EXHIBIT 4.03
EPILOGUE TECHNOLOGY CORPORATION,
a Delaware corporation
1994 STOCK OPTION PLAN
As Adopted October 6, 1994
1. PURPOSE. The purpose of the Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent,
Subsidiaries and Affiliates, by offering them an opportunity to participate in
the Company's future performance through awards of Options. Capitalized terms
not defined in the text are defined in Section 20.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and
15, the total number of Shares reserved and available for grant and issuance
pursuant to the Plan shall be 30,000 Shares. Subject to Sections 2.2 and 15,
Shares shall again be available for grant and issuance in connection with future
Option grants under the Plan that: (a) are subject to issuance upon exercise of
an Option but cease to be subject to such Option for any reason other than
exercise of such Option, (b) are subject to an Option granted hereunder but are
forfeited or are repurchased by the Company at the original issue price, or (c)
are subject to an Option that otherwise terminates without Shares being issued.
2.2 Adjustment of Shares. In the event that the number of
outstanding Shares is changed by a stock dividend, recapitalization, stock
split, reverse stock split, subdivision, combination, reclassification or
similar change in the capital structure of the Company without consideration,
then (a) the number of Shares reserved for issuance under the Plan, and (b) the
Exercise Prices of and number of Shares subject to outstanding Options shall be
proportionately adjusted, subject to any required action by the Board or the
shareholders of the Company and compliance with applicable securities laws;
provided, however, that fractions of a Share shall not be issued but shall
either be paid in cash at Fair Market Value or shall be rounded up to the
nearest Share, as determined by the Committee; and provided, further, that the
Exercise Price of any Option may not be decreased to below the par value of the
Shares.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. NQSOs may be granted to
employees, officers, directors, consultants, independent contractors and
advisors of the Company or any Parent, Subsidiary or Affiliate of the Company;
provided such consultants, contractors and advisors render bona fide services
not in connection with the offer and sale of securities in a capital-raising
transaction. A person may be granted more than one Option under the Plan.
4. ADMINISTRATION.
4.1 Committee Authority. The Plan shall be administered by the
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of the Plan, and to the direction of the Board, the
Committee shall have full power to implement and carry out the Plan. The
Committee shall have the authority to:
(a) construe and interpret the Plan, any Option Agreement and any other
agreement or document executed pursuant to the Plan;
(b) prescribe, amend and rescind rules and regulations relating to the
Plan;
(c) select persons to receive Options;
(d) determine the form and terms of Options;
(e) determine the number of Shares subject to Options;
(f) grant waivers of Plan or Option conditions;
(g) determine the vesting, exercisability and payment of Options;
(h) correct any defect, supply any omission, or reconcile any
inconsistency in the Plan, any Option or any Option Agreement; and
(i) make all other determinations necessary or advisable for the
administration of the Plan.
4.2 Committee Discretion. Any determination made by the
Committee with respect to any Option shall be made in its sole discretion at the
time of grant of the Option or, unless in contravention of any express term of
the Plan or Option, at any later time, and such determination shall be final and
binding on the Company and all persons having an interest in any Option under
the Plan.
4.3 Exchange Act Requirements. If the Company is subject to
the Exchange Act, the Company will take appropriate steps to comply with the
disinterested director requirements of Section 16(b) of the Exchange Act,
including but not limited to, the appointment by the Board of a Committee
consisting of not less than two persons (who are members of the Board), each of
whom is a Disinterested Person.
5. OPTIONS. The Committee may grant Options to eligible persons and
shall determine whether such Options shall be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
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5.1 Form of Option Grant. Each Option granted under the Plan
shall be evidenced by an Option Agreement which shall expressly identify the
Option as an ISO or NQSO ("Stock Option Agreement"), and be in such form and
contain such provisions (which need not be the same for each Participant) as the
Committee shall from time to time approve, and which shall comply with and be
subject to the terms and conditions of the Plan.
5.2 Date of Grant. The date of grant of an Option shall be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
the Plan will be delivered to the Participant within a reasonable time after the
granting of the Option.
5.3 Exercise Period. Options shall be exercisable within the
times or upon the events determined by the Committee as set forth in the Stock
Option Agreement; provided, however, that no Option shall be exercisable after
the expiration of ten (10) years from the date the Option is granted, and
provided further that no Option granted to a person who directly or by
attribution owns more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or any Parent or Subsidiary of the
Company ("Ten Percent Shareholder") shall be exercisable after the expiration of
five (5) years from the date the Option is granted. The Committee also may
provide for the exercise of Options to become exercisable at one time or from
time to time, periodically or otherwise, in such number or percentage as the
Committee determines.
5.4 Exercise Price. The Exercise Price shall be determined by
the Committee when the Option is granted and may be not less than 85% of the
Fair Market Value of the Shares on the date of grant; provided that (i) the
Exercise Price of an ISO shall be not less than 100% of the Fair Market Value of
the Shares on the date of grant and (ii) the Exercise Price of any Option
granted to a Ten Percent Shareholder shall not be less than 110% of the Fair
Market Value of the Shares on the date of grant. Payment for the Shares
purchased may be made in accordance with Section 8 of the Plan.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"Exercise Agreement") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares, if any, and such representations and
agreements regarding Participant's investment intent and access to information
and other matters, if any, as may be required or desirable by the Company to
comply with applicable securities laws, together with payment in full of the
Exercise Price for the number of Shares being purchased.
5.6 Termination. Notwithstanding the exercise periods set
forth in the Stock Option Agreement, exercise of an Option shall always be
subject to the following:
(a) If the Participant is Terminated for any reason except death or
Disability, then Participant may exercise such Participant's
Options only to the extent that such Options would have been
exercisable upon the Termination Date no later than thirty (30)
days after the Termination Date, but in any event, no later than
the expiration date of the Options.
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(b) If the Participant is terminated because of death or Disability (or
the Participant dies within 30 days of such termination), then
Participant's Options may be exercised only to the extent that such
Options would have been exercisable by Participant on the
Termination Date and must be exercised by Participant (or
Participant's legal representative or authorized assignee) no later
than twelve (12) months after the Termination Date (or such shorter
time period as may be specified in the Stock Option Agreement), but
in any event no later than the expiration date of the Options.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on any exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
the Plan or under any other incentive stock option plan of the Company or any
Affiliate, Parent or Subsidiary of the Company) shall not exceed $100,000. If
the Fair Market Value of Shares on the date of grant with respect to which ISOs
are exercisable for the first time by a Participant during any calendar year
exceeds $100,000, the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year shall be ISOs and the Options for the amount
in excess of $100,000 that become exercisable in that calendar year shall be
NQSOs. In the event that the Code or the regulations promulgated thereunder are
amended after the Effective Date of the Plan to provide for a different limit on
the Fair Market Value of Shares permitted to be subject to ISOs, such different
limit shall be automatically incorporated herein and shall apply to any Options
granted after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of Participant, impair any of Participant's rights under any
Option previously granted. Any outstanding ISO that is modified, extended,
renewed or otherwise altered shall be treated in accordance with Section 424(h)
of the Code. The Committee may reduce the Exercise Price of outstanding Options
without the consent of Participants affected by a written notice to them;
provided, however, that the Exercise Price may not be reduced below the minimum
Exercise Price that would be permitted under Section 5.4 of the Plan for Options
granted on the date the action is taken to reduce the Exercise Price; provided,
further, that the Exercise Price shall not be reduced below the par value of the
Shares.
5.10 No Disqualification. Notwithstanding any other provision
in the Plan, no term of the Plan relating to ISOs shall be interpreted, amended
or altered, nor shall any discretion or authority granted under the Plan be
exercised, so as to disqualify the Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
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6. PAYMENT FOR SHARE PURCHASES.
6.1 Payment. Payment for Shares purchased pursuant to the Plan
may be made in cash (by check) or, where expressly approved for the Participant
by the Committee and where permitted by law:
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by waiver of compensation due or accrued to Participant for
services rendered;
(c) with respect only to purchases upon exercise of an Option, and
provided that a public market for the Company's stock exists:
(1) through a "same day sale" commitment from Participant and
a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD Dealer")
whereby the Participant irrevocably elects to exercise the
Option and to sell a portion of the Shares so purchased to
pay for the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward
the Exercise Price directly to the Company; or
(2) through a "margin" commitment from Participant and an NASD
Dealer whereby Participant irrevocably elects to exercise
the Option and to pledge the Shares so purchased to the
NASD Dealer in a margin account as security for a loan
from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the exercise price
directly to the Company;
or
(d) by any combination of the foregoing.
6.2 Withholding. Whenever Shares are to be issued in
satisfaction of Options granted under the Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under the Plan, payments
in satisfaction of Options are to be made in cash, such payment shall be net of
an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
7. PRIVILEGES OF STOCK OWNERSHIP.
7.1 Voting and Dividends. No Participant shall have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
shall be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, however, that
the Participant shall have no right to retain such stock dividends or stock
distributions with respect to Shares that are repurchased at the Participant's
original Purchase Price pursuant to Section 9.
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7.2 Financial Statements. The Company shall provide financial
statements to each Participant prior to such Participant's purchase of Shares
under the Plan, and to each Participant annually during the period such
Participant has Options outstanding; provided, however, the Company shall not be
required to provide such financial statements to Participants whose services in
connection with the Company assure them access to equivalent information.
8. TRANSFERABILITY. Options granted under the Plan, and any interest
therein, shall not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution or as consistent with the specific
Plan and Option Agreement provisions relating thereto. During the lifetime of
the Participant an Option shall be exercisable only by the Participant, and any
elections with respect to an Option, may be made only by the Participant.
9. RESTRICTIONS ON SHARES. At the discretion of the Committee, the
Company may reserve to itself and/or its assignee(s) in the Option Agreement (a)
a right of first refusal to purchase all Shares that a Participant (or a
subsequent transferee) may propose to transfer to a third party, and/or (b) a
right to repurchase a portion of or all Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after the
later of Participant's Termination Date and the date Participant purchases
Shares under the Plan, for cash, at: (A) with respect to Shares that are
"Vested" (as defined in the Option Agreement), the higher of: (l) Participant's
original Purchase Price, or (2) the Fair Market Value of such Shares on
Participant's Termination Date, provided, such right of repurchase terminates
when the Company's securities become publicly traded; or (B) with respect to
Shares that are not "Vested" (as defined in the Option Agreement), at the
Participant's original Purchase Price, provided, that the right to repurchase at
the original Purchase Price lapses at the rate of at least 20% per year over 5
years from the date the Shares were purchased, and if the right to repurchase is
assignable, the assignee must pay the Company, upon assignment of the right to
repurchase, cash equal to the excess of the Fair Market Value of the Shares over
the original Purchase Price.
10. CERTIFICATES. All certificates for Shares or other securities
delivered under the Plan shall be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed.
11. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates.
12. EXCHANGE AND BUYOUT OF OPTIONS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Options in exchange for the surrender and
cancellation of any or all outstanding Options. The Committee may at any time
buy from a Participant an Option previously granted with payment in cash, Shares
or other consideration, based on such terms and conditions as the Committee and
the Participant shall agree.
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13. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Option shall not
be effective unless such Option is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed, as they are in effect on the date of grant of the
Option and also on the date of exercise or other issuance. Notwithstanding any
other provision in the Plan, the Company shall have no obligation to issue or
deliver certificates for Shares under the Plan prior to (a) obtaining any
approvals from governmental agencies that the Company determines are necessary
or advisable, and/or (b) completion of any registration or other qualification
of such shares under any state or federal law or ruling of any governmental body
that the Company determines to be necessary or advisable. The Company shall be
under no obligation to register the Shares with the SEC or to effect compliance
with the registration, qualification or listing requirements of any state
securities laws, stock exchange or automated quotation system, and the Company
shall have no liability for any inability or failure to do so.
14. NO OBLIGATION TO EMPLOY. Nothing in the Plan or any Option granted
under the Plan shall confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent, Subsidiary or Affiliate of the Company or limit in any
way the right of the Company or any Parent, Subsidiary or Affiliate of the
Company to terminate Participant's employment or other relationship at any time,
with or without cause.
15. CORPORATE TRANSACTIONS.
15.1 Assumption or Replacement of Options by Successor. In the
event of (a) a merger or consolidation in which the Company is not the surviving
corporation (other than a merger or consolidation with a wholly-owned
subsidiary, a reincorporation of the Company in a different jurisdiction, or
other transaction in which there is no substantial change in the shareholders of
the Company and the Options granted under the Plan are assumed or replaced by
the successor corporation, which assumption shall be binding on all
Participants), (b) a dissolution or liquidation of the Company, (c) the sale of
substantially all of the assets of the Company, or (d) any other transaction
which qualifies as a "corporate transaction" under Section 424(a) of the Code
wherein the shareholders of the Company give up all of their equity interest in
the Company (except for the acquisition, sale or transfer of all or
substantially all of the outstanding shares of the Company), any or all
outstanding Options may be assumed or replaced by the successor corporation (if
any), which assumption or replacement shall be binding on all Participants. In
the alternative, the successor corporation may substitute equivalent Options or
provide substantially similar consideration to Participants as was provided to
shareholders (after taking into account the existing provisions of the Options).
The successor corporation may also issue, in place of outstanding Shares of the
Company held by the Participant, substantially similar shares or other property
subject to repurchase restrictions no less favorable to the Participant.
In the event such successor corporation (if any) refuses to
assume or substitute Options, as provided above, pursuant to a transaction
described in this Subsection 15.1, such Options shall expire on such transaction
at such time and on such conditions as the Board shall determine.
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15.2 Other Treatment of Options. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 15, in
the event of the occurrence of any transaction described in Section 15.1, any
outstanding Options shall be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation, sale of assets or other
"corporate transaction."
15.3 Assumption of Options by the Company. The Company, from
time to time, also may substitute or assume outstanding Options granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either (a) granting an Option under the Plan in substitution of
such other company's Option, or (b) assuming such Option as if it had been
granted under the Plan if the terms of such assumed Option could be applied to
an Option granted under the Plan. Such substitution or assumption shall be
permissible if the holder of the substituted or assumed Option would have been
eligible to be granted an Option under the Plan if the other company had applied
the rules of the Plan to such grant. In the event the Company assumes an Option
granted by another company, the terms and conditions of such Option shall remain
unchanged (except that the exercise price and the number and nature of Shares
issuable upon exercise of any such option will be adjusted appropriately
pursuant to Section 424(a) of the Code). In the event the Company elects to
grant a new Option rather than assuming an existing option, such new Option may
be granted with a similarly adjusted Exercise Price.
16. ADOPTION AND SHAREHOLDER APPROVAL. The Plan shall become effective
on the date that it is adopted by the Board (the "Effective Date"). The Plan
shall be approved by the shareholders of the Company (excluding Shares issued
pursuant to this Plan), consistent with applicable laws, within twelve months
before or after the Effective Date. Upon the Effective Date, the Board may grant
Options pursuant to the Plan; provided, however, that: (a) no Option may be
exercised prior to initial shareholder approval of the Plan; (b) no Option
granted pursuant to an increase in the number of Shares approved by the Board
shall be exercised prior to the time such increase has been approved by the
shareholders of the Company; and (c) in the event that shareholder approval is
not obtained within the time period provided herein, all Options granted
hereunder shall be cancelled, any Shares issued pursuant to any Option shall be
cancelled and any purchase of Shares hereunder shall be rescinded. After the
Company becomes subject to Section 16(b) of the Exchange Act, the Company will
comply with the requirements of Rule 16b-3 (or its successor), as amended, with
respect to shareholder approval.
17. TERM OF PLAN. The Plan will terminate ten (10) years from the
Effective Date or, if earlier, the date of shareholder approval.
18. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time
terminate or amend the Plan in any respect, including without limitation
amendment of any form of Option Agreement or instrument to be executed pursuant
to the Plan; provided, however, that the Board shall not, without the approval
of the shareholders of the Company, amend the Plan in any manner that requires
such shareholder approval pursuant to the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans or pursuant to the Exchange Act
or Rule 16b-3 (or its successor), as amended, thereunder.
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19. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of the Plan
by the Board, the submission of the Plan to the shareholders of the Company for
approval, nor any provision of the Plan shall be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options otherwise than under the Plan, and such arrangements
may be either generally applicable or applicable only in specific cases.
20. DEFINITIONS. As used in the Plan, the following terms shall
have the following meanings:
"Affiliate" means any corporation that directly, or
indirectly through one or more intermediaries, controls or is controlled by, or
is under common control with, another corporation, where "control" (including
the terms "controlled by" and "under common control with") means the possession,
direct or indirect, of the power to cause the direction of the management and
policies of the corporation, whether through the ownership of voting securities,
by contract or otherwise.
"Option" means any Option under the Plan, including any
ISO or NQSO.
"Option Agreement" means, with respect to each Option,
the signed written agreement between the Company and the Participant setting
forth the terms and conditions of the Option.
"Board" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as
amended.
"Committee" means the committee appointed by the Board
to administer the Plan, or if no committee is appointed, the Board.
"Company" means Epilogue Technology Corporation, a
corporation organized under the laws of the State of Delaware, or any successor
corporation.
"Disability" means a disability, whether temporary or
permanent, partial or total, within the meaning of Section 22(e)(3) of the Code,
as determined by the Committee.
"Disinterested Person" means a director who has not,
during the period that person is a member of the Committee and for one year
prior to service as a member of the Committee, been granted an Option pursuant
to the Plan or any other plan of the Company or any Parent, Subsidiary or
Affiliate of the Company, except in accordance with the requirements set forth
in Rule 16b-3(c)(2)(i) (and any successor regulation thereto) as promulgated by
the SEC under Section 16(b) of the Exchange Act, as such rule is amended from
time to time and as interpreted by the SEC.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"Exercise Price" means the price at which a holder of
an Option may purchase the Shares issuable upon exercise of the Option.
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"Fair Market Value" means, as of any date, the value of
a share of the Company's Common Stock determined as follows:
(a) if such Common Stock is then quoted on the Nasdaq
National Market, its last reported sale price on the
Nasdaq National Market or, if no such reported sale
takes place on such date, the average of the closing
bid and asked prices;
(b) if such Common Stock is publicly traded and is then
listed on a national securities exchange, the last
reported sale price or, if no such reported sale takes
place on such date, the average of the closing bid and
asked prices on the principal national securities
exchange on which the Common Stock is listed or
admitted to trading;
(c) if such Common Stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities exchange,
the average of the closing bid and asked prices on such
date, as reported by The Wall Street Journal, for the
over-the-counter market; or
(d) if none of the foregoing is applicable, by the Board of
Directors of the Company in good faith.
"Insider" means an officer or director of the Company
or any other person whose transactions in the Company's Common Stock are subject
to Section 16 of the Exchange Act.
"Parent" means any corporation (other than the Company)
in an unbroken chain of corporations ending with the Company, if at the time of
the granting of an Option under the Plan, each of such corporations other than
the Company owns stock possessing 50% or more of the total combined voting power
of all classes of stock in one of the other corporations in such chain.
"Participant" means a person who receives an Option
under the Plan.
"Plan" means this Epilogue Technology Corporation 1994
Stock Option Plan, as amended from time to time.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended.
"Shares" means shares of the Company's Common Stock,
$0.001 par value per share, reserved for issuance under the Plan, as adjusted
pursuant to Sections 2 and 15, and any successor security.
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"Subsidiary" means any corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company if, at
the time of granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
"Termination" or "Terminated" means, for purposes of
the Plan with respect to a Participant, that the Participant has ceased to
provide services as an employee, director, consultant, independent contractor or
adviser, to the Company or a Parent, Subsidiary or Affiliate of the Company,
except in the case of sick leave, military leave, or any other leave of absence
approved by the Committee, provided, that such leave is for a period of not more
than ninety (90) days, or reinstatement upon the expiration of such leave is
guaranteed by contract or statute. The Committee shall have sole discretion to
determine whether a Participant has ceased to provide services and the effective
date on which the Participant ceased to provide services (the "Termination
Date").
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EPILOGUE TECHNOLOGY CORPORATION,
a Delaware corporation
1994 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement") is made and entered
into as of the date of grant set forth below (the "Date of Grant") by and
between Epilogue Technology Corporation, a Delaware corporation (the "Company"),
and the participant named below ("Participant"). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Company's 1994 Stock
Option Plan (the "Plan").
Participant:
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Social Security Number:
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Address:
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Total Option Shares:
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Exercise Price Per Share:
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Date of Grant:
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First Vesting Date:
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Expiration Date:
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Type of Stock Option
(Check one): [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
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1. Grant of Option. The Company hereby grants to Participant an
option (the "Option") to purchase the total number of shares of Common Stock,
$0.001 par value per share, of the Company set forth above (the "Shares") at the
Exercise Price Per Share set forth above (the "Exercise Price"), subject to all
of the terms and conditions of this Agreement and the Plan. If designated as an
Incentive Stock Option above, the Option is intended to qualify as an "incentive
stock option" ("ISO") within the meaning of Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code").
2. Exercise Period
2.1 Vesting Schedule. Provided Participant continues to
provide services to the Company or any Subsidiary, Parent or Affiliate of the
Company throughout the specified period, the Option shall become exercisable as
to portions of the Shares as follows:
Cumulative Number
of Shares
Exercisable:
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On or after: But before:
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, 19 , 19
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, 19 , 19
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, 19 , 19
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, 19 , 19
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, 19 , 19
- ---------------------- ------ ---------------------- ------- ----------------------
TOTAL OPTION SHARES: ----------------------
2.2 Expiration. The Option shall expire on the
Expiration Date set forth above and must be exercised, if at all, on or before
the Expiration Date; provided, that the Option will become fully exercisable
within 5 years from the Date of Grant with at least 20% of the total shares
first becoming exercisable at the end of each of the five years.
3. Termination.
3.1 Termination for Any Reason Except Death or
Disability. If Participant is Terminated for any reason, except death or
Disability, the Option, to the extent (and only to the extent) that it would
have been exercisable by Participant on the date of Termination, may be
exercised by Participant no later than thirty (30) days after the date of
Termination, but in any event no later than the Expiration Date.
3.2 Termination Because of Death or Disability. If
Participant is Terminated because of death or Disability of Participant, the
Option, to the extent that it is exercisable by Participant on the date of
Termination, may be exercised by Participant (or Participant's legal
representative) no later than twelve (12) months after the date of Termination,
but in any event no later than the Expiration Date.
-2-
3.3 No Obligation to Employ. Nothing in the Plan or
this Agreement shall confer on Participant any right to continue in the employ
of, or other relationship with, the Company or any Parent, Subsidiary or
Affiliate of the Company, or limit in any way the right of the Company or any
Parent, Subsidiary or Affiliate of the Company to terminate Participant's
employment or other relationship at any time, with or without cause.
4. Manner of Exercise.
4.1 Stock Option Exercise Agreement. To exercise this
Option, Participant (or in the case of exercise after Participant's death,
Participant's executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed stock option exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Company from time to time (the "Exercise Agreement"), which shall set forth,
inter alia, Participant's election to exercise the Option, the number of Shares
being purchased, any restrictions imposed on the Shares and any representations,
warranties and agreements regarding Participant's investment intent and access
to information as may be required by the Company to comply with applicable
securities laws. If someone other than Participant exercises the Option, then
such person must submit documentation reasonably acceptable to the Company that
such person has the right to exercise the Option.
4.2 Limitations on Exercise. The Option may not be
exercised unless such exercise is in compliance with all applicable federal and
state securities laws, as they are in effect on the date of exercise. The Option
may not be exercised as to fewer than 100 Shares unless it is exercised as to
all Shares as to which the Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be
accompanied by full payment of the Exercise Price for the Shares being purchased
in cash (by check), or where permitted by law:
(a) by cancellation of indebtedness of the Company to the
Participant;
(b) by waiver of compensation due or accrued to
Participant for services rendered;
(c) provided that a public market for the Company's stock
exists, (1) through a "same day sale" commitment from
Participant and a broker-dealer that is a member of
the National Association of Securities Dealers (an
"NASD Dealer") whereby Participant irrevocably elects
to exercise the Option and to sell a portion of the
Shares so purchased to pay for the exercise price and
whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the exercise price
directly to the Company, or (2) through a "margin"
commitment from Participant and an NASD Dealer whereby
Participant irrevocably elects to exercise the Option
and to pledge the Shares so purchased to the NASD
Dealer in a margin account as security for a loan from
the NASD Dealer in the amount of the exercise price,
and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the exercise price
directly to the Company; or
(d) by any combination of the foregoing.
-3-
4.4 Tax Withholding. Prior to the issuance of the
Shares upon exercise of the Option, Participant must pay or provide for any
applicable federal or state withholding obligations of the Company.
4.5 Issuance of Shares. Provided that the Exercise
Agreement and payment are in form and substance satisfactory to counsel for the
Company, the Company shall issue the Shares registered in the name of
Participant, Participant's authorized assignee, or Participant's legal
representative, and shall deliver certificates representing the Shares with the
appropriate legends affixed thereto.
5. Notice of Disqualifying Disposition of ISO Shares. If the
Option is an ISO, and if Participant sells or otherwise disposes of any of the
Shares acquired pursuant to the ISO on or before the later of (1) the date two
years after the Date of Grant, and (2) the date one year after transfer of such
Shares to Participant upon exercise of the Option, Participant shall immediately
notify the Company in writing of such disposition. Participant agrees that
Participant may be subject to income tax withholding by the Company on the
compensation income recognized by Participant from the early disposition by
payment in cash or out of the current wages or other compensation payable to
Participant.
6. Compliance with Laws and Regulations. The exercise of the
Option and the issuance and transfer of Shares shall be subject to compliance by
the Company and Participant with all applicable requirements of federal and
state securities laws and with all applicable requirements of any stock exchange
on which the Company's Common Stock may be listed at the time of such issuance
or transfer. Participant understands that the Company is under no obligation to
register or qualify the Shares with the Securities and Exchange Commission, any
state securities commission or any stock exchange to effect such compliance.
7. Nontransferability of Option. The Option may not be
transferred in any manner other than by will or by the laws of descent and
distribution and may be exercised during the lifetime of Participant only by
Participant. The terms of the Option shall be binding upon the executors,
administrators, successors and assigns of Participant.
8. Tax Consequences. Set forth below is a brief summary as of
the Date of Grant of some of the federal and California tax consequences of
exercise of the Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION OR
DISPOSING OF THE SHARES.
8.1 Exercise of ISO. If the Option qualifies as an ISO,
there will be no regular federal or California income tax liability upon the
exercise of the Option, although the excess, if any, of the fair market value of
the Shares on the date of exercise over the Exercise Price will be treated as a
tax preference item for federal income tax purposes and may subject the
Participant to the alternative minimum tax in the year of exercise.
8.2 Exercise of Nonqualified Stock Option. If the
Option does not qualify as an ISO, there may be a regular federal and California
income tax liability upon the exercise of the Option. Participant will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the fair market value of the Shares on
the date of exercise over the Exercise Price. The Company will be required to
withhold from Participant's compensation or collect from Participant and pay to
the applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
-4-
8.3 Disposition of Shares. If the Shares are held for
more than twelve (12) months after the date of the transfer of the Shares
pursuant to the exercise of the Option (and, in the case of an ISO, are disposed
of more than two years after the Date of Grant), any gain realized on
disposition of the Shares will be treated as long term capital gain for federal
and California income tax purposes. If Shares purchased under an ISO are
disposed of within one year of exercise or within two years after the Date of
Grant, any gain realized on such disposition will be treated as compensation
income (taxable at ordinary income rates) to the extent of the excess, if any,
of the Fair Market Value of the Shares on the date of exercise over the Exercise
Price. The Company will be required to withhold from Participant's compensation
or collect from Participant and pay to the applicable taxing authorities an
amount equal to a percentage of this compensation income at the time of
exercise.
9. Privileges of Stock Ownership. Participant shall not have any
of the rights of a shareholder with respect to any Shares until Participant
exercises the Option and pays the Exercise Price.
10. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or the Company to the Committee
for review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
11. Entire Agreement. The Plan is incorporated herein by
reference. This Agreement and the Plan constitute the entire agreement of the
parties and supersede all prior undertakings and agreements with respect to the
subject matter hereof.
12. Notices. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: personal delivery;
three (3) days after deposit in the United States mail by certified mail (return
receipt requested); one (1) business day after deposit with any return receipt
express courier (prepaid); or one (1) business day after transmission by rapifax
or telecopier.
13. Successors and Assigns. The Company may assign any of its
rights under this Agreement. This Agreement shall be binding upon and inure to
the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement shall be binding upon
Participant and Participant's heirs, executors, administrators, legal
representatives, successors and assigns.
14. Governing Law. This Agreement shall be governed by and
construed in accordance with 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 California.
15. Acceptance. Participant hereby acknowledges receipt of a copy
of the Plan and this Agreement. Participant has read and understands the terms
and provisions thereof, and accepts the Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of the Option or disposition of
the Shares and that Participant should consult a tax adviser prior to such
exercise or disposition.
-5-
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate by its duly authorized representative and Participant has
executed this Agreement in duplicate as of the Effective Date.
EPILOGUE TECHNOLOGY CORPORATION PARTICIPANT
By:
---------------------------- --------------------------------
(Signature)
- -------------------------------- ---------------------------------
(Please print name) (Please print name)
- --------------------------------
(Please print title)
-6-
EXHIBIT A
EPILOGUE TECHNOLOGY CORPORATION,
a Delaware corporation
1994 STOCK OPTION PLAN
STOCK OPTION EXERCISE AGREEMENT
This Exercise Agreement is made and entered into as of
______________, 19___ (the "Effective Date") by and between Epilogue Technology
Corporation, a Delaware corporation (the "Company"), and the purchaser named
below (the "Purchaser"). Capitalized terms not defined herein shall have the
meaning ascribed to them in the Company's 1994 Stock Option Plan (the "Plan").
Purchaser:
---------------------------------------------
Social Security Number:
---------------------------------------------
Address:
---------------------------------------------
---------------------------------------------
---------------------------------------------
Total Number of Shares:
---------------------------------------------
Purchase Price Per Share:
---------------------------------------------
Total Purchase Price:
---------------------------------------------
Option No. ___ Date of Grant:
---------------------------------------------
Type of Option: [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
-1-
1. Exercise of Option.
1.1 Exercise. Pursuant to exercise of that certain option
("Option") granted to Purchaser under the Plan and subject to the terms and
conditions of this Agreement, Purchaser hereby purchases from the Company, and
the Company hereby sells to Purchaser, the total number of shares set forth
above ("Shares") of the Company's Common Stock, $0.001 par value per Share, at a
purchase price per share set forth above for a total purchase price set forth
above (the "Purchase Price"). As used in this Agreement, the term "Shares"
refers to the Shares purchased under this Exercise Agreement and includes all
securities received (a) in replacement of the Shares, (b) as a result of stock
dividends or stock splits with respect to the Shares, and (c) all securities
received in replacement of the Shares in a merger, recapitalization,
reorganization or similar corporate transaction.
1.2 Title to Shares. The exact spelling of the name(s) under
which Purchaser will take title to the Shares is:
----------------------------------------------------------
----------------------------------------------------------
Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[ ] Alone or with spouse as trustee(s) of the
following trust (including date):
-------------------------------------------------
-------------------------------------------------
[ ] Other; please specify:
-------------------------------
-------------------------------------------------
1.3 Payment. Purchaser hereby delivers payment of the Purchase
Price in the manner permitted in the Stock Option Agreement as follows (check
and complete as appropriate):
[ ] in cash in the amount of $____________, receipt of which
is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company to
Purchaser in the amount of $__________;
[ ] by the waiver hereby of compensation due or accrued for
services rendered in the amount of $_________.
-2-
2. Delivery.
2.1 Deliveries by Purchaser. Purchaser hereby delivers to the
Company (i) this Exercise Agreement, (ii) two (2) copies of a blank Stock Power
and Assignment Separate from Stock Certificate in the form of Exhibit 1 attached
hereto (the "Stock Powers"), both executed by Purchaser (and Purchaser's spouse,
if any), (iii) if Purchaser is married, a Consent of Spouse in the form of
Exhibit 2 attached hereto (the "Spouse Consent") executed by Purchaser's spouse,
and (iv) the Purchase Price.
2.2 Deliveries by the Company. Upon its receipt of the Purchase
Price and all the documents to be executed and delivered by Purchaser to the
Company under Section 2.1, the Company will issue a duly executed stock
certificate evidencing the Shares in the name of Purchaser, to be placed in
escrow as provided in Section 11 until expiration or termination of the
Company's Repurchase Option and Right of First Refusal described in Sections 8
and 9 and payment in full to the Company of all sums due under the Note.
3. Representations and Warranties of Purchaser. Purchaser represents
and warrants to the Company that:
3.1 Agrees to Terms of the Plan. Purchaser has received a copy
of the Plan and the Stock Option Agreement, has read and understands the terms
of the Plan, the Stock Option Agreement and this Exercise Agreement, and agrees
to be bound by their terms and conditions. Purchaser acknowledges that there may
be adverse tax consequences upon exercise of the Option or disposition of the
Shares, and that Purchaser should consult a tax adviser prior to such exercise
or disposition.
3.2 Purchase for Own Account for Investment. Purchaser is
purchasing the Shares for Purchaser's own account for investment purposes only
and not with a view to, or for sale in connection with, a distribution of the
Shares within the meaning of the Securities Act of 1933, as amended (the
"Securities Act"). Purchaser has no present intention of selling or otherwise
disposing of all or any portion of the Shares and no one other than Purchaser
has any beneficial ownership of any of the Shares.
3.3 Access to Information. Purchaser has had access to all
information regarding the Company and its present and prospective business,
assets, liabilities and financial condition that Purchaser reasonably considers
important in making the decision to purchase the Shares, and Purchaser has had
ample opportunity to ask questions of the Company's representatives concerning
such matters and this investment.
3.4 Understanding of Risks. Purchaser is fully aware of: (i) the
highly speculative nature of the investment in the Shares; (ii) the financial
hazards involved; (iii) the lack of liquidity of the Shares and the restrictions
on transferability of the Shares (e.g., that Purchaser may not be able to sell
or dispose of the Shares or use them as collateral for loans); (iv) the
qualifications and backgrounds of the management of the Company; and (v) the tax
consequences of investment in the Shares. Purchaser is capable of evaluating the
merits and risks of this investment, has the ability to protect Purchaser's own
interests in this transaction and is financially capable of bearing a total loss
of this investment.
-3-
3.5 No General Solicitation. At no time was Purchaser presented
with or solicited by any publicly issued or circulated newspaper, mail, radio,
television or other form of general advertising or solicitation in connection
with the offer, sale and purchase of the Shares.
4. Compliance with Securities Laws.
4.1 Compliance with Federal Securities Laws. Purchaser
understands and acknowledges that the Shares have not been registered with the
Securities and Exchange Commission ("SEC") under the Securities Act and that,
notwithstanding any other provision of the Stock Option Agreement to the
contrary, the exercise of any rights to purchase any Shares is expressly
conditioned upon compliance with the Securities Act and all applicable state
securities laws. Purchaser agrees to cooperate with the Company to ensure
compliance with such laws. The Shares are being issued under the Securities Act
pursuant to (the Company will check the applicable box):
[x] the exemption provided by SEC Rule 701;
[ ] the exemption provided by SEC Rule 504;
[ ] Section 4(2) of the Securities Act;
[ ] other: ____________________________.
4.2 Compliance with California Securities Laws. THE SALE OF THE
SECURITIES THAT ARE THE SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED
WITH THE CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH
QUALIFICATION, IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH
SECURITIES, AND THE RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE
PARTIES TO THIS EXERCISE AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH
QUALIFICATION BEING OBTAINED OR AN EXEMPTION BEING AVAILABLE.
5. Restricted Securities.
5.1 No Transfer Unless Registered or Exempt. Purchaser
understands that Purchaser may not transfer any Shares unless such Shares are
registered under the Securities Act or qualified under applicable state
securities laws or unless, in the opinion of counsel to the Company, exemptions
from such registration and qualification requirements are available. Purchaser
understands that only the Company may file a registration statement with the SEC
and that the Company is under no obligation to do so with respect to the Shares.
Purchaser has also been advised that exemptions from registration and
qualification may not be available or may not permit Purchaser to transfer all
or any of the Shares in the amounts or at the times proposed by Purchaser.
5.2 SEC Rule 144. In addition, Purchaser has been advised that
SEC Rule 144 promulgated under the Securities Act, which permits certain limited
sales of unregistered securities, is not presently available with respect to the
Shares and, in any event, requires that the Shares be held for a minimum of two
years, and in certain cases three years, after they have been purchased and paid
for (within the meaning of Rule 144), before they may be resold under Rule 144.
Purchaser understands that Rule 144 may indefinitely restrict transfer of the
Shares so long as Purchaser remains an "affiliate" of the Company or if "current
public information" about the Company (as defined in Rule 144) is not publicly
available.
-4-
5.3 SEC Rule 701. The Shares may become freely tradeable by
non-affiliates if issued pursuant to SEC Rule 701 promulgated under the
Securities Act (under limited conditions regarding the method of sale) 90 days
after the first sale of Common Stock of the Company to the general public
pursuant to a registration statement filed with and declared effective by the
SEC, subject to the lengthier market standoff agreement contained in Section 7
of this Exercise Agreement or any other agreement entered into by Purchaser.
Affiliates must comply with the provisions (other than the holding period
requirements) of Rule 144.
5.4 State Law Restrictions on Transfer. Purchaser understands
that transfer of the Shares may be restricted by Section 260.141.11 of the Rules
of the California Commissioner of Corporations, a copy of which is attached
hereto as Exhibit 3, and that the certificate(s) representing the Shares may
bear a legend to that effect.
6. Restrictions on Transfers.
6.1 Disposition of Shares. Purchaser hereby agrees that
Purchaser shall make no disposition of the Shares (other than as permitted by
this Agreement) unless and until:
(a) Purchaser shall have notified the Company of the
proposed disposition and provided a written summary of the terms and conditions
of the proposed disposition;
(b) Purchaser shall have complied with all requirements
of this Exercise Agreement applicable to the disposition of the Shares;
(c) Purchaser shall have provided the Company with
written assurances, in form and substance satisfactory to counsel for the
Company, that (i) the proposed disposition does not require registration of the
Shares under the Securities Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the Securities Act or of any
exemption from registration available under the Securities Act (including Rule
144) has been taken; and
(d) Purchaser shall have provided the Company with
written assurances, in form and substance satisfactory to the Company, that the
proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Shares pursuant to the provisions of the
Commissioner Rules identified in Section 4.2.
6.2 Restriction on Transfer. Purchaser shall not transfer,
assign, grant a lien or security interest in, pledge, hypothecate, encumber or
otherwise dispose of any of the Shares which are subject to the Company's
Repurchase Option or the Company's Right of First Refusal, except as permitted
by this Agreement.
6.3 Transferee Obligations. Each person (other than the Company)
to whom the Shares are transferred by means of one of the permitted transfers
specified in this Agreement must, as a condition precedent to the validity of
such transfer, acknowledge in writing to the Company that such person is bound
by the provisions of this Exercise Agreement and that the transferred shares are
subject to (i) both the Company's Repurchase Option and the Company's Right of
First Refusal granted hereunder and (ii) the market stand-off provisions of
Section 7, to the same extent such shares would be so subject if retained by the
Purchaser.
-5-
7. Market Standoff Agreement. Purchaser agrees in connection with any
registration of the Company's securities that, upon the request of the Company
or the underwriters managing any public offering of the Company's securities,
Purchaser will not sell or otherwise dispose of any Shares without the prior
written consent of the Company or such underwriters, as the case may be, for
such period of time (not to exceed 180 days) after the effective date of such
registration requested by such managing underwriters and subject to all
restrictions as the Company or the underwriters may specify.
8. Company's Repurchase Option. The Company, or its assignee, shall
have the option to repurchase all or a portion of the Shares on the terms and
conditions set forth in this Section (the "Repurchase Option") if Purchaser is
Terminated (as defined in the Plan) for any reason, or no reason, including
without limitation Purchaser's death, Disability (as defined in the Plan),
voluntary resignation or termination by the Company with or without cause.
8.1 Termination and Termination Date. In case of any dispute as
to whether Purchaser is Terminated, the Committee shall have discretion to
determine whether Purchaser has been Terminated and the effective date of such
Termination (the "Termination Date").
8.2 Exercise of Repurchase Option. At any time within ninety
(90) days after the later of the Termination Date or the date the Purchaser
purchased the Shares, the Company, or its assignee, may elect to repurchase any
or all of the Shares by giving Purchaser written notice of exercise of the
Repurchase Option.
8.3 Calculation of Repurchase Price. The Company or its assignee
shall have the option to repurchase from Purchaser (or from Purchaser's personal
representative as the case may be) any or all of the Shares at the higher of
Fair Market Value of such Shares on the Purchaser's Termination Date or the
Purchaser's original Purchase Price Per Share.
8.4 Payment of Repurchase Price. The repurchase price shall be
payable, at the option of the Company or its assignee, by check or by
cancellation of all or a portion of any outstanding indebtedness of Purchaser to
the Company or such assignee, or by any combination thereof. The repurchase
price shall be paid without interest within sixty (60) days after exercise of
the Repurchase Option.
8.5 Right of Termination Unaffected. Nothing in this Exercise
Agreement shall be construed to limit or otherwise affect in any manner
whatsoever the right or power of the Company (or any Parent, Subsidiary or
Affiliate of the Company) to terminate Purchaser's employment or other
relationship with Company (or the Parent, Subsidiary or Affiliate of the
Company) at any time, for any reason or no reason, with or without cause.
8.6 Termination of Repurchase Option. The Repurchase Option
shall terminate as to any Shares upon the first sale of Common Stock of the
Company to the general public pursuant to a registration statement filed with
and declared effective by the SEC (other than a registration statement solely
covering an employee benefit plan or corporate reorganization).
9. Company's Right of First Refusal. Before any Shares held by
Purchaser or any transferee of such Shares (either being sometimes referred to
herein as the "Holder") may be sold or otherwise transferred (including without
limitation a transfer by gift or operation of law), the Company and/or its
assignee(s) shall have an assignable right of first refusal to purchase the
Shares to be sold or transferred (the "Offered Shares") on the terms and
conditions set forth in this Section (the "Right of First Refusal").
-6-
9.1 Notice of Proposed Transfer. The Holder of the Shares shall
deliver to the Company a written notice (the "Notice") stating: (i) the Holder's
bona fide intention to sell or otherwise transfer the Offered Shares; (ii) the
name of each proposed bona fide purchaser or other transferee ("Proposed
Transferee"); (iii) the number of Offered Shares to be transferred to each
Proposed Transferee; (iv) the bona fide cash price or other consideration for
which the Holder proposes to transfer the Offered Shares (the "Offered Price");
and (v) that the Holder will offer to sell the Offered Shares to the Company
and/or its assignee(s) at the Offered Price as provided in this Section.
9.2 Exercise of Right of First Refusal. At any time within
thirty (30) days after the date of the Notice, the Company and/or its
assignee(s) may, by giving written notice to the Holder, elect to purchase all
of the Offered Shares proposed to be transferred to any one or more of the
Proposed Transferees named in the Notice, at the purchase price determined as
specified below.
9.3 Purchase Price. The purchase price for the Offered Shares
purchased under this Section will be the Offered Price. If the Offered Price
includes consideration other than cash, then the cash equivalent value of the
non-cash consideration shall conclusively be deemed to be the value of such
non-cash consideration as determined in good faith by the Company's Board of
Directors.
9.4 Payment. Payment of the purchase price for Offered Shares
will be payable, at the option of the Company and/or its assignee(s) (as
applicable), by check or by cancellation of all or a portion of any outstanding
indebtedness of the Holder to the Company (or to such assignee, in the case of a
purchase of Offered Shares by such assignee) or by any combination thereof. The
purchase price will be paid without interest within sixty (60) days after the
Company's receipt of the Notice, or, at the option of the Company and/or its
assignee(s), in the manner and at the time(s) set forth in the Notice.
9.5 Holder's Right to Transfer. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company and/or its assignee(s) as provided in this Section,
then the Holder may sell or otherwise transfer such Offered Shares to that
Proposed Transferee at the Offered Price or at a higher price, provided that
such sale or other transfer is consummated within 120 days after the date of the
Notice, and provided further, that (i) any such sale or other transfer is
effected in compliance with all applicable securities laws and (ii) the Proposed
Transferee agrees in writing that the provisions of this Section will continue
to apply to the Offered Shares in the hands of such Proposed Transferee. If the
Offered Shares described in the Notice are not transferred to the Proposed
Transferee within such 120 day period, then a new Notice must be given to the
Company, and the Company will again be offered the Right of First Refusal before
any Shares held by the Holder may be sold or otherwise transferred.
-7-
9.6 Exempt Transfers. Notwithstanding anything to the contrary
in this Section, the following transfers of Shares will be exempt from the Right
of First Refusal: (i) the transfer of any or all of the Shares during
Purchaser's lifetime by gift or on Purchaser's death by will or intestacy to
Purchaser's "immediate family" (as defined below) or to a trust for the benefit
of Purchaser or Purchaser's immediate family, provided that each transferee or
other recipient agrees in a writing satisfactory to the Company that the
provisions of this Section will continue to apply to the transferred Shares in
the hands of such transferee or other recipient; (ii) any transfer of Shares
made pursuant to a statutory merger or statutory consolidation of the Company
with or into another corporation or corporations (except that the Right of First
Refusal will continue to apply thereafter to such Shares, in which case the
surviving corporation of such merger or consolidation shall succeed to the
rights of the Company under this Section unless the agreement of merger or
consolidation expressly otherwise provides); or (iii) any transfer of Shares
pursuant to the winding up and dissolution of the Company. As used herein, the
term "immediate family" will mean Purchaser's spouse, the lineal descendant or
antecedent, father, mother, brother or sister, adopted child or grandchild of
the Purchaser or the Purchaser's spouse, or the spouse of any child, adopted
child, grandchild or adopted grandchild of Purchaser or the Purchaser's spouse.
9.7 Termination of Right of First Refusal. The Right of First
Refusal will terminate as to all Shares on the effective date of the first sale
of Common Stock of the Company to the general public pursuant to a registration
statement filed with and declared effective by the SEC under the Securities Act
(other than a registration statement relating solely to the issuance of Common
Stock pursuant to a business combination or an employee incentive or benefit
plan).
10. Rights as Shareholder. Subject to the terms and conditions of this
Exercise Agreement, Purchaser will have all of the rights of a shareholder of
the Company with respect to the Shares from and after the date that Purchaser
delivers payment of the Purchase Price until such time as Purchaser disposes of
the Shares or the Company and/or its assignee(s) exercise(s) the Repurchase
Option or Right of First Refusal. Upon an exercise of the Repurchase Option or
the Right of First Refusal, Purchaser will have no further rights as a holder of
the Shares so purchased upon such exercise, except the right to receive payment
for the Shares so purchased in accordance with the provisions of this Exercise
Agreement, and Purchaser will promptly surrender the stock certificate(s)
evidencing the Shares so purchased to the Company for transfer or cancellation.
11. Escrow. As security for Purchaser's faithful performance of this
Agreement, Purchaser agrees, immediately upon receipt of the stock
certificate(s) evidencing the Shares, to deliver such certificate(s), together
with the Stock Powers executed by Purchaser and by Purchaser's spouse, if any
(with the date and number of Shares left blank), to the Secretary of the Company
or other designee of the Company ("Escrow Holder"), who is hereby appointed to
hold such certificate(s) and Stock Powers in escrow and to take all such actions
and to effectuate all such transfers and/or releases of such Shares as are in
accordance with the terms of this Agreement. Purchaser and the Company agree
that Escrow Holder will not be liable to any party to this Exercise Agreement
(or to any other party) for any actions or omissions unless Escrow Holder is
grossly negligent or intentionally fraudulent in carrying out the duties of
Escrow Holder under this Exercise Agreement. Escrow Holder may rely upon any
letter, notice or other document executed by any signature purported to be
genuine and may rely on the advice of counsel and obey any order of any court
with respect to the transactions contemplated by this Agreement. The Shares will
be released from escrow upon termination of both the Repurchase Option and the
Right of First Refusal.
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12. Restrictive Legends and Stop-Transfer Orders.
12.1 Legends. Purchaser understands and agrees that the Company
will place the legends set forth below or similar legends on any stock
certificate(s) evidencing the Shares, together with any other legends that may
be required by state or federal securities laws, the Company's Certificate of
Incorporation or Bylaws, any other agreement between Purchaser and the Company
or any agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE
SECURITIES LAWS OF CERTAIN STATES. THESE SECURITIES ARE SUBJECT
TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE
TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE
REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY
REQUIRE AN OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY
TO THE ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE
IS IN COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON PUBLIC RESALE, TRANSFER, RIGHT OF
REPURCHASE AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER
AND/OR ITS ASSIGNEE(S) AS SET FORTH IN A STOCK OPTION EXERCISE
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE
SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE
OF THE ISSUER. SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS AND
THE RIGHT OF REPURCHASE AND RIGHT OF FIRST REFUSAL ARE BINDING
ON TRANSFEREES OF THESE SHARES.
The California Commissioner of Corporations may require that the
following legend also be placed upon the share certificate(s) evidencing
ownership of the Shares:
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.
12.2 Stop-Transfer Instructions. Purchaser agrees that, to
ensure compliance with the restrictions imposed by this Agreement, the Company
may issue appropriate "stop-transfer" instructions to its transfer agent, if
any, and if the Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
-9-
12.3 Refusal to Transfer. The Company will not be required (i)
to transfer on its books any Shares that have been sold or otherwise transferred
in violation of any of the provisions of this Agreement or (ii) to treat as
owner of such Shares, or to accord the right to vote or pay dividends to any
purchaser or other transferee to whom such Shares have been so transferred.
13. Tax Consequences. PURCHASER UNDERSTANDS THAT PURCHASER MAY SUFFER
ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR DISPOSITION OF
THE SHARES. PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH ANY TAX
ADVISER PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE OR DISPOSITION
OF THE SHARES AND THAT PURCHASER IS NOT RELYING ON THE COMPANY FOR ANY TAX
ADVICE. IN PARTICULAR, IF THE SHARES ARE SUBJECT TO REPURCHASE BY THE COMPANY OR
IF PURCHASER IS AN INSIDER SUBJECT TO SECTION 16(b) OF THE EXCHANGE ACT,
PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED WITH PURCHASER'S TAX ADVISER
CONCERNING THE ADVISABILITY OF FILING AN 83(b) ELECTION WITH THE INTERNAL
REVENUE SERVICE. Set forth below is a brief summary as of the date of this
Exercise Agreement of some of the federal and California tax consequences of
exercise of the Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXECUTING THIS OPTION OR
DISPOSING OF THE SHARES.
13.1 Exercise of Incentive Stock Option. If the Option qualifies
as an incentive stock option, there will be no regular federal income tax
liability or California income tax liability upon the exercise of the Option,
although the excess, if any, of the fair market value of the Shares on the date
of exercise over the Purchase Price Per Share will be treated as a tax
preference item for federal income tax purposes and may subject Purchaser to the
alternative minimum tax in the year of exercise.
13.2 Exercise of Nonqualified Stock Option. If the Option does
not qualify as an incentive stock option, there may be a regular federal income
tax liability and a California income tax liability upon the exercise of the
Option. Purchaser will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the fair
market value of the Shares on the date of exercise over the Purchase Price Per
Share. The Company will be required to withhold from Purchaser's compensation or
collect from Purchaser and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
13.3 Disposition of Shares. If the Shares are held for more than
twelve months after the date of the transfer of the Shares pursuant to the
exercise of the Option (and, in the case of an ISO, are disposed of more than
two years after the Option Date of Grant), any gain realized on disposition of
the Shares will be treated as long term capital gain for federal and California
income tax purposes. If Shares purchased under an ISO are disposed of within one
year of exercise or within two years after the Option Date of Grant, any gain
realized on such disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the excess, if any, of the fair market
value of the Shares on the date of exercise over the Purchase Price Per Share.
The Company will be required to withhold from Purchaser's compensation or
collect from Purchaser and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income at the time of exercise.
-10-
14. Compliance with Laws and Regulations. The issuance and transfer of
the Shares will be subject to and conditioned upon compliance by the Company and
Purchaser with all applicable state and federal laws and regulations and with
all applicable requirements of any stock exchange or automated quotation system
on which the Company's Common Stock may be listed or quoted at the time of such
issuance or transfer.
15. Successors and Assigns. The Company may assign any of its rights
under this Agreement, including its rights to repurchase Shares under the
Repurchase Option and the Right of First Refusal. However, if the Company
assigns its right to repurchase Shares under the Repurchase Option, the assignee
will pay to the Company, in addition to the purchase price it pays to Purchaser,
the excess of the Fair Market Value of the Shares at the time of assignment over
the original Purchase Price of the Shares. This Agreement shall be binding upon
and inure to the benefit of the successors and assigns of the Company. Subject
to the restrictions on transfer herein set forth, this Agreement will be binding
upon Purchaser and Purchaser's heirs, executors, administrators, legal
representatives, successors and assigns.
16. Governing Law; Severability. This Agreement shall be governed by
and construed in accordance with the internal laws of the State of Delaware as
such laws are applied to agreements between Delaware residents entered into and
to be performed entirely within Delaware, excluding that body of laws pertaining
to conflict of laws. If any provision of this Agreement is determined by a court
of law to be illegal or unenforceable, then such provision will be enforced to
the maximum extent possible and the other provisions will remain fully effective
and enforceable.
17. Notices. Any notice required to be given or delivered to the
Company shall be in writing and addressed to the Corporate Secretary of the
Company at its principal corporate offices. Any notice required to be given or
delivered to Purchaser shall be in writing and addressed to Purchaser at the
address indicated above or to such other address as Purchaser may designate in
writing from time to time to the Company. All notices shall be deemed
effectively given upon personal delivery, three (3) days after deposit in the
United States mail by certified or registered mail (return receipt requested),
one (1) business day after its deposit with any return receipt express courier
(prepaid), or one (1) business day after transmission by rapifax or telecopier.
18. Further Instruments. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
19. Headings. The captions and headings of this Agreement are included
for ease of reference only and will be disregarded in interpreting or construing
this Agreement. All references herein to Sections will refer to Sections of this
Agreement.
20. Entire Agreement. The Plan, the Stock Option Agreement and this
Exercise Agreement, together with all its Exhibits, constitute the entire
agreement and understanding of the parties with respect to the subject matter of
this Agreement, and supersede all prior understandings and agreements, whether
oral or written, between the parties hereto with respect to the specific subject
matter hereof.
11
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in duplicate by its duly authorized representative and Purchaser has
executed this Agreement in duplicate as of the Effective Date.
EPILOGUE TECHNOLOGY CORPORATION
PURCHASER
By:
---------------------------- -----------------------------------
(Signature)
- -------------------------------
(Please print Name) -----------------------------------
(Please print name)
- -------------------------------
(Please print title)
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LIST OF EXHIBITS
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
Exhibit 3: California Commissioner Rule 260.141.11
Exhibit 4: Copy of Purchaser's Check
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EXHIBIT 1
Stock Power and Assignment
Separate from Stock Certificate
FOR VALUE RECEIVED and pursuant to that certain Stock Option
Exercise Agreement No. ___ dated as of _______________, 19___, (the
"Agreement"), the undersigned hereby sells, assigns and transfers unto
_______________________________, shares of the Common Stock, par value $0.001
per share, of Epilogue Technology Corporation, a Delaware corporation (the
"Company"), standing in the undersigned's name on the books of the Company
represented by Certificate No(s). ______ delivered herewith, and does hereby
irrevocably constitute and appoint the Secretary of the Company as the
undersigned's attorney-in-fact, with full power of substitution, to transfer
said stock on the books of the Company. THIS ASSIGNMENT MAY ONLY BE USED AS
AUTHORIZED BY THE AGREEMENT AND ANY EXHIBITS THERETO.
Dated: _______________, 19____
PURCHASER
-----------------------------------
(Signature)
-----------------------------------
(Please Print Name)
-----------------------------------
(Spouse's Signature, if any)
-----------------------------------
(Please Print Spouse's Name)
Instructions: Please do not fill in any blanks other than the signature line.
The purpose of this Stock Power and Assignment is to enable the Company to
exercise its "Repurchase Option" and/or "Right of First Refusal" set forth in
the Agreement without requiring additional signatures on the part of the
Purchaser or Purchaser's Spouse.
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EXHIBIT 2
Spouse Consent
The undersigned spouse of Purchaser has read, understands, and
hereby approves the Stock Option Exercise Agreement between Purchaser and the
Company (the "Agreement"). In consideration of the Company's granting my spouse
the right to purchase the Shares as set forth in the Agreement, the undersigned
hereby agrees to be irrevocably bound by the Agreement and further agrees that
any community property interest shall similarly be bound by the Agreement. The
undersigned hereby appoints Purchaser as my attorney-in-fact with respect to any
amendment or exercise of any rights under the Agreement.
Date:
-------------------------- -------------------------
Purchaser's Spouse
Address:
-------------------------
-------------------------
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EXHIBIT 3
California Commissioner Rule 260.141.11
(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 intervivos 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 Section 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 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;
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(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 requirements 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 THEREFORE, WITHOUT THE
PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF
CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
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EXHIBIT 4
COPY OF PURCHASER'S CHECK
-18-