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EXHIBIT 10.14
THE VIRTUAL MALL, INC.
1996 STOCK OPTION PLAN
(AS AMENDED MAY 15, 1996)
1. ADOPTION AND PURPOSE OF THE PLAN. This stock option plan, to be
known as the "The Virtual Mall, Inc. 1996 Stock Option Plan" (but referred to
herein as the "PLAN") has been adopted by the board of directors (the "BOARD")
of The Virtual Mall, Inc., a California corporation (the "COMPANY"), and is
subject to the approval of its shareholders pursuant to section 8 below. The
purpose of this Plan is to advance the interests of the Company and its
shareholders by enabling the Company to attract and retain qualified employees,
independent contractors, consultants and advisers by providing them with an
opportunity for investment in the Company. The options that may be granted
hereunder ("OPTIONS") represent the right by the grantee thereof (each,
including any permitted transferee hereunder, an "OPTIONEE") to acquire shares
of the Company's common stock ("SHARES" which if acquired pursuant to the
exercise of an Option will be referred to as "OPTION STOCK") subject to the
terms and conditions of this Plan and a written agreement between the Company
and the Optionee to evidence each such Option (an "OPTION AGREEMENT").
2. CERTAIN DEFINITIONS. The defined terms set forth in Exhibit A
attached hereto and incorporated herein (together with other capitalized terms
defined elsewhere in this Plan) will govern the interpretation of this Plan.
3. ELIGIBILITY. The Company may grant Options under this Plan only
to persons who, at the time of such grant, are employees (including officers),
directors, independent contractors, advisers or consultants of the Company
and/or any of its Subsidiaries ("ELIGIBLE PARTICIPANTS"), and no Option may be
granted to any person after he or she ceases, for any reason, to be an Eligible
Participant (a "LOSS OF ELIGIBILITY STATUS", which for all purposes hereunder
will be determined with respect to the original grantee and holder of an Option,
who will be referred to as the "ORIGINAL HOLDER"). Subject to the provisions of
section 4 of this Plan, there is no limitation on the number of Options that may
be granted to an Eligible Participant.
4. OPTION POOL; SHARES RESERVED FOR OPTIONS. Options may be granted
hereunder from time to time only to the extent that the number of Shares (i)
that may be issued pursuant to the exercise of all outstanding and unexpired
Options granted hereunder, and (ii) that have been issued and are outstanding
pursuant to the exercise of Options granted hereunder (net of any such Shares of
Option Stock that have been reacquired by the Company by repurchase or
otherwise) does not exceed Six Hundred Thirty-Five Thousand (635,000) Shares
(the "OPTION POOL"). At all times while this Plan is in effect, the Company will
reserve for issuance hereunder the number of authorized and unissued Shares that
is equal to the Option Pool, less the number of Shares of Option Stock that have
been issued and are outstanding pursuant to the exercise of Options granted
hereunder.
5. ADMINISTRATION. This Plan will be administered and interpreted
by the Board, or by a committee consisting of two or more members of the Board,
appointed by the Board for such purpose (the Board, or such committee, referred
to herein as the
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"ADMINISTRATOR"). Subject to the express terms and conditions hereof, the
Administrator is authorized to prescribe, amend and rescind rules and
regulations relating to this Plan, and to make all other determinations
necessary or advisable for its administration and interpretation. Specifically,
the Administrator will have full and final authority in its discretion, subject
to the specific limitations on that discretion as are set forth herein and in
the Articles of Incorporation and Bylaws of the Company, at any time and from
time to time:
(a) to select and approve the Eligible Participants to whom
Options will be granted from time to time hereunder;
(b) to determine the Fair Market Value of the Shares as of
the Grant Date for any Option that is granted hereunder;
(c) with respect to each Option it decides to grant, to
determine the terms and conditions of that Option, to be set forth in the Option
Agreement evidencing that Option (the form of which also being subject to
approval by the Administrator), including at a minimum the following:
(i) the total number of Shares of Option Stock that
may be acquired by the Optionee pursuant to that Option;
(ii) whether that Option will be designated an
"incentive stock option" as defined in Section 422 of the Code (an "ISO"), in
which case the Option will be subject to all of the special provisions set forth
in section 6 below;
(iii) the per share purchase price to be paid to the
Company by the Optionee to acquire the Option Stock issuable upon exercise of
the Option (the "OPTION PRICE"); provided that the Option Price will not be less
than eighty-five percent (85%) of the Fair Market Value of the Shares as of the
Grant Date, unless the Optionee is a 10% shareholder, in which case the Option
Price will not be less than one hundred ten percent (110%) of such Fair Market
Value;
(iv) the maximum period or term during which that
Option will be exercisable (the "OPTION TERM") and/or the last date on which
that Option may be exercised (the "EXPIRATION DATE"), provided that in no event
may the Expiration Date be later than, or the Option Term be longer than, ten
(10) years from the Grant Date;
(v) the maximum period following any Loss of
Eligibility Status with respect to the Original Holder, whether resulting from
his or her death, disability or any other reason, during which period (the
"GRACE PERIOD") the Option will be exercisable, subject to the earlier end of
the Option Term or the Expiration Date, provided that if the Administrator fails
to specify such Grace Periods, but subject to the provisions of section 6(e)
below with respect to ISOs, the Option may be exercised until its Expiration
Date regardless of such Loss of Eligibility Status, unless the same results from
a Just Cause Termination of the Original Holder, in which case the Grace Period
shall be a period of thirty (30) days after such Loss of Eligibility Status,
provided further that in no event may the Administrator specify any
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Grace Periods that are shorter than (A) thirty (30) days after a Loss of
Eligibility Status, other than by reason of the Original Holder's death or
disability, and (B) six (6) months after a Loss of Eligibility Status by reason
of the Original Holder's death or disability;
(vi) the conditions (e.g., the passage of time or the
occurrence of events), if any, that must be satisfied prior to the vesting of
the right to exercise all, or specified portions, of an Option (the vested
portion of such Option being referred to as a "VESTED OPTION" and the unvested
portion being referred to as an "UNVESTED OPTION"); provided that no such
conditions (except the Loss of Eligibility Status of the Original Holder, after
which no Unvested Option will become a Vested Option) may be imposed which
prevents an Optionee from purchasing at least twenty percent (20%) of the Shares
of Option Stock initially subject to the Option as of the first anniversary of
the Grant Date, and as of each anniversary thereafter, such that by the fifth
anniversary of the Grant Date (assuming no such Loss of Eligibility Status) the
entire Option would be deemed a Vested Option; provided further, that if the
Option Agreement does not otherwise specify, the Option will initially be deemed
an entirely Unvested Option but portions of the Option will become a Vested
Option on the following schedule: (A) no portion of the Option will become a
Vested Option during the first six (6) months after the Grant Date; (B) two and
two-ninths percent (2.22%) will become a Vested Option, on a cumulative basis,
as of the end of each month following the Grant Date until the fourth
anniversary of the Grant Date, except that on the first anniversary of the Grant
Date an additional six and two-thirds percent (6.67%) will become a Vested
Option so that as of such first anniversary a total of twenty percent (20%) will
have become a Vested Option and as of the fourth anniversary of the Grant Date,
the entire Option will be a Vested Option, subject in each case to the condition
as of each such vesting date that the Original Holder does not suffer a Loss
Eligibility Status prior to such vesting date; and
(vii) the form or forms of legal consideration in
addition to cash (including without limitation Shares, unexercised Vested
Options, and promissory notes) that the Company will accept as payment of all or
a portion of the Option Price and/or Tax Withholding Liability to be paid by the
Optionee upon the exercise of an Option granted hereunder, and the fair market
value of such non-cash consideration; and
(d) to delegate all or a portion of the Administrator's
authority under sections 5(a), (b) and (c) above to one or more members of the
Board who also are executive officers of the Company, and subject to such
restrictions and limitations as the Administrator may decide to impose on such
delegation.
6. SPECIAL PROVISIONS RELATING TO ISOs. Notwithstanding anything
else in this Plan to the contrary, the following provisions will apply to each
Option granted hereunder that is designated as an ISO pursuant to section
5(c)(ii) above and that is intended to qualify for the treatment available
pursuant to Section 422 of the Code:
(a) such ISO may be granted only to Eligible Participants
who, as of the Grant Date, are employees of the Company and/or its Subsidiaries
(as determined by Section 340 1 (c) of the Code);
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(b) to the extent that the Fair Market Value of Option Stock
with respect to which all ISOs are exercisable for the first time by any
individual during any calendar year (pursuant to this Plan and all other plans
of the Company and/or its Subsidiaries) exceeds $ 100,000, the Option will not
be treated as an ISO;
(c) the Option Price of an ISO will not be less than one
hundred percent (100%) of the Fair Market Value of the Shares as of the Grant
Date, except as set forth in section 6(d) below;
(d) in the case of an ISO granted to an Optionee who is a
10% shareholder: (i) the Option Price will not be less than one hundred ten
percent (110%) of the Fair Market Value of the Shares as of the Grant Date; and
(ii) the Option Term and/or the Expiration Date may not be more than five (5)
years from the Grant Date; and
(e) notwithstanding any Grace Period selected by the
Administrator pursuant to section 5(c)(v), the tax treatment available pursuant
to Section 422 of the Code upon the exercise of an ISO will not be available to
an Optionee who exercises any ISO more than (i) three (3) months following the
Original Holder's Loss of Eligibility Status other than by reason of his or her
death or permanent and total disability within the meaning of Section 22(e)(3)
of the Code, or (ii) twelve (12) months following such Original Holder's Loss of
Eligibility Status by reason or his or her permanent and total disability,
whichever case may be applicable.
7. ADDITIONAL TERMS AND CONDITIONS OF STOCK OPTION AGREEMENTS. No
Option will be deemed granted hereunder merely upon the authorization thereof by
the Administrator, but will be deemed granted hereunder only upon the execution
of an Option Agreement evidencing the same by both the Optionee and a duly
authorized officer of the Company. In addition to the terms and conditions
thereof to be determined by the Administrator pursuant to section 5(c) above,
unless otherwise stated therein, each-Option Agreement will be deemed to include
the following terms and conditions unless expressly waived by the Company in the
Option Agreement:
(a) EXERCISE OF THE OPTION; ISSUANCE OF SHARE CERTIFICATE.
That portion of the Option that is a Vested Option may be exercised by giving
written notice thereof to the Company, on such form as may be specified by the
Administrator, but in any event stating: the Optionee's intention to exercise
the Option; the date of exercise; the number of full Shares of Option Stock to
be purchased (which number shall be no less than one hundred (100) Shares,
without regard to adjustments to the number of Shares subject to the Option
pursuant to section 9 below, or, if less, all of the remaining Shares subject to
the Option); the amount and form of payment of the Option Price; and shall
contain such assurances of the Optionee's investment intent as the Company may
require to ensure that the transaction complies in all respects with the
requirements of the 1933 Act and other applicable securities laws. The notice of
exercise will be signed by the person or persons exercising the Option. In the
event that the Option is being exercised by the representative of Optionee, the
notice will be accompanied by proof satisfactory to the Company of the
representative's right to exercise the Option. The notice
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of exercise will be accompanied by full payment of the Option Price for the
number of Shares of Option Stock to be purchased, in United States dollars, in
cash, by check made payable to the Company, or in the form of such other legal
consideration for the purchase of Shares as may be approved by the
Administrator, in its discretion pursuant to section 5(c)(vii) above. In
addition, to the extent required by applicable federal, state, local or foreign
law, and as a condition to the Company's obligation to issue any Shares upon the
exercise of the Option in full or in part, Optionee will make arrangements
satisfactory to the Company for the payment of any applicable Tax Withholding
Liability that may arise by reason of or in connection with such exercise. Such
arrangements may include, in the Company's sole discretion, that the Optionee
tender to the Company the amount of such Tax Withholding Liability, in cash, by
check made payable to the Company, or in the form of such other payment as may
be approved by the Administrator, in its discretion pursuant to section
5(c)(vii) above. After receiving a proper notice of exercise and payment of the
applicable Option Price and withholding taxes, the Company will cause to be
issued a certificate or certificates for the Shares of Option Stock as to which
the Option has been exercised, registered in the name of the person rightfully
exercising the Option and, subject to sections 7(e)(iv) and 7(g) below, the
Company will cause such certificate or certificates to be delivered to such
person.
(b) COMPLIANCE WITH LAW. Notwithstanding any other provision
of this Plan, Options may be granted pursuant to this Plan, and Option Stock may
be issued pursuant to the exercise thereof by an Optionee, only after and on the
condition that there has been compliance with all applicable federal and state
securities laws. The Company will not be required to list, register or qualify
any Shares of Option Stock upon any securities exchange, under any state or
federal law, or with the Securities and Exchange Commission or any State agency,
or secure the consent or approval of any governmental regulatory authority,
except that if at any time the Board determines, in its discretion, that such
listing, registration or qualification of the Shares of Option Stock, or any
such consent or approval, is necessary or desirable as a condition of or in
connection with the exercise of an Option and the purchase of Shares of Option
Stock thereunder, that Option may not be exercised, in whole or in part, unless
and until such listing, registration, qualification, consent or approval is
effected or obtained free of any conditions that are not acceptable to the
Board, in its discretion. However, the Company will seek to register or qualify
with, or as may be provided by applicable local law, file for and secure an
exemption from such registration or qualification requirements from, the
applicable securities administrator and other officials of each jurisdiction in
which an Eligible Participant would be granted an Option hereunder prior to such
grant.
(c) RESTRICTIONS ON TRANSFER.
(i) OPTIONS NONTRANSFERABLE. No Option will be
transferable by the Original Holder otherwise than by will or the laws of
descent and distribution. During the lifetime of the Original Holder, the Option
will be exercisable only by him or her.
(ii) GENERAL RULE ON PROHIBITED TRANSFERS OF OPTION
STOCK. Until the occurrence of a First Public Offering, all Transfers of Option
Stock (or
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interest therein) are expressly prohibited, except for Permitted Transfers
described in section 7(d) below and the Transfers described in section 7(e)
below. Any prohibited Transfer is void and of no effect, and no purported
transferee thereof will be recognized as a shareholder of the Company for any
purpose whatsoever. Should such a Transfer purport to occur, the Company may
refuse to carry out the Transfer on its books, attempt to set aside the
Transfer, enforce any rights under this section 7(c), or exercise any other
legal or equitable remedy. For purposes of this section 7, the term "Option
Stock" includes all Shares issued by the Company to a Holder (or his, her or
its predecessor) by reason of such holdings, including any securities which may
be acquired as a result of a stock split, stock dividend, and other
distributions of Shares in the Company made upon, or in exchange for, other
securities of the Company.
(iii) MARKET STANDOFF. In connection with a firm
commitment underwritten public offering of securities of the Company (or any
Successor Entity), if requested by the issuer or its principal underwriter, each
Optionee and each Holder will: (A) not sell or otherwise Transfer any such
Shares not included in such underwriting during the period of two hundred ten
(210) days (or such shorter or longer period as the underwriter may require of
the principal security holders of the issuer) following the effective date of
the registration statement filed with the Securities and Exchange Commission in
connection with such offering; and (B) execute such instruments as the
underwriter may reasonably require to evidence compliance with this section
7(c)(iii).
(d) PERMITTED TRANSFERS. The following Transfers of Shares
of Option Stock are permitted ("PERMITTED TRANSFERS"), and are not subject to
the Company's rights of first refusal described in section 7(e) below:
(i) a Transfer by will or under the laws of descent
and distribution; and
(ii) a Transfer by a Holder of Shares of Option Stock
to his or her ancestors, descendants or spouse (other than pursuant to a decree
of divorce, dissolution or separate maintenance, a property settlement, or a
separation agreement or any similar agreement or arrangement with a spouse,
except for bona fide estate planning purposes), or to a trust, partnership,
custodianship or other fiduciary account for the benefit of the Holder and/or
such ancestors, descendants or spouse, including any Transfer in the form of a
distribution from any such trust, partnership, custodianship or other fiduciary
account to any of the foregoing permitted beneficiaries thereof.
(e) COMPANY RIGHTS OF REPURCHASE AND FIRST REFUSAL. The
Company will have the following rights of repurchase and first refusal with
respect to Shares of Option Stock:
(i) COMPANY'S RIGHT OF FIRST REFUSAL. If any Holder
proposes to Transfer any Shares of Option Stock to any transferee, other than in
the case of an Involuntary Transfer subject to section 7(e)(ii) below, the
Company will have an assignable right (but not an obligation) to purchase such
Shares on the terms and conditions set out in this section 7(e)(i). Such right
of first refusal will be exercisable only on an all-or-nothing basis as to
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any particular Transfer of Shares, in the following manner:
(1) The Holder proposing to Transfer such
Shares will provide to the Company a notice of proposed Transfer (a "PROPOSED
TRANSFER NOTICE") stating: the number of Shares that the Holder proposes to
Transfer and the Holder's bona fide intention to Transfer such Shares; the names
and addresses of the Holder, the proposed transferee and subsequently such other
information regarding such transferee as the Company reasonably requests; the
manner and date of such proposed Transfer; and the bona fide cash price and/or
other consideration (and the fair market value thereof) per share, if any, that
such Transferee has offered to pay Holder for such Shares (the "OFFERED PRICE")
as well as such other terms, including payment terms, and conditions, if any, as
were included in such offer (the "OFFERED TERMS").
(2) The Company (or its assignee) may
exercise its right of first refusal under this section 7(e)(i) at any time not
more than thirty (30) days after the Company has received the Proposed Transfer
Notice with respect to such Shares. If the Company (or its assignee) elects to
exercise such purchase rights it will do so by delivering to the Holder of such
Shares a notice of such election, specifying the number of Shares to be
purchased and a closing date that is no more than sixty (60) days after receipt
of the Proposed Transfer Notice (or such later date as the transferee may have
offered or on which the Transfer is otherwise scheduled to occur).
(3) At such closing, to be held at the
Company's principal executive offices, the Company (or its assignee) will pay
the Holder of the Shares, in cash, the purchase price equal to the Offered
Price, subject to an appropriate adjustment to take into account any deferred
payment terms that were included in the Offered Terms; provided that if the
Offered Price includes any non-cash consideration, the value thereof for
purposes of this section 7(e)(i) will be determined in good faith by the Board,
subject to section 7(e)(iii) below.
(4) If the Company (including its assignees)
fails or refuses to exercise its rights under this section 7(e)(i) with respect
to any Shares that are the subject of any Proposed Transfer Notice, the Holder
may Transfer such Shares to the transferee named in such Notice at the Offered
Price and upon such Offered Terms as were set forth in such Notice; provided
that such Transfer must be completed within ninety (90) days after the Company
has received the Proposed Transfer Notice with respect to such Shares; provided
further that as a condition of such Transfer, such transferee will execute such
documents as the Company may reasonably require to ensure that the Company's
rights under the applicable Option Agreement and this Plan are adequately
protected with respect to such Shares, including, without limitation, the
Transferee's agreement to be bound by all of the terms and conditions of this
Plan, and of the Option Agreement, as if he or she were the original Holder of
the Shares, and the Company satisfies itself that such Transfer complies in all
respects with the requirements imposed by applicable state and federal
securities laws and regulations.
(ii) FOLLOWING AN INVOLUNTARY TRANSFER.
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Following any Involuntary Transfer of Shares of Option Stock (the "TRANSFERRED
SHARES"), the Company shall have the assignable right (but not the obligation),
prior to a First Public Offering, to purchase from the transferee of the
Transferred Shares ("TRANSFEREE") all or a portion of such Shares for a purchase
price that is equal to the Fair Market Value of those Shares as of the date of
such Involuntary Transfer. Such right will be exercisable in the following
manner:
(1) The Transferee promptly after such
Involuntary Transfer will provide to the Company a notice of Transfer (an
"INVOLUNTARY TRANSFER NOTICE") stating: the number of Transferred Shares; the
names and addresses of the transferor and the Transferee, and subsequently such
other information regarding the Transferee as the Company reasonably requests;
and the manner, circumstances and date of such Involuntary Transfer.
(2) The Company (or its assignee) may
exercise its purchase rights under this section 7(e)(ii) at any time not more
than ninety (90) days after the Company has received the Involuntary Transfer
Notice with respect to the Transferred Shares. If the Company (or its assignee)
elects to exercise such purchase rights it will do so by delivering to the
Transferee a notice of such election, specifying the number of Transferred
Shares to be purchased and a closing date that is no more than sixty (60) days
after the giving of such notice.
(3) At such closing, to be held at the
Company's principal executive offices, the Company (or its assignee) will pay
the Transferee the purchase price specified in this section 7(e)(ii).
(iii) RESOLUTION OF DISPUTES. If there is a dispute
concerning the fair market value of the consideration offered or accepted for
the Shares of Option Stock or the Fair Market Value of the Option Stock, in
connection with the exercise by the Company of its rights under this section
7(e), the dispute will be resolved by the independent certified public
accounting firm that audited or prepared without audit the Company's last
regular annual financial statement and the determination of that firm will be
binding on the parties in the absence of fraud.
(iv) ESCROW. For purposes of facilitating the
enforcement of the restrictions on Transfer set forth in this Plan or in any
Option Agreement, the Administrator may, at its discretion, require the Holder
of Shares of Option Stock to deliver the certificate(s) for such Shares with a
stock power executed by him or her and by his or her spouse (if required for
Transfer), in blank, to the Secretary of the Company or his or her designee, to
hold said certificate(s) and stock power(s) in escrow and to take all such
actions and to effectuate all such Transfers and/or releases as are in
accordance with the terms of this Plan. The certificates may be held in escrow
so long as the Shares of Option Stock whose ownership they evidence are subject
to any right of repurchase or of first refusal under this Plan or under an
Option Agreement. Each Optionee, by exercising an Option, thereby acknowledges
that the Secretary of the Company (or his or her designee) is so appointed as
the escrow holder with the foregoing authorities as a material inducement to the
grant of an Option under this Plan, that the
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appointment is coupled with an interest, and that it accordingly will be
irrevocable. The escrow holder will not be liable to any party to an Option
Agreement (or to any other party) for any actions or omissions unless the escrow
holder is grossly negligent relative thereto. The escrow holder may rely upon
any letter, notice or other document executed by any signature purported to be
genuine.
(f) CHANGE OF CONTROL TRANSACTIONS. Notwithstanding any
other provision of this Plan, in the event of a Change of Control Transaction
(as defined herein):
(i) with respect to all Options that have been
granted hereunder and that are outstanding as of the consummation of such Change
of Control Transaction, the Board, in its sole discretion, may determine that it
is in the best interests of the Company, and if so may take all appropriate
action either to:
(1) cancel all such Options effective as of
the consummation of the Change of Control Transaction and, in connection with
each Option, any portion of which is a Vested Option, notify the Optionee of the
proposed Change of Control Transaction reasonably prior to its consummation so
that the Optionee will have an opportunity to exercise the Vested Option
immediately prior to such consummation; or
(2) require the Successor Entity in such
Change of Control Transaction to assume the outstanding Options or substitute
therefor comparable options of such Successor Entity (or of its parent or its
Subsidiary); and
(ii) with respect to all Shares of Option Stock that
have been issued and that are outstanding as of the consummation of such Change
of Control Transaction, the Company will have the right (but not the obligation)
to repurchase all (but not less than all) of the Shares by paying the Holder
thereof cash, or canceling any indebtedness of such Holder to the Company, or
both, at a closing to be held contemporaneously with the consummation of the
Change of Control Transaction, provided that the repurchase price for such
Shares will be an amount per share that is equal to the Fair Market Value of the
Shares based on the Board's good faith estimate of the valuation of the Company
implied by the estimated fair market value of the total consideration to be paid
in connection with the Change of Control Transaction.
(iii) For purposes of this section 7(f): the term
"CHANGE OF CONTROL TRANSACTION" means a Business Combination in which less than
sixty-six and two-thirds percent (66.67%) of the outstanding voting securities
of the Successor Entity immediately following the consummation of the Business
Combination transaction are beneficially held by those persons and entities in
the same proportion as such persons and entities beneficially held the Units of
the Company immediately prior to such transaction; the term "BUSINESS
COMBINATION" means a transaction or series of transactions consummated within
any period of ninety (90) days resulting in (A) the sale of all or substantially
all of the assets of the Company, (B) a merger or consolidation or other
reorganization in which the Company is not the surviving entity or becomes owned
entirely by another entity, or (C) the sale or other change of beneficial
ownership of at least thirty-three and one-third percent (33.33%) of the
outstanding
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voting securities of the Company.
(g) ADDITIONAL RESTRICTIONS ON TRANSFER, INVESTMENT INTENT.
By accepting an Option and/or Shares of Option Stock under this Plan, the
Optionee will be deemed to represent, warrant and agree that, unless a
registration statement is in effect with respect to the sale of Shares of Option
Stock: (i) those Shares are not freely tradeable and must be held indefinitely
unless such Shares are either registered under the 1933 Act or an exemption from
such registration is available; (ii) the Company is under no obligation to
register those Shares; (iii) upon exercise of that Option, the Optionee will
purchase the Shares of Option Stock for his or her own account and not with a
view to distribution within the meaning of the 1933 Act, other than as may be
effected in compliance with the 1933 Act and the rules and regulations
promulgated thereunder; (iv) no one else will have any beneficial interest in
the Option Stock; (v) the Optionee has no present intention of disposing of the
Option Stock at any particular time; and (vi) neither the Option nor the Shares
have been qualified under the securities laws of any state and may only be
offered and sold pursuant to an exception from qualification under applicable
state securities laws.
(h) STOCK CERTIFICATES, LEGENDS. Certificates representing
Shares of Option Stock will bear all legends required, by law and necessary or
appropriate in the Administrator's discretion to effectuate the provisions of
this Plan and of the applicable Option Agreement. The Company may place a "stop
transfer" order against Shares of Option Stock until full compliance with all
restrictions and conditions set forth in this Plan and in the legends referred
to in this section 7(h).
(i) NOTICES. Any notice to be given to the Company under the
terms of an Option Agreement will be addressed to the Company at its principal
executive office, Attention: Corporate Secretary, or at such other address as
the Company may designate in writing. Any notice to be given to an Optionee will
be addressed to him or her at the address provided to the Company by the
Optionee. Any such notice will be deemed to have been duly given if and when
enclosed in a properly sealed envelope, addressed as aforesaid, deposited,
postage prepaid, in a post office or branch post office regularly maintained by
the United States Postal Service.
(j) OTHER PROVISIONS. Each Option Agreement may contain such
other terms, provisions and conditions, including restrictions on the Transfer
of Shares of Option Stock, and rights of the Company to repurchase such Shares,
not inconsistent with this Plan, as may be determined by the Administrator in
its sole discretion.
(k) SPECIFIC PERFORMANCE. Under those circumstances in which
the Company chooses to timely exercise its rights to repurchase Shares of Option
Stock as provided herein, the Company will be entitled to receive such Shares in
specie in order to have the same available for future issuance without dilution
of the holdings of other shareholders of the Company. By accepting Shares of
Option Stock, the Holder thereof therefore acknowledges and agrees that money
damages will be inadequate to compensate the Company and its shareholders if
such a repurchase is not completed as contemplated hereunder and that the
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Company shall, in such case, be entitled to a decree of specific performance of
the terms hereof or to an injunction restraining such Holder (or such Holder's
personal representative) from violating this Plan or Option Agreement, in
addition to any other remedies that may be available to the Company at law or in
equity.
(l) NO SHAREHOLDER RIGHTS. No rights or privileges of a
shareholder in the Company are conferred by reason of the granting of the
Option. No Optionee will become a shareholder in the Company with respect to any
Shares of Option Stock unless and until the Option has been properly exercised
and the Option Price fully paid as to the portion of the Option exercised.
8. TERM OF THE PLAN. This Plan will become effective on the date of
its adoption by the Board, provided this Plan is approved by the shareholders of
the Company (excluding Shares of Option Stock issued by the Company pursuant to
the exercise of Options granted under this Plan) within twelve (12) months
before or after that date. If this Plan is not so approved by the shareholders
of the Company within that twelve (12) month period of time, any Options granted
under this Plan will be rescinded and will be void. This Plan will remain in
effect until the tenth (10th) anniversary of the date of its adoption by the
Board or its approval by the shareholders of the Company, whichever is earlier,
unless it is terminated earlier pursuant to section 1 of this Plan.
9. ADJUSTMENTS UPON CHANGES IN STOCK. In the event of any change in
the outstanding Shares of the Company as a result of a stock split, reverse
stock split, stock dividend or distribution, recapitalization, combination or
reclassification, appropriate proportionate adjustments will be made in: (i) the
aggregate number of Shares that are reserved for issuance in the Option Pool
pursuant to section 4 above, under outstanding Options or future Options granted
hereunder; (ii) the Option Price and the number of Shares of Option Stock that
may be acquired under each outstanding Option granted here6nder; and (iii) other
rights and matters determined on a per share basis under this Plan or any Option
Agreement evidencing an outstanding Option granted hereunder. Any such
adjustments will be made only by the Board, and when so made will be effective,
conclusive and binding for all purposes with respect to this Plan and all
Options then outstanding. No such adjustments will be required by reason of the
issuance or sale by the Company for cash or other consideration of additional
Shares or securities convertible into or exchangeable for Shares.
10. MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS, GOVERNING LAW.
Subject to the terms and conditions and within the limitations of this Plan, the
Administrator may modify, extend or renew outstanding Options granted under this
Plan, or accept the surrender of outstanding Options (to the extent not
theretofore exercised) and authorize the granting of new Options in substitution
therefor (to the extent not theretofore exercised). Notwithstanding the
foregoing, however, no modification of any Option will, without the consent of
the Optionee, alter or impair any rights or obligations under any outstanding
Option. This Plan will be governed by, and construed in accordance with, the
laws of the State of California.
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11. AMENDMENT AND DISCONTINUANCE. The Board may amend, suspend or
discontinue this Plan at any time or from time to time; provided that no action
of the Board will cause ISOs granted under this Plan not to comply with Section
422 of the Code unless the Board specifically declares such action to be made
for that purpose and provided further that no such action may, without the
approval of the shareholders of the Company, materially increase (other than by
reason of an adjustment pursuant to sections 4 or 9 hereof) the maximum
aggregate number of Shares of Option Stock in the Option Pool, materially
increase the benefits accruing to Eligible Participants, or materially modify
the category of, or eligibility requirements for persons who are Eligible
Participants. However, no such action may alter or impair any Option previously
granted under this Plan without the consent of the Optionee, nor may the number
of Shares of Option Stock in the Option Pool be reduced to a number that is less
than the aggregate number of Shares of Option Stock (i) that may be issued
pursuant to the exercise of all outstanding and unexpired Options granted
hereunder, and (ii) that have been issued and are outstanding pursuant to the
exercise of Options granted hereunder (net of any such Shares that have been
reacquired by the Company by repurchase or otherwise).
12. INFORMATION PROVIDED BY COMPANY. Prior to a First Public
Offering, the Company annually will make available to each Optionee the
Company's financial statements (which statements need not be audited), and each
Optionee shall, by virtue of entering into an Option Agreement, be deemed to
have agreed (and to cause any investment advisers to whom the Optionee proposes
to make such information available to agree) to keep such information
confidential and not to use such information for any purpose whatsoever other
than determining whether to exercise an Option.
13. COPIES OF PLAN. A copy of this Plan will be delivered to each
Optionee at or before the time he or she executes an Option Agreement.
Date Plan Adopted by Board of Directors: January 5, 1996
Date Plan Approved by the Shareholders: January 5, 1996
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THE VIRTUAL MALL, INC.
1996 STOCK OPTION PLAN
EXHIBIT A
DEFINITIONS
1. "10% SHAREHOLDER" means a person who owns, either directly or
indirectly by virtue of the ownership attribution provisions set forth in
Section 424(d) of the Code at the time he or she is granted an Option, stock
possessing more than ten percent (10%) of the total combined voting power or
value of all classes of stock of the Company and/or of its Subsidiaries.
2. "1933 ACT" means the Securities Act of 1933, as amended.
3. "CODE" means the Internal Revenue Code of 1986, as amended
(references herein to Sections of the Code are intended to refer to Sections of
the Code as enacted at the time of the Plan's adoption by the Board and as
subsequently amended, or to any substantially similar successor provisions of
the Code resulting from recodification, renumbering or otherwise).
4. "FAIR MARKET VALUE" means, with respect to the Shares and as of
the date that is relevant to-such a determination (e.g., on the Grant Date), the
market price per share of such Shares determined by the Administrator,
consistent with the requirements of Section 422 of the Code and to the extent
consistent therewith, as follows: (a) if the Shares are traded on a stock
exchange on the date in question, then the Fair Market Value will be equal to
the closing price reported by the applicable composite-transactions report for
such date; (b) if the Shares are traded over-the-counter on the date in question
and was classified as a national market issue, then the Fair Market Value will
be equal to the last-transaction price quoted by the NASDAQ system for such
date; (c) if the Shares are traded over-the-counter on the date in question but
was not classified as a national market issue, then the Fair Market Value will
be equal to the mean between the last reported representative bid and asked
prices quoted by the NASDAQ system for such date; and (d) if none of the
foregoing provisions is applicable, then the Fair Market Value will be
determined by the Administrator in good faith on such basis as it deems
appropriate.
5. "FIRST PUBLIC OFFERING" means the closing of the first sale of
securities of the Company, or of any Successor Entity, to the public, through a
firm commitment underwriting, for an aggregate price (exclusive of underwriters'
discounts and commissions and expenses of the offering) of at least seven
million five hundred thousand dollars ($7,500,000), pursuant to an effective
registration statement filed with the Securities and Exchange Commission under
the 1933 Act.
6. "GRANT DATE" means, with respect to an Option, the date on which
the Option Agreement evidencing that Option is entered into between the Company
and the Optionee, or such other date as may be set forth in that Option
Agreement as the "Grant Date" which will be the effective date of that Option
Agreement.
7. "HOLDER" means the holder of any Shares of Option Stock.
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8. "INVOLUNTARY TRANSFER" with respect to Shares of Option Stock
includes, without limitation, any of the following: (A) an assignment of the
Shares for the benefit of creditors of the transferor; (B) a Transfer by
operation of law; (C) an execution of judgment against the Shares or the
acquisition of record or beneficial ownership of Shares by a lender or creditor;
(D) a Transfer by will or under the laws of descent and distribution; (E) a
Transfer pursuant to any decree of divorce, dissolution or separate maintenance,
any property settlement, any separation agreement or any other agreement with a
spouse (except for bona fide estate planning purposes) under which any Shares
are Transferred or awarded to the spouse of the transferor or are required to be
sold; or (F) a Transfer resulting from the filing by the transferor of a
petition for relief, or the filing of an involuntary petition against the
transferor, under the bankruptcy laws of the United States or of any other
nation.
9. "JUST CAUSE TERMINATION" means a termination by the Company
and/or any of its Subsidiaries of the Original Holder's employment or services
(or if the Original Holder is a director, removal of him or her from the Board
by action of the shareholders or, if permitted by applicable law and the Bylaws
of the Company, the other directors), in connection with the good faith
determination of the Board (or of the Company's shareholders if the Original
Holder is a director and the removal of him or her from the Board is by action
of the shareholders, but in either case excluding the vote of the subject
individual if he or she is a director or a shareholder) that the Original Holder
has engaged in any acts involving dishonesty or moral turpitude or in any acts
that materially and adversely affect the business, affairs or reputation of the
Company or any of its Subsidiaries.
10. "SUBSIDIARY" has the same meaning as "subsidiary corporation" as
defined in Section 424(f) of the Code.
11. "SUCCESSOR ENTITY" means a corporation or other entity that
acquires all or substantially all of the assets of the Company, or which is the
surviving or parent entity resulting from a Business Combination, as defined in
section 7(f) of the Plan.
12. "TAX WITHHOLDING LIABILITY" in connection with the exercise of
any Option means all federal and state income taxes, social security tax, and
any other taxes applicable to the compensation income arising from the
transaction required by applicable law to be withheld by the Company.
13. "TRANSFER" with respect to Shares of Option Stock, includes,
without limitation, a voluntary or involuntary sale, assignment, transfer,
conveyance, pledge, hypothecation, encumbrance, disposal, loan, gift, attachment
or levy of those Shares, including without limitation any Involuntary Transfer.
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Stock Option Agreement
Stock Option Agreement
Under the 1996 Stock Option Plan
of Egreetings Network
THIS AGREEMENT is made effective as of (the "Grant Date"), between
Egreetings Network, a California corporation (the "Company"), and (Optionee).
THE PARTIES AGREE AS FOLLOWS:
OPTION GRANT. Subject to all of the terms and conditions of this
Agreement and of the Company's 1996 STOCK OPTION PLAN (the "OPTION PLAN"),
Optionee will have an option (the "OPTION") to purchase _________ shares of the
Company's common stock (the "SHARES"), for an exercise price per share equal to
$_________ (the "OPTION PRICE"). The Option will expire ten years from the date
of grant and will be of no further force or effect thereafter.
VESTING AND EXERCISE. The Option will become a Vested Option on the
schedule set forth in Section 5(a)(vi) of the Option Plan; provided that in each
case the Original Holder of the Option does not suffer a Loss of Eligibility
Status prior to each such vesting date.
REPRESENTATIONS AND WARRANTIES OF OPTIONEE. Optionee represents and
warrants that he or she is acquiring the Option, and will acquire any Shares
obtained upon exercise of the Option, for investment purposes only, for
Optionee's own account, and with no view to the distribution thereof.
NO EMPLOYMENT RIGHTS. This Agreement gives Optionee no right to be
retained as an employee of the Company and/or its Subsidiaries.
TERMS OF THE OPTION PLAN. Optionee understands that the Option Plan
includes important terms and conditions that apply to the Option. Those terms
include: important conditions to the right of Optionee to exercise the Option;
important restrictions on the ability of Optionee to transfer the Option or to
Transfer any of the Shares of Option Stock received upon exercise of the Option;
and early termination of the Option following the occurrence of certain events.
OPTIONEE HAS READ THE OPTION PLAN, AGREES TO BE BOUND BY ITS TERMS, AND MAKES
EACH OF THE REPRESENTATIONS REQUIRED TO BE MADE BY OPTIONEE UNDER IT. OPTIONEE
FURTHER ACKNOWLEDGES THAT THE COMPANY HAS GIVEN NO TAX ADVICE CONCERNING THE
OPTION AND HAS ADVISED OPTIONEE TO CONSULT WITH HIS OR HER OWN TAX OR FINANCIAL
ADVISOR ABOUT THE TAX TREATMENT OF THE OPTION AND ITS EXERCISE.
SPOUSAL CONSENT
The undersigned is the spouse of the Optionee (______) referred to in
the attached Stock Option Agreement (the "AGREEMENT"). The undersigned
acknowledges that he or she:
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1. has received, reviewed and understands the terms and conditions
of the Agreement, including the 1996 Stock Option Plan EGREETINGS NETWORK (the
"PLAN");
2. consents to the Agreement and the Plan, and agrees to be bound
by their terms and conditions to the extent that he or she now has or may obtain
any interest in the Option or Shares of Option Stock covered by the Agreement;
and
3. understands that the Company is relying upon this consent in
entering into the Agreement and in not taking further steps to protect its
interests.
Date: Signature:
Name:
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NOTICE OF EXERCISE OF STOCK OPTION
E-GREETINGS NETWORK INC.
To: Fred Campbell, Secretary; E-greetings Network Inc.
The undersigned, the holder of an Option to purchase shares of common
stock of E-greetings Network, Inc. (the "Company"), hereby irrevocably elects to
exercise the purchase rights represented by such Option, and to purchase
thereunder __________ shares of common stock of the Company, herewith makes
payment of $___________ therefor in the form of a check made payable to the
Company, and requests that the certificates for such shares be issued in the
name of and delivered to the undersigned at the address set forth below.
The undersigned acknowledges that the shares being purchased by him or
her (the "Option Shares") are subject to substantial restrictions on sale or
transfer set forth in the Company's 1996 Stock Option Plan (the "Plan") and
agrees to be bound by the terms and conditions of said Plan and the Stock Option
Agreement entered into by and between the Company and the undersigned on ______,
199_. The undersigned further represents, warrants and acknowledges that, unless
a registration statement is in effect with respect to the s ` ale of Option
Shares: (i) those Option Shares are not freely tradeable and must be held
indefinitely unless such Option Shares are either registered under the
Securities Act of 1933, as amended, (the "Act"), or an exemption from such
registration is available; (ii) the Company is under no obligation to register
those Option Shares; (iii) the undersigned is purchasing the Option Shares for
his or her own account and not with a view to or for sale in connection with any
distribution within the meaning of the Act, other than as may be effected in
compliance with the Act and the rules and regulations promulgated thereunder;
(iv) no one else will have any beneficial interest in the Option Shares; and (v)
he or she has no present intention of disposing of the Option Shares or any
interest therein at any particular time.
DATED
(signature)
Print name exactly as to be shown on certificate
Address:
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