EXHIBIT 10.2
INTERNATIONAL NETWORK SERVICES
AMENDED AND RESTATED 1992 FLEXIBLE STOCK INCENTIVE PLAN
1. Establishment, Purpose, and Definitions.
---------------------------------------
(a) There is hereby adopted the Amended and Restated 1992
Flexible Stock Incentive Plan (the "Plan") of International Network Services, a
California corporation (the "Company").
(b) The purpose of the Plan is to provide a means whereby
eligible individuals (as defined in paragraph_4, below) can acquire Common Stock
of the Company (the "Stock"). The Plan provides employees (including officers
and directors who are employees) of the Company and of its Affiliates an
opportunity to purchase shares of Stock pursuant to options which may qualify as
incentive stock options (referred to as "incentive stock options") under
SectionE422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
employees, officers, directors, independent contractors, and consultants of the
Company and of its Affiliates an opportunity to purchase shares of Stock
pursuant to options which are not described in Sections_422 or_423 of the Code
(referred to as "nonqualified stock options"). The Plan also provides for the
sale or bonus of Stock to eligible individuals in connection with the
performance of services for the Company or its Affiliates. Finally, the Plan
authorizes the grant of stock appreciation rights ("SARs"), either separately or
in tandem with stock options, entitling holders to cash compensation measured by
appreciation in the value of the Stock.
(c) The term "Affiliates" as used in the Plan means parent
or subsidiary corporations, as defined in Sections_424(e) and (f) of the Code
(but substituting "the Company" for "employer corporation"), including parents
or subsidiaries which become such after adoption of the Plan.
2. Administration of the Plan.
--------------------------
(a) The Plan shall be administered by the Board of
Directors of the Company (the "Board"). The Board may delegate the
responsibility for administering the Plan to a committee, under such terms and
conditions as the Board shall determine (the "Committee"). The Committee shall
consist of two or more members of the Board or such lesser number of members of
the Board as permitted by Rule_16b-3 promulgated under the Securities Exchange
Act of 1934, as amended ("Rule_16b-3"). None of the members of the Committee
shall receive, while serving on the Committee, or during the one-year period
preceding appointment to the Committee, a grant or award of equity securities
under (i)_the Plan or (ii)_any other plan of the Company or its affiliates under
which the participants are entitled to acquire Stock (including restricted
Stock), stock options, stock bonuses, related rights or stock appreciation
rights of the Company or any of its affiliates, other than pursuant to
transactions in any such other plan which do not disqualify a director from
being a disinterested person under Rule_16b-3. The limitations set forth in this
Section 2(a) shall automatically incorporate any additional requirements that
may in the future be necessary for the Plan to comply with Rule_16b-3. Members
of the Committee shall serve at the pleasure of the Board. The Committee shall
select one of its members as chairman, and shall hold meetings at such times and
places as it may determine. A majority of the Committee shall constitute a
quorum and acts of the Committee at which a quorum is present, or acts reduced
to or approved in writing by all the members of the Committee, shall be the
valid acts of the Committee. If the Board does not delegate administration of
the Plan to the Committee, then each reference in this Plan to "the Committee"
shall
1
be construed to refer to the Board.
(b) The Committee shall determine which eligible
individuals (as defined in paragraph_4, below) shall be granted options under
the Plan, the timing of such grants, the terms thereof (including any
restrictions on the Stock), and the number of shares subject to such options.
(c) The Committee may amend the terms of any outstanding
option granted under this Plan, but any amendment which would adversely affect
the optionee's rights under an outstanding option shall not be made without the
optionee's written consent. Without limitation of the foregoing, the Committee
shall have the right, with the optionee's consent, to accelerate the exercise
date of any options issued pursuant to the Plan or terminate the restrictions
applicable to any stock issued pursuant to the Plan. The Committee may, with the
optionee's written consent, cancel any outstanding stock option or accept any
outstanding stock option in exchange for a new option.
(d) The Committee shall also determine which eligible
individuals (as defined in paragraph_4, below) shall be issued Stock or SARs
under the Plan, the timing of such grants, the terms thereof (including any
restrictions), and the number of shares or SARs to be granted. The Stock shall
be issued for such consideration (if any) as the Committee deems appropriate.
Stock issued subject to restrictions shall be evidenced by a written agreement
(the "Restricted Stock Purchase Agreement" or the "Restricted Stock Bonus
Agreement"). The Committee may amend any Restricted Stock Purchase Agreement or
Restricted Stock Bonus Agreement, but any amendment which would adversely affect
the shareholder's rights to the Stock shall not be made without his or her
written consent.
(e) The Committee shall have the sole authority, in its
absolute discretion to adopt, amend, and rescind such rules and regulations as,
in its opinion, may be advisable for the administration of the Plan, to construe
and interpret the Plan, the rules and the regulations, and the instruments
evidencing options or Stock granted under the Plan and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
All decisions, determinations, and interpretations of the Committee shall be
binding on all participants.
3. Stock Subject to the Plan.
-------------------------
(a) An aggregate of not more than 4,643,104 shares of Stock
shall be available for the grant of stock options or the issuance of Stock under
the Plan. If an option is surrendered (except surrender for shares of Stock) or
for any other reason ceases to be exercisable in whole or in part, the shares
which were subject to such option but as to which the option had not been
exercised shall continue to be available under the Plan. Any Stock which is
retained by the Company upon exercise of an option in order to satisfy the
exercise price for such option or any withholding taxes due with respect to such
option exercise shall be treated as issued to the optionee and will thereafter
not be available under the Plan.
(b) If there is any change in the Stock subject to the
Plan, an Option Agreement, a Restricted Stock Purchase Agreement, a Restricted
Stock Bonus Agreement, or a SAR Agreement through merger, consolidation,
reorganization, recapitalization, reincorporation, stock split, stock dividend
(in excess of two percent (2%)), or other change in the corporate structure of
the Company, appropriate adjustments shall be made by the Committee in order to
preserve but not to increase the benefits to the individual, including
adjustments to the aggregate number, kind and price per share of shares subject
to the Plan, an Option Agreement, a Restricted Stock Purchase Agreement, a
Restricted Stock Bonus Agreement, or a SAR Agreement.
2
4. Eligible Individuals. Individuals who shall be eligible to
--------------------
have granted to them the options, Stock or SARs provided for by the Plan shall
be such employees, officers, directors, independent contractors and consultants
of the Company or an Affiliate as the Committee, in its discretion, shall
designate from time to time. Notwithstanding the foregoing, only employees of
the Company or an Affiliate (including officers and directors who are bona fide
employees) shall be eligible to receive incentive stock options.
5. The Option Price. The exercise price of the Stock covered
----------------
by each incentive stock option shall be not less than the per share fair market
value of such Stock on the date the option is granted. The exercise price of the
Stock covered by each nonqualified stock option shall be not less than eighty-
five percent (85%) of the per share fair market value of such stock on the date
the option is granted. Notwithstanding the foregoing, in the case of an
incentive stock option granted to a person possessing more than ten percent
(10%) of the combined voting power of the Company or an Affiliate, the exercise
price shall be not less than one hundred ten percent (110%) of the fair market
value of the Stock on the date the option is granted. The exercise price of an
option shall be subject to adjustment to the extent provided in paragraph_3(b),
above.
6. Terms and Conditions of Options.
-------------------------------
(a) Each option granted pursuant to the Plan shall be
evidenced by a written Stock Option Agreement executed by the Company and the
person to whom such option is granted.
(b) The Committee shall determine the term of each option
granted under the Plan; provided, however, that the term of an incentive stock
-------- -------
option shall not be for more than 10_years and that, in the case of an incentive
stock option granted to a person possessing more than ten percent (10%) of the
combined voting power of the Company or an Affiliate, the term shall be for no
more than five years.
(c) In the case of incentive stock options, the aggregate
fair market value (determined as of the time such option is granted) of the
Stock with respect to which incentive stock options are exercisable for the
first time by an eligible employee in any calendar year (under this Plan and any
other plans of the Company or its Affiliates) shall not exceed $100,000.
(d) The Stock Option Agreement may contain such other
terms, provisions and conditions consistent with this Plan as may be determined
by the Committee. If an option, or any part thereof is intended to qualify as an
incentive stock option, the Stock Option Agreement shall contain those terms and
conditions which are necessary to so qualify it as an incentive stock option.
Notwithstanding the foregoing, no option granted under the Plan may vest at less
than 20% per year over five consecutive years.
7. Terms and Conditions of Stock Purchases and Bonuses.
---------------------------------------------------
(a) Each sale or grant of stock pursuant to the Plan shall
be evidenced by a written Restricted Stock Purchase Agreement or Restricted
Stock Bonus Agreement executed by the Company and the person to whom such Stock
is sold or granted.
(b) The Restricted Stock Purchase Agreement or Restricted
Stock Bonus Agreement may contain such other terms, provisions and conditions
consistent with this Plan as may be determined by the Committee, including not
by way of limitation, restrictions on transfer, forfeiture provisions,
repurchase provisions and vesting provisions.
3
(c) At the time of each sale or grant of Stock or option
pursuant to the Plan, a copy of the Plan shall be delivered by the Company to
the person to whom such Stock is sold or option granted.
8. Terms and Conditions of SARs. The Committee may, under such
----------------------------
terms and conditions as it deems appropriate, authorize the issuance of SARS
evidenced by a written SAR agreement (which, in the case of tandem options, may
be part of the option agreement to which the SAR relates) executed by the
Company and the person to whom such SAR is granted. The SAR agreement may
contain such terms, provisions and conditions consistent with this Plan as may
be determined by the Committee.
9. Use of Proceeds. Cash proceeds realized from the sale of
---------------
Stock under the Plan shall constitute general funds of the Company.
10. Amendment, Suspension, or Termination of the Plan.
-------------------------------------------------
(a) The Board may at any time amend, suspend or terminate
the Plan as it deems advisable; provided that such amendment, suspension or
termination complies with all applicable requirements of state and federal law,
including any applicable requirement that the Plan or an amendment to the Plan
be approved by the Company's shareholders, and provided further that, except as
provided in paragraph_3(b), above, the Board shall in no event amend the Plan in
the following respects without the consent of shareholders then sufficient to
approve the Plan in the first instance:
(i) To increase the maximum number of shares subject
to incentive stock options issued under the Plan; or
(ii) To change the designation or class of persons
eligible to receive incentive stock options under the Plan.
(b) No option may be granted nor any Stock issued under the
Plan during any suspension or after the termination of the Plan, and no
amendment, suspension or termination of the Plan shall, without the affected
individual's consent, alter or impair any rights or obligations under any option
previously granted under the Plan. The Plan shall terminate with respect to the
grant of incentive stock options on May 28, 2003, unless previously terminated
by the Board pursuant to this paragraph_10.
11. Assignability. Each option granted pursuant to this Plan
-------------
shall, during the optionee's lifetime, be exercisable only by such optionee or
by such optionee's guardian or legal representative, and neither the option nor
any right hereunder shall be transferable by optionee by operation of law or
otherwise other than by will or the laws of descent and distribution or pursuant
to a qualified domestic relations order as defined by the Code. Stock subject to
a Restricted Stock Purchase Agreement or a Restricted Stock Bonus Agreement
shall be transferable only as provided in such Agreement.
12. Payment Upon Exercise of Options. Payment of the purchase
--------------------------------
price upon exercise of any option granted under this Plan shall be made in cash;
provided, however, that the Committee, in its sole discretion, may permit an
optionee to pay the option price in whole or in part (i)_with shares of Stock
owned by the optionee; (ii)_by delivery on a form prescribed by the Committee of
an irrevocable direction to a securities broker approved by the Committee to
sell shares and deliver all or a portion of the proceeds to the Company in
payment for the Stock; (iii)_by delivery of the optionee's promissory note with
such recourse, interest, security, and redemption provisions as the Committee in
its discretion determines appropriate; or (iv)_in any combination of the
foregoing. Any Stock used to exercise options shall be valued at its fair market
value on the date of the
4
exercise of the option. In addition, the Committee, in its sole discretion, may
authorize the surrender by an optionee of all or part of an unexercised option
and authorize a payment in consideration thereof of an amount equal to the
difference between the aggregate fair market value of the Stock subject to such
option and the aggregate option price of such Stock. In the Committee's
discretion, such payment may be made in cash, shares of Stock with a fair market
value on the date of surrender equal to the payment amount, or some combination
thereof.
13. Withholding Taxes. No Stock shall be granted or sold under
-----------------
the Plan to any participant, and no SAR may be exercised, until the participant
has made arrangements acceptable to the Committee for the satisfaction of
federal, state, and local income and social security tax withholding
obligations, including without limitation obligations incident to the receipt of
Stock under the Plan, the lapsing of restrictions applicable to such Stock, the
failure to satisfy the conditions for treatment as incentive stock options under
applicable tax law, or the receipt of cash payments. Upon exercise of a stock
option or lapsing or restriction on stock issued under the Plan, the Company may
satisfy its withholding obligations by withholding from the optionee or
requiring the Shareholder to surrender shares of the Company's Stock sufficient
to satisfy federal, state, and local income and social security tax withholding
obligations.
14. Restrictions on Transfer of Shares. The Stock acquired
----------------------------------
pursuant to the Plan shall be subject to such restrictions and agreements
regarding sale, assignment, encumbrances or other transfer as are in effect
among the shareholders of the Company at the time such Stock is acquired, as
well as to such other restrictions as the Committee shall deem advisable.
15. Corporate Transaction.
---------------------
(a) For purposes of this Section_15, a "Corporate
Transaction" shall include any of the following shareholder-approved
transactions to which the Company is a party:
(i) a merger or consolidation in which the Company is
not the surviving entity, except for a transaction the principal purpose of
which is to change the state of the Company's incorporation;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in liquidation or
dissolution of the Company; or
(iii) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding
securities are transferred to a holder or holders different from those who
held such securities immediately prior to such merger.
(b) In the event of any Corporate Transaction, any option
or outstanding SAR shall terminate and any restricted stock shall be reconveyed
to or repurchased by the Company immediately prior to the specified effective
date of the Corporate Transaction unless assumed by the successor corporation or
its parent company, pursuant to options, restricted stock agreements or SARs
providing substantially equal value and having substantially equivalent
provisions as the options, restricted stock or SARs granted pursuant to this
Plan.
16. Shareholder Approval. This Plan shall only become effective
--------------------
with regard to incentive
5
stock options upon its approval by a majority of the shareholders voting (in
person or by proxy) at a shareholders' meeting held within 12Emonths of the
Board's adoption of the Plan. The Committee may grant incentive stock options
under the Plan prior to the shareholders' meeting, but until shareholder
approval of the Plan is obtained, no incentive stock option shall be
exercisable.
17. Information to Plan Participants. The Company shall provide
--------------------------------
to each Plan participant, not less frequently than annually, copies of annual
financial statements. The Company shall also provide such statements to each
individual who acquires Stock pursuant to the Plan while such individual owns
such Stock. The Company shall not be required to provide such statements to key
employees whose duties in connection with the Company assure their access to
equivalent information.
6
AMENDMENT TO THE INTERNATIONAL NETWORK SERVICES
AMENDED AND RESTATED 1992 FLEXIBLE STOCK INCENTIVE PLAN
Section 15(b) of the corporation's Amended and Restated 1992 Flexible Stock
Incentive Plan is amended effective ___________, 1996, to read in its entirety
as follows:
"(b) In the event of any Corporate Transaction, any option or
outstanding SAR shall be assumed or an equivalent option or right
substituted by the successor corporation or a the parent of the successor
corporation, and each share of restricted stock shall be exchanged for the
consideration received in the Corporate Transaction by holders of Common
Stock for each share held on the effective date of the Corporate
Transaction. In the event that the successor corporation refuses to assume
or substitute for an option or right, the holder shall fully vest in and
have the right to exercise the option or right as to all of the Common
Stock covered thereby, including shares as to which it would not otherwise
be vested or exercisable. If an option or right becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a
Corporate Transaction, the Committee shall notify the Optionee that the
option or right shall be fully vested and exercisable for a period of
fifteen (15) days from the date of such notice, and the option or right
shall terminate upon the expiration of such period. For the purposes of
this paragraph, an option or right shall be considered assumed if,
following the Corporate Transaction, the option or right confers the right
to purchase or receive, for each share of Common Stock subject to the
option or right immediately prior to the Corporate Transaction, the
consideration (whether stock, cash, or other securities or property)
received in the Corporate Transaction by holders of Common Stock for each
Share held on the effective date of the Corporate Transaction (and if
holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding Shares); provided,
however, that if such consideration received in the Corporate Transaction
is not solely common stock of the successor corporation or its parent, the
Committee may, with the consent of the successor corporation, provide for
the consideration to be received upon the exercise of the option or right,
for each share of Common Stock subject to the option or right, to be solely
common stock of the successor corporation or its parent equal in fair
market value to the per share consideration received by holders of Common
Stock in the Corporate Transaction."
INTERNATIONAL NETWORK SERVICES
INCENTIVE STOCK OPTION TERMS
1. Option Grant. The Company has granted to Optionee the right
------------
and option to purchase from the Company shares of the Common Stock of the
Company (the "Stock") on the terms and conditions hereinafter set forth. The
option is intended to satisfy the requirements of SectionE422 of the Internal
Revenue Code of 1986, as amended (the "Code") and qualify as an incentive stock
option.
2. Option Price. The per share purchase price of the Stock
------------
subject to the option shall be not less than the per share fair market value of
such Stock as of the Grant Date as determined by the Board of Directors of the
Company or a Committee (defined below) designated by it, or, if Optionee
possesses more than ten percent of the combined voting power of the Company or
any of its Affiliates, not less than one hundred ten percent (110%) of the per
share fair market value of the Stock as of the Grant Date as determined by the
Committee. The term "Option Price" as used herein refers to the purchase price
of the Stock subject to the option.
3. Option Period. The option shall be exercisable only during
-------------
the Option Period and, during such Option Period, the exercisability of the
option shall be subject to the limitations of paragraph_4 and the vesting
provisions of paragraph_5. The Option Period shall commence on the Grant Date
and, except as provided in paragraph_4, shall terminate 10 years from the Grant
Date (the "Termination Date"); provided, however, that the Option Period for a
person possessing more than ten percent of the combined voting power of the
Company or an Affiliate shall terminate five years from the Grant Date.
4. Limits on Option Period. The Option Period may end before
-----------------------
the Termination Date, as follows:
(a) If Optionee ceases to be a bona fide employee of the
Company or an Affiliate for any reason other than disability (within the
meaning of subparagraph_(c)) or death during the Option Period, the Option
Period shall terminate three months after the date of such cessation of
employment or on the Termination Date, whichever shall first occur, and the
option shall be exercisable only to the extent exercisable under
paragraph_5 on the date of Optionee's cessation of employment.
(b) If Optionee dies while in the employ of the Company or
any of its Affiliates, the Option Period shall end one year after the date
of death or on the Termination Date, whichever shall first occur, and
Optionee's executor or administrator or the person or persons to whom
Optionee's rights under the option shall pass by will or by the applicable
laws of descent and distribution may exercise the option only to the extent
exercisable under paragraph_5 on the date of Optionee's death.
(c) If Optionee's employment is terminated by reason of
disability, the Option Period shall end one year after the date of
Optionee's cessation of employment or on the Termination Date, whichever
shall first occur, and the option shall be exercisable only to the extent
exercisable under paragraph_5 on the date of Optionee's cessation of
employment, provided, however, that if such disability is not a
"disability" as such term is defined in Section 22(e)(3) of the Code, the
option shall automatically convert to a nonstatutory stock option on the
day three months and one day following such termination.
1
(d) If Optionee is on a leave of absence from the Company
or an Affiliate because of his disability, or for the purpose of serving
the government of the country in which the principal place of employment of
Optionee is located, either in a military or civilian capacity, or for such
other purpose or reason as the Committee may approve, Optionee shall not be
deemed during the period of such absence, by virtue of such absence alone,
to have terminated employment with the Company or an Affiliate except as
the Committee may otherwise expressly provide.
(e) If Optionee's employment with the Company or any of its
Affiliates terminates for cause during the Option Period, the Option Period
shall terminate 30 days after the date of such Optionee's termination of
employment or on the Termination Date, whichever shall first occur, and
this option shall be exercisable only to the extent exercisable under
paragraph 5 on the date of Optionee's cessation of employment.
5. Vesting of Right to Exercise Options. Subject to other
------------------------------------
limitations contained herein, Optionee shall have the right to exercise the
option in accordance with the following schedule:
(a) As to 24% of the number of shares of Stock covered by
the option, on the Initial Vest Date.
(b) As to an additional 2% of the number of shares of Stock
covered by the option, each month thereafter until the option shall be
fully exercisable.
(c) Any portion of the option that is not exercised shall
accumulate and may be exercised at any time during the Option Period prior
to the Termination Date. No partial exercise of the option may be for less
than five_percent (5%) of the total number of shares of Stock then
available under the option. In no event shall the Company be required to
issue fractional shares.
(d) Notwithstanding the foregoing, the aggregate fair
market value (determined as of the time such option is granted) of the
Stock with respect to which incentive stock options are exercisable for the
first time in any calendar year (under the Plan and any other incentive
stock option plans of the Company or its Affiliates) shall not exceed
$100,000.
6. Method of Exercise. Optionee may exercise the option with
------------------
respect to all or any part of the shares of Stock then subject to such exercise
as follows:
(a) By giving the Company written notice of such exercise,
specifying the number of such shares as to which this option is exercised.
Such notice shall be accompanied by an amount equal to the Option Price of
such shares in cash, or by personal or certified check.
(b) Optionee (and Optionee's spouse, if any) shall be
required, as a condition precedent to acquiring Stock through exercise of
the option, to execute one or more agreements relating to obligations in
connection with ownership of the Stock or restrictions on transfer of the
Stock no less restrictive than the obligations and restrictions to which
the other shareholders of the Company are subject at the time of such
exercise.
(c) If required by the Committee, Optionee shall give the
Company satisfactory assurance in writing, signed by Optionee or Optionee's
legal representative, as the case may be, that such shares are being
purchased for investment and not with a view to the distribution thereof,
provided that such assurance shall be deemed inapplicable to (1)_any sale
of such shares by such Optionee made in
2
acccordance with the terms of a registration statement covering such sale
which may hereafter be filed and become effective under the Securities Act
of 1933, as amended, and with respect to which no stop order suspending the
effectiveness thereof has been issued, and (2)_any other sale of such
shares with respect to which in the opinion of counsel for the Company,
such assurance is not required to be given in order to comply with the
provisions of the Securities Act of 1933, as amended.
As soon as practicable after receipt of the notice required
in paragraph_6(a) and satisfaction of the conditions set forth in
paragraphsE6(b) and 6(c), the Company shall, without transfer or issue tax and
without other incidental expense to Optionee, deliver to Optionee at the office
of the Company, at 650 Castro Street, Suite 260, Mountain View, CA 94041,
attention of the Secretary, or such other place as may be mutually acceptable to
the Company and Optionee, a certificate or certificates of such shares of Stock;
provided, however, that the time of such delivery may be postponed by the
Company for such period as may be required for it with reasonable diligence to
comply with applicable registration requirements under the Securities Act of
1933, as amended, the Securities Exchange Act of 1934, as amended, any
applicable listing requirements of any national securities exchange, and
requirements under any other law or regulation applicable to the issuance or
transfer of such shares.
7. Corporate Transactions.
----------------------
(a) If there should be any change in a class of Stock
subject to the option, through merger, consolidation, reorganization,
recapitalization, reincorporation, stock split, stock dividend (in excess of two
percent (2%)) or other change in the corporate structure of the Company, the
Company may make appropriate adjustments in order to preserve, but not to
increase, the benefits to Optionee, including adjustments in the number of
shares of such Stock subject to this option and in the price per share. Any
adjustment made pursuant to this paragraph_7 as a consequence of a change in the
corporate structure of the Company shall not entitle Optionee to acquire a
number of shares of such Stock of the Company or shares of stock of any
successor company greater than the number of shares Optionee would receive if,
prior to such change, Optionee had actually held a number of shares of such
Stock equal to the number of shares subject to this option.
(b) For purposes of this paragraph 7, a "Corporate
Transaction" shall include any of the following shareholder-approved
transactions to which the Company is a party:
(i) a merger or consolidation in which the Company
is not the surviving entity, except for a transaction the
principal purpose of which is to change the state of the
Company's incorporation; the sale, transfer or other disposition
of all or substantially all of the assets of the Company in
liquidation or dissolution of the Company; or
(ii) any reverse merger in which the Company is the
surviving entity but in which securities possessing more than
fifty percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred to a holder or
holders different from those who held such securities immediately
prior to such merger.
(c) In the event of any Corporate Transaction, the option
shall terminate immediately prior to the specified effective date
of the Corporate Transaction unless assumed by the successor
corporation or its parent company, pursuant to options providing
substantially equal value and having substantially equivalent
provisions as the options granted pursuant to this Agreement.
3
8. Limitations on Transfer. The option shall, during
-----------------------
Optionee's lifetime, be exercisable only by Optionee or Optionee's
representative or legal guardian, and neither the option nor any right hereunder
shall be transferable by Optionee by operation of law or otherwise other than by
will or the laws of descent and distribution. In the event of any attempt by
Optionee to alienate, assign, pledge, hypothecate or otherwise dispose of the
option or of any right hereunder, except as provided for in this Agreement, or
in the event of the levy of any attachment, execution or similar process upon
the rights or interest hereby conferred, the Company at its election may
terminate the option by notice to Optionee and the option shall thereupon become
null and void.
9. No Shareholder Rights. Neither Optionee nor any person
---------------------
entitled to exercise Optionee's rights in the event of his death shall have any
of the rights of a shareholder with respect to the shares of Stock subject to
the option except to the extent the certificates for such shares shall have been
issued upon the exercise of the option.
10. NO EFFECT ON TERMS OF EMPLOYMENT. SUBJECT TO THE TERMS OF
--------------------------------
ANY WRITTEN EMPLOYMENT CONTRACT TO THE CONTRARY, THE COMPANY (OR ITS AFFILIATE
WHICH EMPLOYS OPTIONEE) SHALL HAVE THE RIGHT TO TERMINATE OR CHANGE THE TERMS OF
EMPLOYMENT OF OPTIONEE AT ANY TIME AND FOR ANY REASON WHATSOEVER, WITH OR
WITHOUT CAUSE.
11. Right of First Refusal. In the event the Optionee proposes
----------------------
to sell, pledge or otherwise transfer any shares which have been issued upon
exercise of all or a portion of the option (the "Transfer Shares") to any person
or entity, including, without limitation, any shareholder of the Company, 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").
(a) Escrow. To ensure shares subject to the Right of First
------
Refusal will be available for repurchase, the Optionee shall, upon exercise
of the option, instruct the Company to deposit the certificates evidencing
the shares which the Optionee purchases upon exercise of this option with
an escrow agent designated by the Committee under the terms and conditions
of an escrow agreement approved by the Committee. The Company shall bear
the expenses of the escrow.
(b) Notice of Proposed Transfer. Prior to any proposed
---------------------------
transfer of the Transfer Shares, 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. In the event Optionee proposed to
transfer any Vested Shares to more than one proposed transferee, Optionee
shall provide a separate Transfer Notice for the proposed transfer to each
Proposed Transferee. The Transfer Notice shall be signed by both Optionee
and the Proposed Transferee and must constitute a binding commitment of
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. Within ten (10) days after receipt
------------------
of the Transfer Notice, the Committee shall determine the bona fide nature
of the proposed voluntary transfer and give Optionee written notice of the
Committee's determination. If the proposed transfer is deemed not to be
bona fide, Optionee shall be responsible for providing additional
information to the Committee to show the bona fide nature of the proposed
transfer. The Committee shall have the right to demand further assurances
from Optionee and the Proposed Transferee (in a form satisfactory to the
Committee) that the Transfer Notice fully and accurately sets forth all of
the terms and conditions of the proposed transfer, including, without
limitation, assurance that the Transfer Notice fully and accurately sets
forth the consideration
4
actually paid for the Transfer Shares and all transactions, directly or
indirectly, between the parties which may have affected the price the
Proposed Transferee was willing to pay for the Transfer Shares.
(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 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 or ten (10) days after the Committee has approved the proposed
transfer as bona fide, whichever is later. 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 Optionee or issued by a person other than
Optionee with respect to a proposed transfer to the same Proposed
Transferee. If the Company exercises the Right of First Refusal, the
Company and 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 Committee. For purposes of the foregoing,
cancellation of any indebtedness from Optionee to the Company shall be
treated as payment to Optionee in cash to the extent of the unpaid
principal and any accrued interest cancelled. In the event of a bona fide
gift or involuntary transfer, the purchase price shall be the fair market
value of the Transfer Shares as determined by the Committee in good faith.
(e) Failure to Exercise 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, 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 Committee shall have the right to
demand further assurance from Optionee and the Proposed Transferee (in a
form satisfactory to the Committee) 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 Committee has received such assurances, if so
demanded, and has approved the proposed transfer as bona fide, pursuant to
paragraph_11(c) above. Any proposed transfer on terms and conditions
different from those described in the Transfer Notice, as well as any
subsequent proposed transfer by Optionee, shall again be subject to the
Right of First Refusal and shall require compliance by Optionee with the
procedure described in this paragraph_11.
(f) Transfers 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 Committee) 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.
---------------------------------------------------
5
(i) The Right of First Refusal shall not apply to a
transfer to the Optionee's ancestors, descendants, spouse or to a
trustee solely for benefit of the Optionee or the Optionee's
ancestors, descendants or spouse; provided, however that such
transferee shall agree in writing (in a form satisfactory to the
Committee) to take the stock subject to all the terms of this
paragraph_11 providing for a Right of First Refusal with respect
to any subsequent transfer.
(ii) 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 a
Transfer of Control. If the consideration received pursuant to
such transfer or exchange consists of stock of the Company, such
consideration shall remain subject to the Right of First Refusal
unless the provisions of subparagraph_(g)(iv) result in a
termination of the Right of First Refusal.
(iii) Assignment of the Right of First Refusal. The
----------------------------------------
Company shall have the right to assign the Right of First Refusal
at any time, whether or not the Optionee has attempted a
transfer, to one or more persons as may be selected by the
Committee.
(iv) Early Termination of the Right of First Refusal.
-----------------------------------------------
The foregoing 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 Corporate
Transaction as described in paragraph_7 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 Company's common
stock (or any other stock issued by the Company, or any
successor, in exchange for such stock). A "public market" shall
be deemed to exist if (i)_such stock is listed on a national
securities exchange (as that term is used in the Securities
Exchange Act of 1934), or (ii)_such stock is traded on the over-
the-counter market and prices therefor are published daily on
business days in a recognized financial journal.
(h) Legends. In addition to any other legends required
-------
pursuant to applicable federal or state securities laws, each certificate
evidencing the Stock or a portion thereof issued upon exercise of the
option shall bear the following legend:
"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 HIS PREDECESSOR IN INTEREST, A COPY OF
WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THIS
CORPORATION."
12. Lock-Up Agreement. Optionee, if requested by an underwriter
-----------------
of Common Stock or other securities of the Company, shall agree not to sell or
otherwise transfer or dispose of any Common Stock of the Company held by
Optionee (except Common Stock included in such registration) during the 180 day
period following the effective date of a registration statement of the Company
filed under the Securities Act of 1933, as amended, or such shorter period of
time as the underwriter shall require. Such agreement shall be in writing in the
form satisfactory to such underwriter. The Company may impose stop-transfer
instructions with respect to such Common Stock subject to the foregoing
restriction until the end of said period.
6
INTERNATIONAL NETWORK SERVICES
STOCK OPTION EXERCISE FORM
International Network Services
650 Castro Street, Suite 260
Mountain View, California 94041
Gentlemen:
The undersigned optionee (the "Optionee"), elects to exercise the
option to purchase _________ shares of Common Stock (the "Shares") of
International Network Services, a California corporation (the "Company"), under
and pursuant to the stock option granted to the Optionee by the Company pursuant
to the Company's Amended and Restated 1992 Flexible Stock Incentive Plan (the
"Plan") and that certain Notice of Stock Option Grant and Stock Option Agreement
dated ___________________, 19__ by and between Optionee and the Company (the
"Option Agreement").
Prior to issuance of the Shares, Optionee will make full payment
of the option price for the Shares in cash or by personal or certified check
payable to the Company.
Optionee acknowledges that the exercise of the option and any
subsequent transfer of the Shares may have state and federal income tax
consequences, and that Optionee should consult his or her tax advisor concerning
such consequences. Optionee will make adequate provision for federal and state
income tax withholding obligations of the Company, if any, which arise upon
exercise, in whole or in part, of the option or upon a subsequent transfer of
any of the Shares.
Optionee represents and agrees that Optionee is over eighteen
(18) years of age, that Optionee is acquiring the Shares for investment and that
Optionee has no present intention to transfer, sell or otherwise dispose of such
Shares, except as permitted pursuant to the Plan and in compliance with all
applicable securities laws.
Optionee further 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 or an exemption
from such registration is available. 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.
Optionee understands that the instrument evidencing the Shares will be imprinted
with legends which prohibit the transfer of the Shares unless the Shares are
registered or such registration is not required in the opinion of counsel
satisfactory to the Company. Optionee does not have any contract, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person with respect to any of the Shares.
Optionee is aware of the adoption of Rule_144 by the Securities
and Exchange Commission, promulgated under the Securities Act, which permits
limited public resale of securities acquired in an non-public offering subject
to the satisfaction of certain conditions, including, among other things: the
availability of certain public information about the Company, the resale
occurring not less than two (2) years after the party has purchased and paid for
the securities to be sold, the sale being through a broker in an unsolicited
"broker's transaction", and the amount of securities being sold during any three
- -month period not exceeding specified
limitations.
Optionee agrees further that the Shares are being acquired by
Optionee in accordance with and subject to the terms, provisions and conditions
of the Option Agreement, which Option Agreement shall bind and inure to the
benefit of Optionee's heirs, legal representatives, successors and assigns.
Optionee agrees further that the Shares are being acquired by the
Optionee in accordance with and subject to the Bylaws of the Company, which
Bylaws shall bind and inure to the benefit of Optionee's heirs, legal
representatives, successors and assigns.
Optionee agrees that Optionee will notify the Company in writing
if Optionee transfers any of the shares purchased pursuant to this option within
one (1) year from the date Optionee exercises all or part of this Option or
within two (2) years from the date the Optionee was granted the option.
Optionee agrees to obtain the consent of Optionee's spouse of any
such agreement which may be required by the Company.
Optionee certifies that the forgoing is true. Optionee's address of record is:
____________________________________________ ________________________________
_________
Signature
____________________________________________ ________________________________
_________
Printed Name
____________________________________________ ________________________________
_______
Social Security Number
______________________
Date
Receipt of the above is hereby acknowledged.
INTERNATIONAL NETWORK SERVICES
____________________________________________
Signature
Secretary
- ---------------------------------------------
Title
PROMISSORY NOTE
$ -----------------------------------
- ------------- (City, State)
, 199
-------- --
FOR VALUE RECEIVED, promises to pay to International Network
--------------
Services, a California corporation (the "Company"), or order, the principal sum
of dollars ($ ), together with interest on the unpaid
--------------------- -------
principal hereof from the date hereof at the rate of percent ( %) per
----------- ---
annum, compounded semiannually.
Principal and interest shall be due and payable on , 19 . Should the
------ --
undersigned fail to make full payment of principal or interest for a period of
10 days or more after the due date thereof, the whole unpaid balance on this
Note of principal and interest shall become immediately due at the option of the
holder of this Note. Payments of principal and interest shall be made in lawful
money of the United States of America.
The undersigned may at any time prepay all or any portion of the principal
or interest owing hereunder.
This Note is subject to the terms of the Option, dated as of . This
-------
Note is secured by a pledge of the Company's Common Stock under the terms of a
Security Agreement of even date herewith and is subject to all the provisions
hereof.
The holder of this Note shall have full recourse against the undersigned,
and shall not be required to proceed against the collateral securing this Note
in the event of default.
In the event the undersigned shall cease to be an employee or consultant of
the Company for any reason, this Note shall, at the option the Company, be
accelerated, and the whole unpaid balance on this Note of principal and accrued
interest shall be immediately due and payable.
Should any action be instituted for the collection of this Note, the
reasonable costs and attorneys' fees therein of the holder shall be paid by the
undersigned.
-------------------------
-------------------------