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EXHIBIT 10.20
FLONETWORK INC.
NON-STATUTORY STOCK OPTION AGREEMENT
1. GRANT OF OPTION. This agreement evidences the grant by FloNetwork
Inc., a corporation organized under the laws of Ontario, Canada (the "Company"),
on July 1, 1999 (the "Grant Date") to Eric Goodwin (the "Optionee") of an option
to purchase, in whole or in part, on the terms provided herein, an aggregate of
2,601,408 Common Shares of the Company ("Common Shares") at a price of CDN $.25
per share. Except where the context otherwise requires, the term "Company" shall
include the parent and all present and future subsidiaries of the Company as
defined in Sections 424(e) and 424(f) of the U.S. Internal Revenue Code of 1986,
as amended or replaced from time to time (the "Code").
2. NON-STATUTORY STOCK OPTION. This option is not intended to qualify
as an incentive stock option under Section 422 of the Code.
3. EXERCISE OF OPTION AND PROVISIONS FOR TERMINATION.
(a) Vesting Schedule. Except as otherwise provided in this
Agreement, this option may be exercised prior to the tenth anniversary of the
Grant Date (hereinafter the "Expiration Date") as to 108,392 of the Shares on
the Grant Date and as to an additional 108,392 of the Shares at the end of each
successive one-month period until such time as this option shall become
exercisable in full.
Notwithstanding the foregoing, if, prior to the date on which the
Employee ceases to be an Eligible Optionee of the Company (as defined below),
(i) the Company consummates an underwritten initial public
offering of its Common Shares pursuant to an effective registration statement in
the United States or prospectus in Canada as a result of which the Company's
Common Shares are listed and traded on the Nasdaq National Market, the Toronto
Stock Exchange or a similar national exchange, then the vesting of the Shares
that have not vested as of the closing of such initial public offering shall
immediately accelerate upon such closing such that (A) upon such date this
option shall become immediately exercisable with respect to a number of the then
unvested Shares equal to the aggregate number of Shares then exercisable under
this option and previously exercised under this option and (B) following such
date this option shall become exercisable with respect to an additional 216,784
of the remaining unvested Shares at the end of each successive one-month period
until such time as this option shall become exercisable in full; or
(ii) a Change in Control (as defined below) of the Company is
consummated, then the vesting of this option shall immediately accelerate in
full upon the date of consummation of the Change in Control such that upon such
date this option shall become immediately exercisable with respect to all of the
Shares. For purposes of this Agreement, a "Change in Control" shall be deemed to
have occurred if: (i) the Company consummates an amalgamation, plan of
arrangement, merger or consolidation with any other entity, other than an
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amalgamation, plan of arrangement, merger or consolidation which would result in
the voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) more than 50% of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; (ii) the
stockholders of the Company approve a plan of complete liquidation of the
Company; or (iii) the Company consummates the sale or disposition of all or
substantially all of the Company's assets.
The right of exercise shall be cumulative so that if the option is not
exercised to the maximum extent permissible during any exercise period, it shall
continue to be exercisable, in whole or in part, with respect to all Shares not
so purchased at any time prior to the Expiration Date or the earlier termination
of this option.
This option may not be exercised at any time on or after the Expiration Date.
(b) EXERCISE PROCEDURE. Subject to the conditions set forth in
this Agreement, this option shall be exercised by the Optionee's delivery of
written notice of exercise to the Company specifying the number of shares to be
purchased and the purchase price to be paid therefor and accompanied by payment
in full in accordance with Section 4. Such exercise shall be effective upon
receipt by the Company of such written notice together with the required
payment. The Optionee may purchase fewer than the total number of shares covered
hereby, provided that no partial exercise of this option may be for any
fractional share.
(c) CONTINUOUS RELATIONSHIP WITH THE COMPANY REQUIRED. Except
as otherwise provided in this Section 3, this option may not be exercised unless
the Optionee, at the time he or she exercises this option, is, and has been at
all times since the date of grant of this option, an employee, officer or
director of, or consultant or advisor to, the Company (an "Eligible Optionee").
(d) TERMINATION OF RELATIONSHIP WITH THE COMPANY. If the
Optionee ceases to be an Eligible Optionee of the Company for any reason other
than death or disability or a termination of such relationship by the Company
for "cause", each as provided below, the right to exercise this option shall
terminate upon the Expiration Date, provided that this option shall be
exercisable only to the extent that the Optionee was entitled to exercise this
option on the date of such cessation. Notwithstanding the foregoing, if the
Optionee, prior to the Expiration Date, materially violates the non-competition
or confidentiality provisions of the Employment Agreement dated as of July 1,
1999 (the "Employment Agreement") between the Company and the Optionee, the
Non-Competition and Assignment of Intellectual Property Agreement dated as of
July 1, 1999 (the "Non-Competition Agreement") between the Company and the
Optionee or any other employment or consulting contract, confidentiality and
non-disclosure agreement or other agreement between the Optionee and the
Company, the right to exercise this option shall terminate immediately upon such
violation.
(e) EXERCISE PERIOD UPON DEATH OR DISABILITY. If the Optionee
dies or becomes disabled (within the meaning of Section 22(e)(3) of the Code)
prior to the Expiration Date while he or she is an Eligible Optionee, or if the
Optionee dies prior to the Expiration Date but after the Optionee ceases to be
an Eligible Optionee (other than as the result of a termination of such
relationship by the Company for "cause" as specified in paragraph (f) below),
this option
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shall be exercisable, within the period of one year following the date of death
or disability of the Optionee (but in no event after the Expiration Date), by
the Optionee or by the person to whom this option is transferred by will or the
laws of descent and distribution, PROVIDED THAT this option shall be exercisable
only to the extent that this option was exercisable by the Optionee on the date
of his or her death or disability. Except as otherwise indicated by the context,
the term "Optionee", as used in this option, shall be deemed to include the
estate of the Optionee or any person who acquires the right to exercise this
option by bequest or inheritance or otherwise by reason of the death of the
Optionee.
(f) DISCHARGE FOR CAUSE. If the Optionee, prior to the
Expiration Date, ceases his relationship with the Company because such
relationship is terminated by the Company for "cause" (as defined below), the
right to exercise this option shall terminate immediately upon such cessation.
"Cause" shall have the meaning set forth in any employment agreement between the
Company and the Optionee, or if there shall be at such time no employment
agreement or no such definition in such employment agreement, shall mean willful
misconduct by the Optionee or willful failure to perform his or her
responsibilities in the best interests of the Company (including, without
limitation, breach by the Optionee of any provision of the Employment Agreement,
the Non-Competition Agreement or any other employment, consulting, advisory,
nondisclosure, non-competition or other similar agreement between the Optionee
and the Company), as determined by the Company, which determination shall be
conclusive.
4. PAYMENT OF PURCHASE PRICE.
(a) METHOD OF PAYMENT. Payment of the purchase price for
Shares purchased upon exercise of this option shall be made (i) by delivery to
the Company of cash or a check to the order of the Company in an amount equal to
the purchase price of such Shares, (ii) subject to the consent of the Company,
by delivery to the Company of Common Shares then owned by the Optionee having a
fair market value equal in amount to the purchase price of such shares, (iii) by
any other means which the Board of Directors approves and determines are
consistent with the purpose of this option and applicable laws and regulations,
or (iv) by any combination of such methods of payment.
(b) VALUATION OF SHARES OR OTHER NON-CASH CONSIDERATION
TENDERED IN PAYMENT OF PURCHASE PRICE. For the purposes hereof, the fair market
value of any Common Shares or other non-cash consideration which may be
delivered to the Company in exercise of this option shall be determined in good
faith by the Board of Directors of the Company.
(c) DELIVERY OF SHARES TENDERED IN PAYMENT OF PURCHASE PRICE.
If the Optionee exercises this option by delivery of Common Shares of the
Company, the certificate or certificates representing the Common Shares of the
Company to be delivered shall be duly executed in blank by the Optionee or shall
be accompanied by a stock power duly executed in blank suitable for purposes of
transferring such shares to the Company. Fractional Common Shares of the Company
will not be accepted in payment of the purchase price of shares acquired upon
exercise of this option.
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5. DELIVERY OF SHARES; COMPLIANCE WITH SECURITIES LAWS, ETC.
(a) GENERAL. The Company shall, upon payment of the option
price for the number of Shares purchased and paid for, make prompt delivery of
such Shares to the Optionee, provided that if any law or regulation requires the
Company to take any action with respect to such Shares before the issuance
thereof, then the date of delivery of such Shares shall be extended for the
period necessary to complete such action.
(b) LISTING, QUALIFICATION, ETC. This option shall be subject
to the requirement that if, at any time, counsel to the Company shall determine
that the listing, registration or qualification of the Shares subject hereto
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or that the disclosure of
non-public information or the satisfaction of any other condition is necessary
as a condition of, or in connection with, the issuance or purchase of shares
hereunder, this option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, disclosure, or
satisfaction of such other condition shall have been effected or obtained on
terms acceptable to the Board of Directors. Nothing herein shall be deemed to
require the Company to apply for, effect or obtain such listing, registration,
qualification, or disclosure, or to satisfy such other condition.
6. AGREEMENT IN CONNECTION WITH PUBLIC OFFERING.
The Optionee agrees, in connection with the initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any Common Shares held by the
Optionee (other than those shares included in the offering) without the prior
written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such offering.
7. NONTRANSFERABILITY OF OPTION. This option is personal and no rights
granted hereunder may be transferred, assigned, pledged or hypothecated in any
way (whether by operation of law or otherwise) nor shall any such rights be
subject to execution, attachment or similar process, except that this option may
be transferred (i) by will or the laws of descent and distribution or (ii)
pursuant to a qualified domestic relations order as defined in Section 414(p) of
the Code. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise
dispose of this option or of such rights contrary to the provisions hereof, or
upon the levy of any attachment or similar process upon this option or such
rights, this option and such rights shall, at the election of the Company,
become null and void.
8. NO SPECIAL EMPLOYMENT OR SIMILAR RIGHTS. Nothing contained in this
option shall be construed or deemed by any person under any circumstances to
bind the Company to continue the employment or other relationship of the
Optionee with the Company for the period within which this option may be
exercised. The Optionee acknowledges that if the Optionee ceases to be an
Eligible Optionee for any reason, the exercisability of this option will be
subject to the
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limitations set forth herein, including those provisions limiting the number of
shares for which this option is exercisable and the period during which this
option may be exercised.
9. RIGHTS AS A SHAREHOLDER. The Optionee shall have no rights as a
shareholder with respect to any Shares which may be purchased by exercise of
this option (including, without limitation, any rights to receive dividends or
non-cash distributions with respect to such Shares) unless and until a
certificate representing such Shares is duly issued and delivered to the
Optionee. No adjustment shall be made for dividends or other rights for which
the record date is prior to the date such stock certificate is issued.
10. ADJUSTMENT PROVISIONS.
(a) GENERAL. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, (i) the outstanding Common
Shares are increased or decreased or are exchanged for a different number or
kind of shares or other securities of the Company, or (ii) additional shares or
new or different shares or other securities of the Company or other non-cash
assets are distributed with respect to such Common Shares or other securities,
then the Board of Directors shall determine, in its sole discretion, appropriate
adjustments with respect to (x) the number and kind of shares as to which this
option is then exercisable and (y) the exercise price per share at which this
option is exercisable.
(b) BOARD AUTHORITY TO MAKE ADJUSTMENTS. Any adjustments under
this Section 9 will be made by the Board of Directors, whose determination as to
what adjustments, if any, will be made and the extent thereof will be final,
binding and conclusive. No fractional shares will be issued pursuant to this
option on account of any such adjustments.
11. ACQUISITION EVENTS.
(a) DEFINITION. An "Acquisition Event" shall mean: (a) any
amalgamation, plan of arrangement, merger or consolidation of the Company with
or into another entity as a result of which Common Shares are converted into or
exchanged for the right to receive cash, securities or other property or (b) any
exchange of shares of the Company for cash, securities or other property
pursuant to a statutory share exchange transaction.
(b) CONSEQUENCES OF AN ACQUISITION EVENT ON OPTIONS. Upon the
occurrence of an Acquisition Event, or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall provide that
this option shall be assumed, or equivalent options shall be substituted, by the
acquiring or succeeding corporation (or an affiliate thereof). For purposes
hereof, this option shall be considered to be assumed if, following consummation
of the Acquisition Event, this option confers the right to purchase, for each
Common Share subject to this option immediately prior to the consummation of the
Acquisition Event, the consideration (whether cash, securities or other
property) received as a result of the Acquisition Event by holders of Common
Shares for each Common Share held immediately prior to the consummation of the
Acquisition Event (and if holders were offered a choice of consideration, the
type of consideration chosen by the holders of a majority of the outstanding
Common
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Shares); provided, however, that if the consideration received as a result of
the Acquisition Event is not solely common stock of the acquiring or succeeding
corporation (or an affiliate thereof), the Company may, with the consent of the
acquiring or succeeding corporation, provide for the consideration to be
received upon the exercise of Options to consist solely of common stock of the
acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair
market value to the per share consideration received by holders of outstanding
Common Shares as a result of the Acquisition Event.
Notwithstanding the foregoing, if the acquiring or succeeding
corporation (or an affiliate thereof) does not agree to assume, or substitute
for, this option, then the Board shall, upon written notice to the Optionee,
provide that this option will become exercisable in full as of a specified time
prior to the Acquisition Event and will terminate immediately prior to the
consummation of such Acquisition Event, except to the extent exercised by the
Optionee before the consummation of such Acquisition Event; provided, however,
that in the event of an Acquisition Event under the terms of which holders of
Common Shares will receive upon consummation thereof a cash payment for each
Common Share surrendered pursuant to such Acquisition Event (the "Acquisition
Price"), then the Board may instead provide that this option shall terminate
upon consummation of such Acquisition Event and that the Optionee shall receive,
in exchange therefor, a cash payment equal to the amount (if any) by which (A)
the Acquisition Price multiplied by the number of Common Shares subject to this
option (whether or not then exercisable), exceeds (B) the exercise price of this
option.
12. WITHHOLDING TAXES. The Company's obligation to deliver shares upon
the exercise of this option shall be subject to the Optionee's satisfaction of
all applicable federal, state and local income and employment tax withholding
requirements.
13. INVESTMENT REPRESENTATIONS; LEGENDS.
(a) REPRESENTATIONS. The Optionee represents, warrants and
covenants that:
(i) Any Shares purchased upon exercise of this option shall be
acquired for the Optionee's account for investment only, and
not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act
of 1933, as amended (the "Securities Act"), or any rule or
regulation under the Securities Act.
(ii) The Optionee has had such opportunity as he has deemed
adequate to obtain from representatives of the Company such
information as is necessary to permit the Optionee to evaluate
the merits and risks of his investment in the Company.
(iii) The Optionee is able to bear the economic risk of
holding such Shares acquired pursuant to the exercise of this
option for an indefinite period.
(iv) The Optionee understands that (A) the Shares acquired
pursuant to the exercise of this option will not be registered
under the Securities Act and are "restricted securities"
within the meaning of Rule 144 under the Securities Act;
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(B) such Shares cannot be sold, transferred or otherwise
disposed of unless they are subsequently registered under the
Securities Act or an exemption from registration is then
available; (C) in any event, an exemption from registration
under Rule 144 or otherwise under the Securities Act may not
be available for at least two years and even then will not be
available unless a public market then exists for the Common
Shares, adequate information concerning the Company is then
available to the public, and other terms and conditions of
Rule 144 are complied with; and (D) there is now no
registration statement on file with the Securities and
Exchange Commission with respect to any Shares of the Company
and the Company has no obligation or current intention to
register any Shares acquired pursuant to the exercise of this
option under the Securities Act.
By making payment upon exercise of this option, the Optionee shall be deemed to
have reaffirmed, as of the date of such payment, the representations made in
this Section 13.
(b) LEGENDS ON STOCK CERTIFICATE. All stock certificates
representing Common Shares issued to the Optionee upon exercise of this option
shall have affixed thereto legends substantially in the following forms, in
addition to any other legends required by applicable state law:
"The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 and may not be transferred,
sold or otherwise disposed of in the absence of an effective
registration statement with respect to the shares evidenced by this
certificate, filed and made effective under the Securities Act of 1933,
or an opinion of counsel satisfactory to the Company to the effect that
registration under such Act is not required."
"The shares of stock represented by this certificate are subject to
certain restrictions on transfer contained in an Option Agreement, a
copy of which will be furnished upon request by the issuer."
14. MISCELLANEOUS.
(a) This option will be administered by the Board of Directors
of the Company, whose construction and interpretation of the terms and
provisions of this option agreement shall be final and conclusive. The Board of
Directors of the Company shall have the authority to construe this option and
option agreement and to make all determinations in the judgment of the Board of
Directors necessary or desirable for the administration of this option and
option agreement. The Board of Directors may correct any defect or supply any
omission or reconcile any inconsistency in this option agreement in the manner
and to the extent it shall deem expedient to carry the intent of this option
into effect, and it shall be the sole and final judge of such expediency. No
director or person acting pursuant to authority delegated by the Board of
Directors shall be liable for any action or determination made in good faith.
The Board of Directors may, to the full extent permitted by or consistent with
applicable laws or regulations, delegate any or all of its powers hereunder to a
committee (the "Committee") appointed by the Board of Directors, and if the
Committee is so appointed, all references to the Board of Directors in this
option agreement shall mean and relate to such Committee.
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(b) This option constitutes the entire agreement between the
Company and the Optionee and supersedes all prior agreements and understandings,
whether written or oral, relating to the subject matter of this option.
(c) Except as provided herein, this option may not be amended
or otherwise modified unless evidenced in writing and signed by the Company and
the Optionee.
(d) All notices under this option shall be mailed or delivered
by hand to the parties at their respective addresses set forth beneath their
names below or at such other address as may be designated in writing by either
of the parties to one another.
(e) This option shall be governed by and construed in
accordance with the laws of Ontario, Canada.
Date of Grant: FLONETWORK INC.
July 1, 1999
By: /s/ Wilson Lee
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Title: Chief Financial Officer
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Address: 260 King Street East
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OPTIONEE'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the
terms and conditions thereof.
OPTIONEE
/s/ Eric Goodwin
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Eric Goodwin
ADDRESS: RR 1
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Lombardy, Ontario
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