred. The Optionee understands that
the certificate or certificates evidencing the Shares will be imprinted with
legends which prohibit the transfer of the Shares unless they are registered or
such registration is not required in the opinion of legal counsel satisfactory
to the Company.
The Optionee does not have any contract, undertaking, agreement, or
arrangement with any person to sell, transfer, or grant participation to such
person or to any third person with respect to any of the Shares, other than
an agreement to sell the Shares in connection with the Company's initial
public offering of common stock.
The Optionee is aware that Rule 144, promulgated under the Securities Act,
which permits limited public resale of securities acquired in a nonpublic
offering, is not currently available with respect to the Shares and, in any
event, is available only if certain conditions are satisfied. The Optionee
understands that any sale of the Shares that might be made in reliance upon Rule
144 may only be made in limited amounts in accordance with the terms and
conditions of such rule and that a copy of Rule 144 will be delivered to the
Optionee upon request.
The Optionee agrees that the Shares are being acquired by the Optionee in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement, including the Right of First Refusal set forth therein, to all
of which the Optionee hereby expressly assents. These agreements shall inure to
the benefit of and be binding upon the Optionee's heirs, executors,
administrators, successors and assigns. The Optionee agrees, if so requested,
to deposit the certificate or certificates evidencing the Shares, along with a
blank stock assignment separate from certificate executed by the Optionee, with
an escrow agent designated by the Company, to be held by such escrow agent
pursuant to the Company's standard Joint Escrow Instructions.
The Optionee agrees that the Optionee will promptly notify the Chief
Financial Officer of the Company if the Optionee transfers any of the Shares
acquired pursuant to the Option within one (1) year from the date the Optionee
exercises all or part of the Option or within two (2) years of the date of grant
of the Option.
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The Optionee's address of record is:
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- ----------------------------------------
and the Optionee's Social Security Number is: ----------------------------
Very truly yours,
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Print Name:
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Receipt of the above is
hereby acknowledged.
RAY DREAM, INC.
By:
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Title:
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Dated:
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Date:
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INCENTIVE STOCK OPTION
EXERCISE FORM
Ray Dream, Inc.
1804 N. Shoreline Boulevard
Mountain View, CA 94043
Attention: Chief Financial Officer
Gentlemen:
The undersigned optionee (the "Optionee ,) was granted an incentive stock
option (the "Option") to purchase shares of the common stock of Ray Dream, Inc.
(the "Company") pursuant to the Company' s 1992 Stock Option Plan (the "Plan")
and pursuant to the Incentive Stock Option Agreement dated __________, 199__
(the "Option Agreement"). The Optionee hereby elects to exercise the Option as
to __________ shares of the common stock of the Company (the "Shares").
Enclosed herewith is full payment for the Shares in the manner set forth in
the Option Agreement. The Optionee will make adequate provision for foreign,
federal and state tax withholding obligations of the Company, if any, as more
fully set forth in the Option Agreement.
The Optionee represents and warrants that the Optionee is over eighteen
(18) years of age and that the Optionee is purchasing the Shares solely for the
Optionee's own account, and not on behalf of any other person or as a nominee,
for investment and not with a view to, or for sale in connection with, any
distribution of the Shares, other than a sale of the Shares in connection with
the Company's initial public offering of common stock.
The Optionee further represents that the Optionee does not have any present
intention of selling, offering to sell, or otherwise disposing of or
distributing the Shares or any portion thereof, other than a sale of the Shares
in connection with the Company's initial public offering of common stock; and
that the entire legal and beneficial interest in the Shares the Optionee is
purchasing is being purchased for, and will be held for the account of, the
Optionee only and neither in whole nor in part for any other person.
The Optionee acknowledges and understands that the Shares have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
and that consequently the Shares must be held indefinitely unless they are
subsequently registered under the Securities Act, an exemption from such
registration is available, or they are sold in accordance with Rule 144 or Rule
701. The Optionee further acknowledges and understands that the Company is
under no obligation to register the Shares and that, in the absence of
registration, the Shares may not be transferred. The Optionee understands that
the certificate or certificates evidencing the Shares will be imprinted with
legends which prohibit the transfer of the Shares unless they are registered or
such registration is not required in the opinion of legal counsel satisfactory
to the Company.
The Optionee does not have any contract, undertaking, agreement, or
arrangement with any person to sell, transfer, or grant participation to such
person or to any third person with respect to any of the Shares, other than
an agreement to sell the Shares in connection with the Company's initial
public offering of common stock.
The Optionee is aware that Rule 144, promulgated under the Securities Act,
which permits limited public resale of securities acquired in a nonpublic
offering, is not currently available with respect to the Shares and, in any
event, is available only if certain conditions are satisfied. The Optionee
understands that any sale of the Shares that might be made in reliance upon Rule
144 may only be made in limited amounts in accordance with the terms and
conditions of such rule and that a copy of Rule 144 will be delivered to the
Optionee upon request.
The Optionee agrees that the Shares are being acquired by the Optionee in
accordance with and subject to the terms, provisions and conditions of the
Option Agreement, including the Right of First Refusal set forth therein, to all
of which the Optionee hereby expressly assents. These agreements shall inure to
the benefit of and be binding upon the Optionee's heirs, executors,
administrators, successors and assigns. The Optionee agrees, if so requested,
to deposit the certificate or certificates evidencing the Shares, along with a
blank stock assignment separate from certificate executed by the Optionee, with
an escrow agent designated by the Company, to be held by such escrow agent
pursuant to the Company's standard Joint Escrow Instructions.
The Optionee agrees that the Optionee will promptly notify the Chief
Financial Officer of the Company if the Optionee transfers any of the Shares
acquired pursuant to the Option within one (1) year from the date the Optionee
exercises all or part of the Option or within two (2) years of the date of grant
of the Option.
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The Optionee's address of record is:
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- ----------------------------------------
and the Optionee's Social Security Number is: ----------------------------
Very truly yours,
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Print Name:
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Receipt of the above is
hereby acknowledged.
RAY DREAM, INC.
By:
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Title:
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Dated:
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IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
RAY DREAM, INC.
INCENTIVE STOCK OPTION AGREEMENT
Ray Dream, Inc. (the "Company"), granted to the individual named below an
option to purchase certain shares of common stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
1. DEFINITIONS.
(a) "Optionee" shall mean 1 ~
(b) "Date of Option Grant" shall mean 2 ~
(c) "Number of Option Shares" shall mean 3 ~ shares of common stock
of the Company as adjusted from time to time pursuant to paragraph 9 below.
(d) "Exercise Price" shall mean $0.20 per share as adjusted from
time to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the Initial Vesting Date.
(f) "Initial Vesting Date" shall be APRIL 30, 1993
(g) Determination of "Vested Ratio":
Vested Ratio
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Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the Optionee 1/48
is continuously employed by a Participating
Company from the Date of Option Grant until
the Initial Vesting Date
Plus
----
For each full month of the Optionee's 1/48
continuous employment by a Participating
Company from the Initial Vesting Date.
In no event shall the Vested Ratio exceed 1/1.
(h) "Option Term Date" shall mean date which is the tenth
anniversary of the Date of Option Grant less one day.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean Ray Dream, Inc., a California corporation,
and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while
such corporation is a parent or subsidiary of the Company. For purposes of
this Option Agreement, a parent corporation and a subsidiary corporation shall
be as defined in sections 424(e) and 424(f) of the Code.
(l) "Participating Company Group" shall mean at any point in time
all corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Ray Dream, Inc. 1992 Stock Option Plan.
2. STATUS OF THE OPTION. This Option is intended to be an incentive
stock option as described in section 422 of the Code, but the Company does not
represent or warrant that this Option qualifies as such. The Optionee should
consult with the Optionee's own tax advisors regarding the tax effects of this
Option and the requirements necessary to obtain favorable income tax treatment
under section 422 of the Code, including, but not limited to, holding period
requirements. (NOTE: If the aggregate Exercise Price of the Option (that is,
the Exercise Price multiplied by the Number of Option Shares) plus the
aggregate exercise price of any other incentive stock options held by the
Optionee (whether granted pursuant to the Plan or any other stock option plan
of the Participating Company Group) is greater than One Hundred Thousand
Dollars ($100,000), the Optionee should contact the Chief Financial Officer of
the Company to ascertain whether the entire Option qualifies as an incentive
stock option.)
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be
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final and binding upon all persons having an interest in the Option. Any
officer of a Participating Company shall have the authority to act on behalf of
the Company with respect to any matter, right, obligation, or election which is
the responsibility of or which is allocated to the Company herein, provided the
officer has apparent authority with respect to such matter, right, obligation,
or election.
4. EXERCISE OF THE OPTION.
(a) RIGHT TO EXERCISE. The Option shall first become exercisable on
the Initial Exercise Date. The Option shall be exercisable on and after the
Initial Exercise Date and prior to the termination of the Option in the amount
equal to the Number of Option Shares multiplied by the Vested Ratio as set
forth in paragraph 1 above less the number of shares previously acquired upon
exercise of the Option subject to the Optionee's agreement that any shares
purchased upon exercise are subject to the Company's repurchase rights set
forth in paragraph 11 below. In no event shall the Option be exercisable for
more shares than the Number of Option Shares.
(b) METHOD OF EXERCISE. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must
be delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the participating company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment
of the exercise price for the number of shares being purchased and (ii) an
executed copy, if required herein, of the then current form of escrow agreement
referenced below.
(c) FORM OF PAYMENT OF OPTION PRICE. Such payment shall be made (i)
in cash, by check, or cash equivalent, (ii) by tender to the Company of shares
of the Company's common stock owned by the Optionee having a value not less
than the option price, which either have been owned by the Optionee for more
than six (6) months or were not acquired, directly or indirectly, from the
Company, (iii) by Immediate Sales Proceeds, as defined below, or (iv) by any
combination of the foregoing. Notwithstanding the foregoing, the Option may
not be exercised by tender to the Company of shares of the Company's common
stock to the extent such tender of stock would constitute a violation of the
provisions of any law, regulation and/or agreement restricting the redemption
of the Company's common stock. "Immediate Sales Proceeds" shall mean the
assignment in form acceptable to the Company of the proceeds of a sale of some
or all of the shares acquired upon the exercise of the Option pursuant to a
program and/or procedure approved by the Company (including, without
limitation, through an exercise complying with the provisions of Regulation T
as promulgated from time to time by the Board of Governors of the Federal
Reserve System). The Company reserves, at any and all times, the right, in the
Company's sole and absolute discretion, to decline to approve any such program
and/or procedure.
(d) WITHHOLDING. At the time the Option is exercised, in whole or in
part, or at any time thereafter as requested by the Company, the Optionee hereby
authorizes payroll
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withholding and otherwise agrees to make adequate provision for foreign,
federal and state tax withholding obligations of the Company, if any, which
arise in connection with the Option, including, without limitation, obligations
arising upon (i) the exercise, in whole or in part, of the Option, (ii) the
transfer, in whole or in part of any shares acquired on exercise of the Option,
(iii) the operation of any law or regulation providing for the imputation of
interest, or (iv) the lapsing of any restriction with respect to any shares
acquired on exercise of the Option.
(e) CERTIFICATE REGISTRATION. The certificate or certificates for
the shares as to which the Option shall be exercised shall be registered in the
name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of the shares upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal or
state law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations. IT IS
UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES. Section 260.141.11 of the Rules of
the Commissioner of Corporations of the State of California is set forth in
paragraph 15 herein. In addition, no Option may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect
with respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable
exemption from the registration requirements of the Securities Act. THE
OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE
FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE
TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. As a
condition to the exercise of the Option, the Company may require the Optionee
to satisfy any qualifications that may be necessary or appropriate, to evidence
compliance with any applicable law or regulation and to make any representation
or warranty with respect thereto as may be requested by the Company.
(g) FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NON-TRANSFERABILITY OF THE OPTION. The Option may be exercised
during the lifetime of the Optionee only by the Optionee and may not be
assigned or transferred in any manner except by will or by the laws of descent
and distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as
defined above, (b) the last date for exercising the Option following
termination of employment as described in paragraph 7 below, or (c) upon a
Transfer of Control as described in paragraph 8 below.
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7. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF THE OPTION. If the Optionee ceases to be an
employee of the Participating Company Group for any reason, except death or
disability, the Option, to the extent unexercised and exercisable by the
Optionee on the date on which the Optionee ceased to be an employee, may be
exercised by the Optionee within three (3) months after the date on which the
Optionee's employment terminated, but in any event no later than the Option Term
Date. If the Optionee's employment with the Company is terminated because of
the death or disability of the Optionee, the Option, to the extent unexercised
and exercisable by the Optionee on the date on which the Optionee ceased to be
an employee, may be exercised by the Optionee (or the Optionee's legal
representative) at any time prior to the expiration of twelve (12) months from
the date on which the Optionee's employment terminated, but in any event no
later than the Option Term Date. The Optionee's employment shall be deemed to
have terminated on account of death if the Optionee dies within three (3) months
after the Optionee's termination of employment. Except as provided in this
paragraph 7(a), the Option shall terminate and may not be exercised after the
Optionee ceases to be an employee of the Participating Company Group.
(b) TERMINATION OF EMPLOYMENT DEFINED. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company.
(c) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth above is prevented by the provisions of paragraph 4(f) above, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Term Date.
(d) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b). Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above would subject the Optionee to suit under Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which the Optionee would no longer be subject to such
suit, (ii) the one hundred and ninetieth (190th) day after the Optionee's
termination of employment, or (i/i) the Option Term Date.
(e) LEAVE OF ABSENCE. For purposes hereof, the Optionee's employment
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company of ninety (90) days or less. In the event of a
leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
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8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL. An "Ownership Change" shall
be deemed to have occurred in the event any of the following occurs with respect
to the Company:
(a) the direct or indirect sale or exchange by the shareholders of
the Company of all or substantially all of the stock of the Company;
(b) a merger or consolidation in which the Company is a party;
(c) the sale, exchange, or transfer of all or substantially all of
the assets of the Company (other than a sale, exchange, or transfer to one (1)
or more subsidiary corporations as defined in paragraph 1(k) above of the
Company; or
(d) a liquidation or dissolution of the Company.
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Company before such Ownership Change do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such transaction or in which the Company is not the
surviving corporation.
In the event of a Transfer of Control, the Board, in its sole discretion,
may arrange with the surviving, continuing, successor, or purchasing corporation
or parent corporation thereof, as the case may be (the "Acquiring Corporation"),
for the Acquiring Corporation to assume the Company's rights and obligations
under this Option Agreement or substitute an option for the Acquiring
Corporation's stock of the Option. The Option shall terminate and cease to be
outstanding effective as of the date of the Transfer of Control to the extent
that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, combination, reclassification, or like change in the
capital structure of the Company. In the event a majority of the shares which
are of the same class as the shares that are subject to the Option are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change) shares of another corporation (the "New Shares"), the Company
may unilaterally amend the Option to provide that the Option is exercisable for
New Shares. In the event of any such amendment, the number of shares and the
exercise price shall be adjusted in a fair and equitable manner.
10. RIGHTS AS A SHAREHOLDER OR EMPLOYEE. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
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11. RIGHT OF FIRST REFUSAL.
(a) RIGHT OF FIRST REFUSAL. In the event the Optionee proposes to
sell, pledge, or otherwise transfer any Vested Shares (the "Transfer Shares") to
any person or entity, including, without limitation, any shareholder of the
Participating Company Group, the Company shall have the right to repurchase the
Transfer Shares under the terms and subject to the conditions set forth in this
paragraph 11 (the "Right of First Refusal").
(b) NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of
the Transfer Shares, that Optionee shall give a written notice (the "Transfer
Notice") to the Company describing fully the proposed transfer, including the
number of Transfer Shares, the name and address of the proposed transferee (the
"Proposed Transferee") and, if the transfer is voluntary, the proposed transfer
price and containing such information necessary to show the bona fide nature of
the proposed transfer. In the event of a bona fide gift or involuntary
transfer, the proposed transfer price shall be deemed to be the fair market
value of the Transfer Shares as determined by the Company in good faith. In the
event the Optionee proposes to transfer any Vested Shares to more than one (1)
Proposed Transferee, the Optionee shall provide a separate Transfer Notice for
the proposed transfer to each Proposed Transferee. The Transfer Notice shall be
signed by both the Optionee and the Proposed Transferee and must constitute a
binding commitment of the Optionee and the Proposed Transferee for the transfer
of the Transfer Shares to the Proposed Transferee subject only to the Right of
First Refusal.
(c) BONA FIDE TRANSFER. In the event that the Company shall
determine that the information provided by the Optionee in the Transfer Notice
is insufficient to establish the bona fide nature of a proposed voluntary
transfer, the Company shall give the Optionee written notice of the Optionee's
failure to comply with the procedure described in this paragraph 11 and the
Optionee shall have no right to transfer the Transfer Shares without first
complying with the procedure described in this paragraph 11. The Optionee shall
not be permitted to transfer the Transfer Shares if the proposed transfer is not
bona fide.
(d) EXERCISE OF THE RIGHT OF FIRST REFUSAL. In the event the
proposed transfer is deemed to be bona fide, the Company shall have the right to
purchase all, but not less than all, of the Transfer Shares at the purchase
price and on the terms set forth in the Transfer Notice by delivery to the
Optionee of a notice of exercise of the Right of First Refusal within thirty
(30) days after the date the Transfer Notice is delivered to the Company. The
Company's exercise or failure to exercise the Right of First Refusal with
respect to any proposed transfer described in a Transfer Notice shall not affect
the Company's ability to exercise the Right of First Refusal with respect to any
proposed transfer described in any other Transfer Notice, whether or not such
other Transfer Notice is issued by the Optionee or issued by a person other than
the Optionee with respect to a proposed transfer to the same Proposed
Transferee. If the Company exercises the Right of First Refusal, the Company
and the Optionee shall thereupon consummate the sale of the Transfer Shares to
the Company on the terms set forth in the Transfer Notice; provided, however,
that in the event the Transfer Notice provides for the payment for the Transfer
Shares other than in cash, the Company shall have the option of paying for the
Transfer Shares by the discounted cash equivalent of the consideration described
in the Transfer Notice as reasonably determined by the Company. For purposes of
the foregoing, cancellation of any indebtedness of
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the Optionee to any Participating Company shall be treated as payment to the
Optionee in cash to the extent of the unpaid principal and any accrued interest
canceled.
(e) FAILURE TO EXERCISE THE RIGHT OF FIRST REFUSAL. If the Company
fails to exercise the Right of First Refusal in full within the period specified
in paragraph 11 (d) above, the Optionee may conclude a transfer to the Proposed
Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than one hundred twenty
(120) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona
fide. Any proposed transfer on terms and conditions different from those
described in the Transfer Notice, as well as any subsequent proposed transfer
by the Optionee, shall again be subject to the Right of First Refusal and shall
require compliance by the Optionee with the procedure described in this
paragraph 11.
(f) TRANSFEREES OF THE TRANSFER SHARES. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interests subject to the provisions of this paragraph 11
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any shares acquired upon exercise of the
Option shall be void unless the provisions of this paragraph 11 are met.
(g) 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 if such transfer is in
connection with an Ownership Change. If the consideration received pursuant to
such transfer or exchange consists of stock of a Participating Company, such
consideration shall remain subject to the Right of First Refusal unless the
provisions of paragraph 11(i) below result in a termination of the Right of
First Refusal.
(h) 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 (1) or more persons as may be selected
by the Company.
(i) EARLY TERMINATION OF THE RIGHT OF FIRST REFUSAL. The other
provisions of this paragraph 11 notwithstanding, the Right of First Refusal
shall terminate, and be of no further force and effect upon (i) the occurrence
of a Transfer of Control, unless the surviving, continuing, successor, or
purchasing corporation, as the case may be, assumes the Company's rights and
obligations under the Plan, 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.
-8-
12. ESCROW.
(a) ESTABLISHMENT OF ESCROW. To insure shares subject to the Right
of First Refusal will be available for repurchase, the Company may require the
Optionee to deposit the certificate or certificates evidencing the shares which
the Optionee purchases upon exercise of the Option with an escrow agent
designated by the Company under the terms and conditions of an escrow agreement
approved by the Company. If the Company does not require such deposit as a
condition of exercise of the Option, the Company reserves the right at any time
to require the Optionee to so deposit the certificate or certificates in
escrow. The Company shall bear the expenses of the escrow.
(b) DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after the
expiration of the Right of First Refusal, the escrow agent shall deliver to the
Optionee the shares no longer subject to such restriction.
(c) NOTICE AND PAYMENTS. In the event the shares held in escrow are
subject to the Company's exercise of the Right of First Refusal, the notices
required to be given to the Optionee shall be given to the escrow agent and any
payment required to be given to the Optionee shall be given to the escrow
agent. Within thirty (30) days after payment by the Company, the escrow agent
shall deliver the shares which the Company has purchased to the Company and
shall deliver the payment received from the Company to the Optionee.
13. STOCK DIVIDENDS SUBJECT TO OPTION AGREEMENT. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Right of First Refusal with the
same force and effect as the shares subject to the Right of First Refusal
immediately before such event.
14. NOTICE OF SALES UPON DISQUALIFYING DISPOSITION. The Optionee shall
dispose of the shares acquired pursuant to the Option only in accordance with
the provisions of this Option Agreement. In addition, the Optionee shall
promptly notify the Chief Financial Officer of the Company if the Optionee
disposes of any of the shares acquired pursuant to the Option within one (1)
year from the date the Optionee exercises all or part of the Option or within
two (2) years of the date of grant of the Option. Until such time as the
Optionee disposes of such shares in a manner consistent with the provisions of
this Option Agreement, the Optionee shall hold all shares acquired pursuant to
the Option in the Optionee's name (and not in the name of any nominee) for the
one-year period immediately after exercise of the Option and the two-year period
immediately after grant of the Option. At any time during the one-year or two-
year periods set forth above, the Company may place a legend or legends on any
certificate or certificates representing shares acquired pursuant to the Option
requesting the transfer agent for the Company's stock to notify the Company of
any such transfers. The obligation of the Optionee to notify the Company of any
such transfer shall continue notwithstanding that a legend has been placed on
the certificate or certificates pursuant to the preceding sentence.
-9-
15. RULES OF THE COMMISSIONER OF CORPORATIONS. The Optionee is hereby
delivered a copy of Section 260.141.11 of the Rules of the Commissioner of
Corporations of the State of California, adopted pursuant to the California
Corporate Securities Act of 1968. References to the "Code" in the following
text are references to the California Corporations Code.
260.141.11. RESTRICTION ON TRANSFER.
(a) The issuer of any security upon which a restriction on transfer
has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall
cause a copy of this section to be delivered to each issuee or transferee of
such security at the time the certificate evidencing the security is delivered
to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate
a sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in subdivision (i) of Section 25102
of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants, or spouse, or
any custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants, or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) if the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this role not required;
-10-
(10) by way of a sale qualified under Sections 25111, 25112,
25113, or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this rule, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102; provided that any such transfer is on the condition that
any certificate evidencing the security issued to such transferee shall contain
the legend required by this section.
(c) The certificates representing all such securities subject to such
a restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend prominently stamped or printed
thereon in capital letters of not less than 10-point size reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMlSSIONER'S RULES."
16. LEGENDS. The Company may at any time place legends referencing the
Right of First Refusal set forth in paragraph 11 above and any applicable
federal or state securities law restrictions on all certificates representing
shares of stock subject to the provisions of this Option Agreement. The
Optionee shall, at the request of the Company, promptly present to the Company
any and all certificates representing shares acquired pursuant to the Option in
the possession of the Optionee in order to effectuate the provisions of this
paragraph.
-11-
Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
(c) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET
FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH
HOLDER'S PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL
OFFICE OF THIS CORPORATION."
(d) "THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE
CORPORATION TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION
AS DEFINED IN SECTION 422A OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED.
THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE CORPORATION
IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER HEREOF MADE
ON OR BEFORE THE REGISTERED HOLDER SHALL HOLD ALL SHARES PURCHASED UNDER THE
OPTION IN THE REGISTERED HOLDER'S NAME (AND NOT IN THE NAME OF ANY NOMINEE)
PRIOR TO THIS DATE."
17. INITIAL PUBLIC OFFERING. The Optionee hereby agrees that in the event
of an initial public offering of stock made by the Company under the Securities
Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate,
grant any option to purchase or make any short sale of, or otherwise dispose of
any shares of stock of the Company or any rights to acquire stock of the Company
for such period of time as may be established by the underwriter for such
initial public offering; provided, however, that such period of time shall not
exceed one hundred eighty (180) days from the effective date of the registration
statement to be fled in connection with such initial public offering. The
foregoing limitation shall not apply to shares registered in the initial public
offering under the Securities Act.
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18. BINDING EFFECT. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
19. TERMINATION OR AMENDMENT. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee unless such amendment is required to enable the Option to qualify as an
Incentive Stock Option.
20. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
21. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
RAY DREAM, INC.
By: /s/ Joseph Consul
---------------------------------
Title: Chief Financial Officer
------------------------------
The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Right of First Refusal set
forth in paragraph 11, and hereby accepts the Option subject to all of the terms
and provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Option Agreement.
The undersigned acknowledges receipt of a copy of the Plan and a copy of
Section 260.141.11 of the Rules of the Commissioner of Corporations of the State
of California regarding restriction on transfer.
Date:
-----------------------------
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Signature
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Print Name
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Address
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IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN
EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
SECURITIES ACT OF 1933.
RAY DREAM, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Ray Dream, Inc. (the "Company"), granted to the individual named below an
option to purchase certain shares of common stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
1. DEFINITIONS.
(a) "Optionee" shall mean 1 ~.
(b) "Date of Option Grant" shall mean MAY 23, 1995.
(c) "Number of Option Shares" shall mean 2 ~ shares of common stock
of the Company as adjusted from time to time pursuant to paragraph 9 below.
(d) "Exercise Price" shall mean $0.20 per share as adjusted from time
to time pursuant to paragraph 9 below.
(e) "Initial Exercise Date" shall be the date occurring one (1) year
after the Date of Option Grant.
(i) "Initial Vesting Date" shall be APRIL 30, 1995.
(g) Determination of "Vested Ratio":
VESTED RATIO
------------
Prior to Initial Vesting Date 0
On Initial Vesting Date, provided the 1/48
Optionee is continuously employed by a
Participating Company from the Date of
Option Grant until the Initial Vesting Date
Plus
----
For each full month of the Optionee's 1/48
continuous employment by a Participating
Company from the Initial Vesting Date
In no event shall the Vested Ratio exceed 1/1.
(h) "Option Term Date" shall mean the date which is the tenth
anniversary of the Date of Option Grant less one day.
(i) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(j) "Company" shall mean Ray Dream, Inc., a California corporation,
and any successor corporation thereto.
(k) "Participating Company" shall mean (i) the Company and (ii) any
present or future parent and/or subsidiary corporation of the Company while such
corporation is a parent or subsidiary of the Company. For purposes of this
Option Agreement, a parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Code.
(l) "Participating Company Group" shall mean at any point in time all
corporations collectively which are then a Participating Company.
(m) "Plan" shall mean the Ray Dream, Inc. 1992 Stock Option Plan.
2. STATUS OF THE OPTION. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option, as described
in section 422A of the Code.
3. ADMINISTRATION. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all
persons having an interest in the Option. Any officer of a Participating
Company shall have the authority to act on behalf of the Company with respect to
any matter, right, obligation, or election which is the responsibility of or
which is allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or election.
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4. EXERCISE OF THE OPTION.
(a) RIGHT TO EXERCISE. The Option shall first become exercisable on
the Initial Exercise Date. The Option shall be exercisable on and after the
Initial Exercise Date and prior to the termination of the Option in the amount
equal to the Number of Option Shares multiplied by the Vested Ratio as set forth
in paragraph 1 above less the number of shares previously acquired upon exercise
of the Option subject to the Optionee's agreement that any shares purchased upon
exercise are subject to the Company's repurchase rights set forth in paragraph
11 below. In no event shall the Option be exercisable for more shares than the
Number of Option Shares.
(b) METHOD OF EXERCISE. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be
delivered in person or by certified or registered mail, return receipt
requested, to the Chief Financial Officer of the Company, or other authorized
representative of the Participating Company Group, prior to the termination of
the Option as set forth in paragraph 6 below, accompanied by (i) full payment of
the exercise price for the number of shares being purchased and (ii) an executed
copy, if required herein, of the then current form of escrow agreement
referenced below.
(c) FORM OF PAYMENT OF OPTION PRICE. Such payment shall be made (i)
in cash, by check, or cash equivalent, (ii) by tender to the Company of shares
of the Company's common stock owned by the Optionee having a value not less than
the option price, which either have been owned by the Optionee for more than six
(6) months or were not acquired, directly or indirectly, from the Company, (iii)
by Immediate Sales Proceeds, as defined below, or (iv) by any combination of the
foregoing. Notwithstanding the foregoing, the Option may not be exercised by
tender to the Company of shares of the Company's common stock to the extent such
tender of stock would constitute a violation of the provisions of any law,
regulation and/or agreement restricting the redemption of the Company's common
stock. "Immediate Sales Proceeds" shall mean the assignment in form acceptable
to the Company of the proceeds of a sale of some or all of the shares acquired
upon the exercise of the Option pursuant to a program and/or procedure approved
by the Company (including, without limitation, through an exercise complying
with the provisions of Regulation T as promulgated from time to time by the
Board of Governors of the Federal Reserve System). The Company reserves, at any
and all times, the right, in the Company's sole and absolute discretion, to
decline to approve any such program and/or procedure.
(d) WITHHOLDING. At the time the Option is exercised, in whole or in
part, or at any time thereafter as requested by the Company, the Optionee hereby
authorizes payroll withholding and otherwise agrees to make adequate provision
for foreign, federal and state tax withholding obligations of the Company, if
any, which arise in connection with the Option, including, without limitation,
obligations arising upon (i) the exercise, in whole or in part, of the Option,
(ii) the transfer, in whole or in part, of any shares acquired on exercise of
the Option, (iii) the operation of any law or regulation providing for the
imputation of interest, or (iv) the lapsing of any restriction with respect to
any shares acquired on exercise of the Option.
-3-
(e) CERTIFICATE REGISTRATION. The certificate or certificates for
the shares as to which the Option shall be exercised shall be registered in the
name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) RESTRICTIONS ON GRANT OF THE OPTION AND ISSUANCE OF SHARES. The
grant of the Option and the issuance of the shares upon exercise of the Option
shall be subject to compliance with all applicable requirements of federal or
state law with respect to such securities. The Option may not be exercised if
the issuance of shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other law or regulations. IT IS
UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONER'S RULES. Section 260,141.11 of the Rules of
the Commissioner of Corporations of the State of California is set forth in
paragraph 14 herein. In addition, no Option may be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. THE OPTIONEE IS
CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS
ARE SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION
WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED. As a condition to the exercise
of the Option, the Company may require the Optionee to satisfy any
qualifications that may be necessary or appropriate, to evidence compliance with
any applicable law or regulation and to make any representation or warranty with
respect thereto as may be requested by the Company.
(g) FRACTIONAL SHARES. The Company shall not be required to issue
fractional shares upon the exercise of the Option.
5. NON-TRANSFERABILITY OF THE OPTION. The Option may be exercised during
the lifetime of the Optionee only by the Optionee and may not be assigned or
transferred in any manner except by will or by the laws of descent and
distribution.
6. TERMINATION OF THE OPTION. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
employment as described in paragraph 7 below, or (c) upon a Transfer of Control
as described in paragraph 8 below.
7. TERMINATION OF EMPLOYMENT.
(a) TERMINATION OF THE OPTION. If the Optionee ceases to be an
employee of the Participating Company Group for any reason, except death or
disability within the meaning of section 422(c) of the Code, the Option, to the
extent unexercised and exercisable by the Optionee on the date on which the
Optionee ceased to be an employee, may be exercised by the Optionee
-4-
within three (3) months after the date on which the Optionee's employment
terminated, but in any event no later than the Option Term Date. If the
Optionee's employment with the Company is terminated because of the death or
disability of the Optionee within the meaning of section 422(c) of the Code,
the Option, to the extent unexercised and exercisable by the Optionee on the
date on which the Optionee ceased to be an employee, may be exercised by the
Optionee (or the Optionee's legal representative) at any time prior to the
expiration of twelve (12) months from the date on which the Optionee's
employment terminated, but in any event no later than the Option Term Date.
The Optionee's employment shall be deemed to have terminated on account of
death if the Optionee dies within three (3) months after the Optionee's
termination of employment. Except as provided in this paragraph 7(a), the
Option shall terminate and may not be exercised after the Optionee ceases to be
an employee of the Participating Company Group.
(b) TERMINATION OF EMPLOYMENT DEFINED. For purposes of this
paragraph 7, the Optionee's employment shall be deemed to have terminated either
upon an actual termination of employment or upon the Optionee's employer ceasing
to be a Participating Company.
(c) EXTENSION IF EXERCISE PREVENTED BY LAW. Notwithstanding the
foregoing, if the exercise of the Option within the applicable time periods set
forth above is prevented by the provisions of paragraph 4(f) above, the Option
shall remain exercisable until three (3) months after the date the Optionee is
notified by the Company that the Option is exercisable, but in any event no
later than the Option Term Date.
(d) EXTENSION IF OPTIONEE SUBJECT TO SECTION 16(b). Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above would subject the Optionee to suit under Section 16(b) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day
following the date on which the Optionee would no longer be subject to such
suit, (ii) the one hundred and ninetieth (190th) day after the Optionee's
termination of employment, or (iii) the Option Term Date.
(e) LEAVE OF ABSENCE. For purposes hereof, the Optionee's employment
with the Participating Company Group shall not be deemed to terminate if the
Optionee takes any military leave, sick leave, or other bona fide leave of
absence approved by the Company) of ninety (90) days or less. In the event of a
leave in excess of ninety (90) days, the Optionee's employment shall be deemed
to terminate on the ninety-first (91st) day of the leave unless the Optionee's
right to reemployment with the Participating Company Group remains guaranteed by
statute or contract. Notwithstanding the foregoing, however, a leave of absence
shall be treated as employment for purposes of determining the Optionee's Vested
Ratio if and only if the leave of absence is designated by the Company as (or
required by law to be) a leave for which vesting credit is given.
(i) APPLICATION TO DIRECTORS AND CONSULTANTS. For purposes of this
Option Agreement, in the event the Optionee is a director or consultant or an
advisor but not an employee of the Participating Company at the time the Option
is granted, termination of the Optionee's status as a director or consultant or
an advisor of the Participating Company shall be deemed to be termination of the
Optionee's employment.
-5-
8. OWNERSHIP CHANGE AND TRANSFER OF CONTROL. An "Ownership Change" shall
be deemed to have occurred in the event any of the following occurs with respect
to the Company:
(a) the direct or indirect sale or exchange by the shareholders of
the Company of all or substantially all of the stock of the Company;
(b) a merger or consolidation in which the Company is a party;
(c) the sale, exchange, or transfer of all or substantially all of
the assets of the Company (other than a sale, exchange, or transfer to one (1)
or more subsidiary corporations as defined in paragraph 1(k) above of the
Company; or
(d) a liquidation or dissolution of the Company.
A "Transfer of Control" shall mean an Ownership Change in which the
shareholders of the Company before such Ownership Change do not retain, directly
or indirectly, at least a majority of the beneficial interest in the voting
stock of the Company after such transaction or in which the Company is not the
surviving corporation.
In the event of a Transfer of Control, the Board, in its sole discretion,
may arrange with the surviving, continuing, successor, or purchasing corporation
or parent corporation thereof, as the case may be (the "Acquiring Corporation"),
for the Acquiring Corporation to assume the Company's rights and obligations
under this Option Agreement or substitute an option for the Acquiring
Corporation's stock of the Option. The Option shall terminate and cease to be
outstanding effective as of the date of the Transfer of Control to the extent
that the Option is neither assumed or substituted for by the Acquiring
Corporation in connection with the Transfer of Control nor exercised as of the
date of the Transfer of Control.
9. EFFECT OF CHANGE IN STOCK SUBJECT TO THE OPTION. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, combination, reclassification, or like change in the
capital structure of the Company. In the event a majority of the shares which
are of the same class as the shares that are subject to the Option are exchanged
for, converted into, or otherwise become (whether or not pursuant to an
Ownership Change) shares of another corporation (the "New Shares"), the Company
may unilaterally amend the Option to provide that the Option is exercisable for
New Shares. In the event of any such amendment, the number of shares and the
exercise price shall be adjusted in a fair and equitable manner.
10. RIGHTS AS A SHAREHOLDER OR EMPLOYEE. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 9
above. Nothing in the Option shall confer upon the Optionee any right to
continue in the employ of a Participating Company or interfere in any way with
any right of the Participating Company Group to terminate the Optionee's
employment at any time.
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11. RIGHT OF FIRST REFUSAL.
(a) RIGHT OF FIRST REFUSAL. In the event the Optionee proposes to
sell, pledge, or otherwise transfer any Vested Shares (the "Transfer Shares") to
any person or entity, including, without limitation, any shareholder of the
Participating Company Group, the Company shall have the right to repurchase the
Transfer Shares under the terms and subject to the conditions set forth in this
paragraph 11 (the "Right of First Refusal").
(b) NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of
the Transfer Shares, the Optionee shall give a written notice (the "Transfer
Notice") to the Company describing fully the proposed transfer, including the
number of Transfer Shares, the name and address of the proposed transferee (the
"Proposed Transferee") and, if the transfer is voluntary, the proposed transfer
price and containing such information necessary to show the bona fide nature of
the proposed transfer. In the event of a bona fide gift or involuntary
transfer, the proposed transfer price shall be deemed to be the fair market
value of the Transfer Shares as determined by the Company in good faith. In the
event the Optionee proposes to transfer any Vested Shares to more than one (1)
Proposed Transferee, the Optionee shall provide a separate Transfer Notice for
the proposed transfer to each Proposed Transferee. The Transfer Notice shall be
signed by both the Optionee and the Proposed Transferee and must constitute a
binding commitment of the Optionee and the Proposed Transferee for the transfer
of the Transfer Shares to the Proposed Transferee subject only to the Right of
First Refusal.
(c) BONA FIDE TRANSFER. In the event that the Company shall
determine that the information provided by the Optionee in the Transfer Notice
is insufficient to establish the bona fide nature of a proposed voluntary
transfer, the Company shall give the Optionee written notice of the Optionee's
failure to comply with the procedure described in this paragraph 11 and the
Optionee shall have no right to transfer the Transfer Shares without first
complying with the procedure described in this paragraph 11. The Optionee shall
not be permitted to transfer the Transfer Shares if the proposed transfer is not
bona fide.
(d) EXERCISE OF THE RIGHT OF FIRST REFUSAL. In the event the
proposed transfer is deemed to be bona fide, the Company shall have the right to
purchase all, but not less than all, of the Transfer Shares at the purchase
price and on the terms set forth in the Transfer Notice by delivery to the
Optionee of a notice of exercise of the Right of First Refusal within thirty
(30) days after the date the Transfer Notice is delivered to the Company. The
Company's exercise or failure to exercise the Right of First Refusal with
respect to any proposed transfer described in a Transfer Notice shall not affect
the Company's ability to exercise the Right of First Refusal with respect to any
proposed transfer described in any other Transfer Notice, whether or not such
other Transfer Notice is issued by the Optionee or issued by a person other than
the Optionee with respect to a proposed transfer to the same Proposed
Transferee. If the Company exercises the Right of First Refusal, the Company
and the Optionee shall thereupon consummate the sale of the Transfer Shares to
the Company on the terms set forth in the Transfer Notice; provided, however,
that in the event the Transfer Notice provides for the payment for the Transfer
Shares other than in cash, the Company shall have the option of paying for the
Transfer Shares by the discounted cash equivalent of the consideration described
in the Transfer Notice as reasonably determined by the Company. For purposes of
the foregoing, cancellation of any indebtedness of
-7-
the Optionee to any Participating Company shall be treated as payment to the
Optionee in cash to the extent of the unpaid principal and any accrued interest
canceled.
(e) FAILURE TO EXERCISE THE RIGHT OF FIRST REFUSAL. If the Company
fails to exercise the Right of First Refusal in full within the period specified
in paragraph 11(d) above, the Optionee may conclude a transfer to the Proposed
Transferee of the Transfer Shares on the terms and conditions described in the
Transfer Notice, provided such transfer occurs not later than one hundred twenty
(120) days following delivery to the Company of the Transfer Notice. The
Company shall have the right to demand further assurances from the Optionee and
the Proposed Transferee (in a form satisfactory to the Company) that the
transfer of the Transfer Shares was actually carried out on the terms and
conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such
assurances, if so demanded, and has approved the proposed transfer as bona
fide. Any proposed transfer on terms and conditions different from those
described in the Transfer Notice, as well as any subsequent proposed transfer
by the Optionee, shall again be subject to the Right of First Refusal and shall
require compliance by the Optionee with the procedure described in this
paragraph 11.
(f) TRANSFEREES OF THE TRANSFER SHARES. All transferees of the
Transfer Shares or any interest therein, other than the Company, shall be
required as a condition of such transfer to agree in writing (in a form
satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interests subject to the provisions of this paragraph 11
providing for the Right of First Refusal with respect to any subsequent
transfer. Any sale or transfer of any shares acquired upon exercise of the
Option shall be void unless the provisions of this paragraph 11 are met.
(g) 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 if such transfer is in
connection with an Ownership Change. If the consideration received pursuant to
such transfer or exchange consists of stock of a Participating Company, such
consideration shall remain subject to the Right of First Refusal unless the
provisions of paragraph 1l(i) below result in a termination of the Right of
First Refusal.
(h) 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 (1) or more persons as may be selected
by the Company.
(i) EARLY TERMINATION OF THE RIGHT OF FIRST REFUSAL. The other
provisions of this paragraph 11 notwithstanding, the Right of First Refusal
shall terminate, and be of no further force and effect upon (i) the occurrence
of a Transfer of Control, unless the surviving, continuing, successor, or
purchasing corporation, as the case may be, assumes the Company's rights and
obligations under the Plan, 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.
-8-
12. ESCROW.
(a) ESTABLISHMENT OF ESCROW. To insure shares subject to the Right
of First Refusal will be available for repurchase, the Company may require the
Optionee to deposit the certificate or certificates evidencing the shares which
the Optionee purchases upon exercise of the Option with an escrow agent
designated by the Company under the terms and conditions of an escrow agreement
approved by the Company. If the Company does not require such deposit as a
condition of exercise of the Option, the Company reserves the right at any time
to require the Optionee to so deposit the certificate or certificates in
escrow. The Company shall bear the expenses of the escrow.
(b) DELIVERY OF SHARES TO OPTIONEE. As soon as practicable after
the expiration of the Right of First Refusal, the escrow agent shall deliver to
the Optionee the shares no longer subject to such restriction.
(c) NOTICE AND PAYMENTS. In the event the shares held in escrow are
subject to the Company's exercise of the Right of First Refusal, the notices
required to be given to the Optionee shall be given to the escrow agent and any
payment required to be given to the Optionee shall be given to the escrow
agent. Within thirty (30) days after payment by the Company, the escrow agent
shall deliver the shares which the Company has purchased to the Company and
shall deliver the payment received from the Company to the Optionee.
13. STOCK DIVIDENDS SUBJECT TO OPTION AGREEMENT. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Right of First Refusal with the
same force and effect as the shares subject to the Right of First Refusal
immediately before such event.
14. RULES OF THE COMMISSIONER OF CORPORATIONS. The Optionee is hereby
delivered a copy of Section 260.141.11 of the Rules of the Commissioner of
Corporations of the State of California, adopted pursuant to the California
Corporate Securities Act of 1968. References to the "Code" in the following
text are references to the California Corporations Code.
260.141.11. RESTRICTION ON TRANSFER.
(a) The issuer of any security upon which a restriction on transfer
has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall
cause a copy of this section to be delivered to each issuee or transferee of
such security at the time the certificate evidencing the security is delivered
to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate
a sale or transfer of such security, or any interest therein, without the prior
written consent of the Commissioner (until this condition is removed pursuant to
Section 260.141.12 of these rules), except:
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(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in subdivision (i) of Section 25102
of the Code or Section 260.105.14 of these rules;
(4) to the transferor's ancestors, descendants, or spouse, or
any custodian or trustee for the account of the transferor or the transferor's
ancestors, descendants, or spouse; or to a transferee by a trustee or custodian
for the account of the transferee or the transferee's ancestors, descendants, or
spouse;
(5) to holders of securities of the same class of the same
issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code
(either acting as such or as a finder) to a resident of a foreign state,
territory or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of such
securities is not in violation of any securities law of the foreign state,
territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting syndicate or
selling group;
(9) If the interest sold or transferred is a pledge or other
lien given by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not required;
(10) by way of a sale qualified under Sections 25111, 25112,
25113, or 25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or subdivision (a) of Section 25143 is in effect
with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such
corporation, or by a wholly owned subsidiary of a corporation to such
corporation;
(12) by way of an exchange qualified under Section 25111, 25112
or 25113 of the Code, provided that no order under Section 25140 or subdivision
(a) of Section 25143 is in effect with respect to such qualification;
(13) between residents of foreign states, territories or
countries who are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property
Law or to the administrator of the unclaimed property law of another state;
-10-
(15) by the State Controller pursuant to the Unclaimed Property
Law or by the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential purchasers at the
sale that transfer of the securities is restricted under this role, (ii)
delivers to each purchaser a copy of this rule, and (iii) advises the
Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does
not involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an
issuer transaction that is subject to the qualification requirement of Section
25110 of the Code but exempt from that qualification requirement by subdivision
(f) of Section 25102;
provided that any such transfer is on the condition that any
certificate evidencing the security issued to such transferee shall contain the
legend required by this section.
(c) The certificates representing all such securities subject to such
a restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend prominently stamped or printed
thereon in capital letters of not less than/O-point size reading as follows: "IT
IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY OR ANY INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED) IN THE COMMISSIONER'S RULES."
15. LEGENDS. The Company may at any time place legends referencing the
Right of First Refusal set forth in paragraph 11 above and any applicable
federal or state securities law restrictions on all certificates representing
shares of stock subject to the provisions of this Option Agreement. The
Optionee shall, at the request of the Company, promptly present to the Company
any and all certificates representing shares acquired pursuant to the Option in
the possession of the Optionee in order to effectuate the provisions of this
paragraph. Unless otherwise specified by the Company, legends placed on such
certificates may include, but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN
ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
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(b) Any legend required to be placed thereon by the Commissioner of
Corporations of the State of California.
(c) THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT
OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN
AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER'S
PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF
THIS CORPORATION."
16. INITIAL PUBLIC OFFERING. The Optionee hereby agrees that in the event
of an initial public offering of stock made by the Company under the Securities
Act, the Optionee shall not offer, sell, contract to sell, pledge, hypothecate,
grant any option to purchase or make any short sale of, or otherwise dispose of
any shares of stock of the Company or any rights to acquire stock of the Company
for such period of time as may be established by the underwriter for such
initial public offering; provided, however, that such period of time shall not
exceed one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such initial public offering. The
foregoing limitation shall not apply to shares registered in the initial public
offering under the Securities Act.
17. BINDING EFFECT. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
18. TERMINATION OR AMENDMENT. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such termination or amendment may adversely
affect the Option or any unexercised portion hereof without the consent of the
Optionee.
19. INTEGRATED AGREEMENT. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Participating Company Group
with respect to the subject matter contained herein, and there are no
agreements, understandings, restrictions, representations, or warranties among
the Optionee and the Company other than those as set forth or provided for
herein. To the extent contemplated herein, the provisions of this Option
Agreement shall survive any exercise of the Option and shall remain in full
force and effect.
20. APPLICABLE LAW. This Option Agreement shall be governed by the laws
of the State of California as such laws are applied to agreements between
California residents entered into and to be performed entirely within the State
of California.
RAY DREAM, INC.
By: /s/ Joseph Consul
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Title: Chief Financial Officer
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The Optionee represents that the Optionee is familiar with the terms and
provisions of this Option Agreement, including the Right of First Refusal set
forth in paragraph 11, and hereby accepts the Option subject to all of the terms
and provisions thereof. The Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the Board upon any
questions arising under this Option Agreement.
The undersigned acknowledges receipt of a copy of the Plan and a copy of
Section 260.141.11 of the Rules of the Commissioner of Corporations of the State
of California regarding restriction on transfer.
Date:
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Signature
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Print Name
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Address
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