INTERNATIONAL NETWORK SERVICES
1996 STOCK PLAN
(AMENDED AND RESTATED April 3, 1998)
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees,
Directors and Consultants, and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options
or Nonstatutory Stock Options, as determined by the Administrator
at the time of grant. Stock Purchase Rights may also be granted
under the Plan.
2. DEFINITIONS. As used herein, the following definitions
shall apply:
(a) "ADMINISTRATOR" means the Board or any of its
Committees as shall be administering the Plan, in accordance with
Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to
the administration of stock option plans under U. S. state
corporate laws, U.S. federal and state securities laws, the Code,
any stock exchange or quotation system on which the Common Stock is
listed or quoted and the applicable laws of any foreign country or
jurisdiction where Options or Stock Purchase Rights are, or will
be, granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as
amended.
(e) "COMMITTEE" means a committee of Directors appointed
by the Board in accordance with Section 4 of the Plan.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means International Network Services, a
California corporation.
(h) "CONSULTANT" means any person, including an advisor,
engaged by the Company or a Parent or Subsidiary to render services
and who is compensated for such services.
(i) "DIRECTOR" means a member of the Board.
(j) "DISABILITY" means total and permanent disability as
defined in Section 22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Section 16(b)
Officers and Directors, employed by the Company or any Parent or
Subsidiary of the Company. A Service Provider shall not cease to
be an Employee in the case of (i) any leave of absence approved by
the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor.
For purposes of Incentive Stock Options, no such leave may exceed
ninety days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract. If reemployment upon expiration
of a leave of absence approved by the Company is not so guaranteed,
on the 181st day of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option
and shall be treated for tax purposes as a Nonstatutory Stock
Option. Neither service as a Director nor payment of a director's
fee by the Company shall be sufficient to constitute "employment"
by the Company.
(l) "EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value
of Common Stock determined as follows:
(i) If the Common Stock is listed on any established
stock exchange or a national market system, including without
limitation the Nasdaq National Market or The Nasdaq SmallCap Market
of The Nasdaq Stock Market, its Fair Market Value shall be the
closing sales price for such stock (or the closing bid, if no sales
were reported) as quoted on such exchange or system on the date of
determination (or if such date is not a market trading day, the
most recent prior market trading day), as reported in THE WALL
STREET JOURNAL or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a
recognized securities dealer but selling prices are not reported,
the Fair Market Value of a Share of Common Stock shall be the mean
between the high bid and low asked prices for the Common Stock on
the date of determination (or if such date is not a market trading
day, the most recent prior market trading day), as reported in THE
WALL STREET JOURNAL or such other source as the Administrator deems
reliable;
(iii) In the absence of an established market for the
Common Stock, the Fair Market Value shall be determined in good
faith by the Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to
qualify as an incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated thereunder.
(o) "NONSTATUTORY STOCK OPTION" means an Option not
intended to qualify as an Incentive Stock Option.
-2-
(p) "NOTICE OF GRANT" means a written or electronic notice
evidencing certain terms and conditions of an individual Option or
Stock Purchase Right grant. The Notice of Grant is part of the
Option Agreement.
(q) "SECTION 16(b) OFFICER" means a person who is an
officer of the Company within the meaning of Section 16(b) of the
Exchange Act and the rules and regulations promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the
Plan.
(s) "OPTION AGREEMENT" means an agreement between the
Company and an Optionee evidencing the terms and conditions of an
individual Option grant. The Option Agreement is subject to the
terms and conditions of the Plan.
(t) "OPTION EXCHANGE PROGRAM" means a program whereby
outstanding options are surrendered in exchange for options with a
lower exercise price.
(u) "OPTIONED STOCK" means the Common Stock subject to an
Option or Stock Purchase Right.
(v) "OPTIONEE" means the holder of an outstanding Option
or Stock Purchase Right granted under the Plan.
(w) "PARENT" means a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(x) "PLAN" means this 1996 Stock Plan.
(y) "RESTRICTED STOCK" means shares of Common Stock
acquired pursuant to a grant of Stock Purchase Rights under
Section 11 below.
(z) "RESTRICTED STOCK PURCHASE AGREEMENT" means a written
agreement between the Company and the Optionee evidencing the terms
and restrictions applying to stock purchased under a Stock Purchase
Right. The Restricted Stock Purchase Agreement is subject to the
terms and conditions of the Plan and the Notice of Grant.
(aa) "RULE 16b-3" means Rule 16b-3 of the Exchange
Act or any successor to Rule 16b-3, as in effect when discretion is
being exercised with respect to the Plan.
(bb) "SECTION 16(b)" means Section 16(b) of the
Securities Exchange Act of 1934, as amended.
-3-
(cc) "SERVICE PROVIDER" means an Employee, Director or
Consultant.
(dd) "SHARE" means a share of the Common Stock, as
adjusted in accordance with Section 13 of the Plan.
(ee) "STOCK PURCHASE RIGHT" means the right to purchase
Common Stock pursuant to Section 11 of the Plan, as evidenced by a
Notice of Grant.
(ff) "SUBSIDIARY" means a "subsidiary corporation",
whether now or hereafter existing, as defined in Section 424(f) of
the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of
Section 13 of the Plan, the maximum aggregate number of Shares that
may be optioned and sold under the Plan is 5,500,000 Shares, plus
(i) any unused Shares, (ii) any forfeited Shares, and (iii) annual
increases on July 1 of each year, beginning on July 1, 1999 and
ending on July 1, 2003, equal to the lesser of (a) 2.5 percent of
the Shares of Common Stock outstanding on the last day of each
preceding fiscal year, (b) 3,750,000 Shares or (c) a lesser
amount determined by the Board. For purposes of this Section 3,
(i) "unused Shares" means Shares reserved for issuance but not
covered by grants under the Amended and Restated 1992 Flexible
Stock Incentive Plan of the Company (the "1992 Plan") (which 1992
Plan shall be terminated as of the effective date of the Plan), and
(ii) "forfeited Shares" means any Shares covered by grants under
the 1992 Plan that are not issued to participants or that are
returned to the Company upon forfeiture of such Shares.
If an Option or Stock Purchase Right expires or becomes
unexercisable without having been exercised in full, or is
surrendered pursuant to an Option Exchange Program, the unpurchased
Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated);
PROVIDED, however, that Shares that have actually been issued under
the Plan, whether upon exercise of an Option or Right, shall not be
returned to the Plan and shall not become available for future
distribution under the Plan, except that if Shares of Restricted
Stock are repurchased by the Company at their original purchase
price, such Shares shall become available for future grant under
the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be
administered by different Committees with respect to different
groups of Service Providers.
(ii) SECTION 162(m). To the extent that the
Administrator determines it to be desirable to qualify Options
granted hereunder as "performance-based compensation" within the
meaning of Section 162(m) of the Code, the Plan shall be
administered by a Committee of two or more "outside directors"
within the meaning of Section 162(m) of the Code.
-4-
(iii) RULE 16b-3. To the extent desirable to qualify
transactions hereunder as exempt under Rule 16b-3, the Plan shall
be administered by the Board or a Committee of two or more
"non-employee directors" within the meaning of Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided
above, the Plan shall be administered by (A) the Board or (B) a
Committee, which Committee shall be constituted to satisfy
Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provi-
sions of the Plan, and in the case of a Committee, subject to the
specific duties delegated by the Board to such Committee, the
Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom
Options and Stock Purchase Rights may be granted hereunder;
(iii) to determine the number of shares of
Common Stock to be covered by each Option and Stock Purchase Right
granted hereunder;
(iv) to approve forms of agreement for use under the
Plan;
(v) to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any Option or Stock
Purchase Right granted hereunder. Such terms and conditions
include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised (which
may be based on performance criteria), any vesting acceleration or
waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option or Stock Purchase Right or the
shares of Common Stock relating thereto, based in each case on such
factors as the Administrator, in its sole discretion, shall
determine;
(vi) to institute an Option Exchange Program;
(vii) to construe and interpret the terms of the Plan
and awards granted pursuant to the Plan;
(viii) to prescribe, amend and rescind rules and
regulations relating to the Plan, including rules and regulations
relating to sub-plans established for the purpose of qualifying for
preferred tax treatment under foreign tax laws;
(ix) to modify or amend each Option or Stock
Purchase Right (subject to Section 15(c) of the Plan), including
the discretionary authority to extend the post-termination
exercisability period of Options longer than is otherwise provided
for in the Plan;
-5-
(x) to allow Optionees to satisfy withholding tax
obligations by electing to have the Company withhold from the
Shares to be issued upon exercise of an Option or Stock Purchase
Right that number of Shares having a Fair Market Value equal to the
amount required to be withheld. The Fair Market Value of the
Shares to be withheld shall be determined on the date that the
amount of tax to be withheld is to be determined. All elections by
an Optionee to have Shares withheld for this purpose shall be made
in such form and under such conditions as the Administrator may
deem necessary or advisable;
(xi) to authorize any person to execute on
behalf of the Company any instrument required to effect the grant
of an Option or Stock Purchase Right previously granted by the
Administrator;
(xii) to make all other determinations deemed
necessary or advisable for administering the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. The
Administrator's decisions, determinations and interpretations shall
be final and binding on all Optionees and any other holders of
Options or Stock Purchase Rights.
5. ELIGIBILITY. Nonstatutory Stock Options and Stock Purchase
Rights may be granted to Service Providers. Incentive Stock
Options may be granted only to Employees.
6. LIMITATIONS.
(a) Each Option shall be designated in the Option
Agreement as either an Incentive Stock Option or a Nonstatutory
Stock Option. However, notwithstanding such designation, to the
extent that the aggregate Fair Market Value of the Shares with
respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all
plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options shall be treated as Nonstatutory Stock
Options. For purposes of this Section 6(a), Incentive Stock
Options shall be taken into account in the order in which they were
granted. The Fair Market Value of the Shares shall be determined
as of the time the Option with respect to such Shares is granted.
(b) Neither the Plan nor any Option or Stock Purchase
Right shall confer upon an Optionee any right with respect to
continuing the Optionee's relationship as a Service Provider with
the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such
relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of
Options:
(i) No Service Provider shall be granted, in any
fiscal year of the Company, Options to purchase more than 2,000,000
Shares.
-6-
(ii) In connection with his or her initial service,
a Service Provider may be granted Options to purchase up to an
additional 500,000 Shares which shall not count against the limit
set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's
capitalization as described in Section 13.
(iv) If an Option is cancelled in the same fiscal
year of the Company in which it was granted (other than in
connection with a transaction described in Section 13), the
cancelled Option will be counted against the limits set forth in
subsections (i) and (ii) above. For this purpose, if the exercise
price of an Option is reduced, the transaction will be treated as a
cancellation of the Option and the grant of a new Option.
7. TERM OF PLAN. Subject to Section 19 of the Plan, the Plan
shall become effective upon its adoption by the Board. It shall
continue in effect for a term of ten (10) years unless terminated
earlier under Section 15 of the Plan.
8. TERM OF OPTION. The term of each Option shall be stated in
the Option Agreement. In the case of an Incentive Stock Option,
the term shall be ten (10) years from the date of grant or such
shorter term as may be provided in the Option Agreement. Moreover,
in the case of an Incentive Stock Option granted to an Optionee
who, at the time the Incentive Stock Option is granted, owns stock
representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the
term of the Incentive Stock Option shall be five (5) years from the
date of grant or such shorter term as may be provided in the Option
Agreement.
9. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) EXERCISE PRICE. The per share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be
determined by the Administrator, subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock
of the Company or any Parent or Subsidiary, the per Share exercise
price shall be no less than 110% of the Fair Market Value per Share
on the date of grant.
(B) granted to any Employee other than an
Employee described in paragraph (A) immediately above, the per
Share exercise price shall be no less than 100% of the Fair Market
Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the
per Share exercise price shall be determined by the Administrator.
In the case of a Nonstatutory Stock Option intended to
-7-
qualify as "performance-based compensation" within the meaning of
Section 162(m) of the Code, the per Share exercise price shall be no
less than 100% of the Fair Market Value per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be
granted with a per Share exercise price of less than 100% of Fair
Market Value on the date of grant pursuant to a merger or other
corporate transaction.
(b) WAITING PERIOD AND EXERCISE DATES. At the time an
Option is granted, the Administrator shall fix the period within
which the Option may be exercised and shall determine any con-
ditions which must be satisfied before the Option may be exercised.
(c) FORM OF CONSIDERATION. The Administrator shall
determine the acceptable form of consideration for exercising an
Option, including the method of payment. In the case of an
Incentive Stock Option, the Administrator shall determine the
acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of
Shares acquired upon exercise of an option, have been owned by the
Optionee for more than six months on the date of surrender, and
(B) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which said Option
shall be exercised;
(v) consideration received by the Company under a
formal cashless exercise program adopted by the Company in
connection with the Plan;
(vi) a reduction in the amount of any Company
liability to the Optionee, including any liability attributable to
the Optionee's participation in any Company-sponsored deferred
compensation program or arrangement;
(vii) any combination of the foregoing methods
of payment; or
(viii) such other consideration and method of payment
for the issuance of Shares to the extent permitted by Applicable
Laws.
10. EXERCISE OF OPTIONS.
-8-
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any
Option granted hereunder shall be exercisable according to the
terms of the Plan and at such times and under such conditions as
determined by the Administrator and set forth in the Option
Agreement. Unless the Administrator provides otherwise, vesting of
Options granted hereunder shall be tolled during any unpaid leave
of absence. An Option may not be exercised for a fraction of a
Share.
An Option shall be deemed exercised when the Company
receives: (i) written or electronic notice of exercise (in
accordance with the Option Agreement) from the person entitled to
exercise the Option, and (ii) full payment for the Shares with
respect to which the Option is exercised. Full payment may consist
of any consideration and method of payment authorized by the
Administrator and permitted by the Option Agreement and the Plan.
Shares issued upon exercise of an Option shall be issued in the
name of the Optionee or, if requested by the Optionee, in the name
of the Optionee and his or her spouse. Until the Shares are issued
(as evidenced by the appropriate entry on the books of the Company
or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a shareholder
shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be
issued) such Shares promptly after the Option is exercised. No
adjustment will be made for a dividend or other right for which the
record date is prior to the date the Shares are issued, except as
provided in Section 13 of the Plan.
Exercising an Option in any manner shall decrease the
number of Shares thereafter available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to
which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If
an Optionee ceases to be a Service Provider, other than upon the
Optionee's death or Disability, the Optionee may exercise his or
her Option within such period of time as is specified in the Option
Agreement to the extent that he or she is entitled to exercise it
on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Option
Agreement). In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for three (3) months
following the Optionee's termination. If, on the date of
termination, the Optionee is not entitled to exercise his or her
entire Option, the Shares covered by the unexercisable portion of
the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a
Service Provider as a result of the Optionee's Disability, the
Optionee may exercise his or her Option at any time within twelve
(12) months from the date of termination, but only to the extent
that the Optionee is entitled to exercise it on the date of
termination (and in no event later than the expiration of the term
of the Option as set forth in the Option Agreement). If, on the
date of termination, the Optionee is not entitled to exercise his
or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after
termination, the Optionee does not exercise his or her Option
-9-
within the time specified herein, the Option shall terminate, and
the Shares covered by such Option shall revert to the Plan.
(d) DEATH OF OPTIONEE. If an Optionee dies while a
Service Provider, the Option may be exercised at any time within
twelve (12) months following the date of death (but in no event
later than the expiration of the term of such Option as set forth
in the Notice of Grant), by the Optionee's estate or by a person
who acquires the right to exercise the Option by bequest or
inheritance, but only to the extent that the Optionee would have
been entitled to exercise the Option on the date of death. If, at
the time of death, the Optionee is not entitled to exercise his or
her entire Option, the Shares covered by the unexercisable portion
of the Option shall immediately revert to the Plan. The Option may
be exercised by the executor or administrator of the Optionee's
estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee's will or the laws of descent or
distribution. If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time
offer to buy out for a payment in cash or Shares, an Option
previously granted based on such terms and conditions as the
Administrator shall establish and communicate to the Optionee at
the time that such offer is made.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be
issued either alone, in addition to, or in tandem with other awards
granted under the Plan and/or cash awards made outside of the Plan.
After the Administrator determines that it will offer Stock
Purchase Rights under the Plan, it shall advise the offeree in
writing or electronically, by means of a Notice of Grant, of the
terms, conditions and restrictions related to the offer, including
the number of Shares that the offeree shall be entitled to
purchase, the price to be paid, and the time within which the
offeree must accept such offer. The offer shall be accepted by
execution of a Restricted Stock Purchase Agreement in the form
determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator deter-
mines otherwise, the Restricted Stock Purchase Agreement shall
grant the Company a repurchase option exercisable upon the volun-
tary or involuntary termination of the purchaser's service with the
Company for any reason (including death or Disability). The pur-
chase price for Shares repurchased pursuant to the Restricted Stock
purchase agreement shall be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of
the purchaser to the Company. The repurchase option shall lapse at
a rate determined by the Administrator.
(c) OTHER PROVISIONS. The Restricted Stock Purchase
Agreement shall contain such other terms, provisions and conditions
not inconsistent with the Plan as may be determined by the Admin-
istrator in its sole discretion.
-10-
(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase
Right is exercised, the purchaser shall have the rights equivalent
to those of a shareholder, and shall be a shareholder when his or
her purchase is entered upon the records of the duly authorized
transfer agent of the Company. No adjustment will be made for a
dividend or other right for which the record date is prior to the
date the Stock Purchase Right is exercised, except as provided in
Section 13 of the Plan.
12. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS.
Unless determined otherwise by the Administrator, an Option or
Stock Purchase Right may not be sold, pledged, assigned,
hypothecated, transferred, or disposed of in any manner other than
by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the
Optionee. If the Administrator makes an Option or Stock Purchase
Right transferable, such Option or Stock Purchase Right shall
contain such additional terms and conditions as the Administrator
deems appropriate.
13. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION,
MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required
action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option and Stock Purchase
Right, and the number of shares of Common Stock which have been
authorized for issuance under the Plan but as to which no Options
or Stock Purchase Rights have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option
or Stock Purchase Right, as well as the price per share of Common
Stock covered by each such outstanding Option or Stock Purchase
Right, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other
increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the
Company shall not be deemed to have been "effected without receipt
of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by
the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an Option or
Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the
proposed dissolution or liquidation of the Company, the
Administrator shall notify each Optionee as soon as practicable
prior to the effective date of such proposed transaction. The
Administrator in its discretion may provide for an Optionee to have
the right to exercise his or her Option until ten (10) days prior
to such transaction as to all of the Optioned Stock covered
thereby, including Shares as to which the Option would not
otherwise be exercisable. In addition, the Administrator may
provide that any Company repurchase option applicable to any Shares
purchased upon exercise of an Option or Stock Purchase Right shall
lapse as to all such Shares, provided the proposed dissolution or
liquidation takes place at the time and in the manner contemplated.
To the extent it has not been
-11-
previously exercised, an Option or Stock Purchase Right will
terminate immediately prior to the consummation of such
proposed action.
(c) MERGER OR ASSET SALE. In the event of a merger of the
Company with or into another corporation, or the sale of
substantially all of the assets of the Company, each outstanding
Option and Stock Purchase Right shall be assumed or an equivalent
option or right substituted by the successor corporation or a
Parent or Subsidiary of the successor corporation. In the event
that the successor corporation refuses to assume or substitute for
the Option or Stock Purchase Right, the Optionee shall fully vest
in and have the right to exercise the Option or Stock Purchase
Right as to all of the Optioned Stock, including Shares as to which
it would not otherwise be vested or exercisable. If an Option or
Stock Purchase Right becomes fully vested and exercisable in lieu
of assumption or substitution in the event of a merger or sale of
assets, the Administrator shall notify the Optionee in writing or
electronically that the Option or Stock Purchase Right shall be
fully vested and exercisable for a period of fifteen (15) days from
the date of such notice, and the Option or Stock Purchase Right
shall terminate upon the expiration of such period. For the
purposes of this paragraph, the Option or Stock Purchase Right
shall be considered assumed if, following the merger or sale of
assets, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock subject to the Option or
Stock Purchase Right immediately prior to the merger or sale of
assets, the consideration (whether stock, cash, or other securities
or property) received in the merger or sale of assets by holders of
Common Stock for each Share held on the effective date of the
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 merger or sale of assets is not
solely common stock of the successor corporation or its Parent, the
Administrator may, with the consent of the successor corporation,
provide for the consideration to be received upon the exercise of
the Option or Stock Purchase Right, for each Share of Optioned
Stock subject to the Option or Stock Purchase 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 merger or sale of assets.
14. DATE OF GRANT. The date of grant of an Option or Stock
Purchase Right shall be, for all purposes, the date on which the
Administrator makes the determination granting such Option or Stock
Purchase Right, or such other later date as is determined by the
Administrator. Notice of the determination shall be provided to
each Optionee within a reasonable time after the date of such
grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time
amend, alter, suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Company shall obtain
shareholder approval of any Plan amendment to the extent necessary
and desirable to comply with Applicable Laws.
-12-
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment,
alteration, suspension or termination of the Plan shall impair the
rights of any Optionee, unless mutually agreed otherwise between
the Optionee and the Administrator, which agreement must be in
writing and signed by the Optionee and the Company.
16. CONDITIONS UPON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares shall not be issued pursuant
to the exercise of an Option or Stock Purchase Right unless the
exercise of such Option or Stock Purchase Right and the issuance
and delivery of such Shares shall comply with Applicable Laws and
shall be further subject to the approval of counsel for the Company
with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the
exercise of an Option or Stock Purchase Right, the Company may
require the person exercising such Option or Stock Purchase Right
to represent and warrant at the time of any such exercise that the
Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is
required.
17. INABILITY TO OBTAIN AUTHORITY. The inability of the
Company to obtain authority from any regulatory body having
jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of
the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
18. RESERVATION OF SHARES. The Company, during the term of
this Plan, will at all times reserve and keep available such number
of Shares as shall be sufficient to satisfy the requirements of the
Plan.
19. SHAREHOLDER APPROVAL. The Plan shall be subject to
approval by the shareholders of the Company within twelve (12)
months after the date the Plan is adopted. Such shareholder
approval shall be obtained in the manner and to the degree required
under Applicable Laws.
-13-
INTERNATIONAL NETWORK SERVICES
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan
shall have the same defined meanings in this Option Agreement.
I. NOTICE OF STOCK OPTION GRANT
[Optionee's Name and Address]
You have been granted an option to purchase Common Stock of the
Company, subject to the terms and conditions of the Plan and this
Option Agreement, as follows:
Grant Number _________________________
Date of Grant _________________________
Vesting Commencement Date _________________________
Exercise Price per Share $________________________
Total Number of Shares Granted _________________________
Total Exercise Price $_________________________
Type of Option: ___ Incentive Stock Option
___ Nonstatutory Stock Option
Term/Expiration Date: _________________________
VESTING SCHEDULE:
This Option may be exercised, in whole or in part, in
accordance with the following schedule:
[24% of the Shares subject to the Option shall vest twelve
months after the Vesting Commencement Date, and 2% of the Shares
subject to the Option shall vest each month thereafter, subject to
the Optionee continuing to be a Service Provider on such dates].
TERMINATION PERIOD:
This Option may be exercised for _____ [days/months] after
Optionee ceases to be a Service Provider. Upon the death or
Disability of the Optionee, this Option may be exercised for such
longer period as provided in the Plan. In no event shall this
Option be exercised later than the Term/Expiration Date as provided
above.
II. AGREEMENT
1. GRANT OF OPTION. The Plan Administrator of the Company
hereby grants to the Optionee named in the Notice of Grant attached
as Part I of this Agreement (the "Optionee") an option (the
"Option") to purchase the number of Shares, as set forth in the
Notice of Grant, at the exercise price per share set forth in the
Notice of Grant (the "Exercise Price"), subject to the terms and
conditions of the Plan, which is incorporated herein by reference.
Subject to Section 15(c) of the Plan, in the event of a conflict
between the terms and conditions of the Plan and the terms and
conditions of this Option Agreement, the terms and conditions of
the Plan shall prevail.
If designated in the Notice of Grant as an Incentive Stock
Option ("ISO"), this Option is intended to qualify as an Incentive
Stock Option under Section 422 of the Code. However, if this
Option is intended to be an Incentive Stock Option, to the extent
that it exceeds the $100,000 rule of Code Section 422(d) it shall
be treated as a Nonstatutory Stock Option ("NSO").
2. EXERCISE OF OPTION.
(a) RIGHT TO EXERCISE. This Option is exercisable during
its term in accordance with the Vesting Schedule set out in the
Notice of Grant and the applicable provisions of the Plan and this
Option Agreement.
(b) METHOD OF EXERCISE. This Option is exercisable by
delivery of an exercise notice, in the form attached as Exhibit A
(the "Exercise Notice"), which shall state the election to exercise
the Option, the number of Shares in respect of which the Option is
being exercised (the "Exercised Shares"), and such other
representations and agreements as may be required by the Company
pursuant to the provisions of the Plan. The Exercise Notice shall
be completed by the Optionee and delivered to the secretary of the
Company. The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares. This
Option shall be deemed to be exercised upon receipt by the Company
of such fully executed Exercise Notice accompanied by such
aggregate Exercise Price.
No Shares shall be issued pursuant to the exercise of this
Option unless such issuance and exercise complies with Applicable
Laws. Assuming such compliance, for income tax purposes the
Exercised Shares shall be considered transferred to the Optionee on
the date the Option is exercised with respect to such Exercised
Shares.
-2-
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price
shall be by any of the following, or a combination thereof, at the
election of the Optionee:
(a) cash;
(b) check;
(c) consideration received by the Company under a formal
cashless exercise program adopted by the Company in connection with
the Plan;
(d) surrender of other Shares which (i) in the case of
Shares acquired upon exercise of an option, have been owned by the
Optionee for more than six (6) months on the date of surrender, and
(ii) have a Fair Market Value on the date of surrender equal to the
aggregate Exercise Price of the Exercised Shares; or
(e) with the Administrator's consent, delivery of
Optionee's promissory note (the "Note") in the form attached hereto
as Exhibit C, in the amount of the aggregate Exercise Price of the
Exercised Shares together with the execution and delivery by the
Optionee of the Security Agreement attached hereto as Exhibit B.
The Note shall bear interest at the "applicable federal rate"
prescribed under the Code and its regulations at time of purchase,
and shall be secured by a pledge of the Shares purchased by the
Note pursuant to the Security Agreement.
4. NON-TRANSFERABILITY OF OPTION. This Option may not be
transferred in any manner otherwise than by will or by the laws of
descent or distribution and may be exercised during the lifetime of
Optionee only by the Optionee. The terms of the Plan and this
Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.
5. TERM OF OPTION. This Option may be exercised only within
the term set out in the Notice of Grant, and may be exercised
during such term only in accordance with the Plan and the terms of
this Option Agreement.
6. TAX CONSEQUENCES. Some of the federal tax consequences
relating to this Option, as of the date of this Option, are set
forth below. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD
CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF
THE SHARES.
(a) EXERCISING THE OPTION.
(i) NONSTATUTORY STOCK OPTION. The Optionee may incur
regular federal income tax liability upon exercise of a NSO. The
Optionee will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any,
of the Fair Market Value of the Exercised Shares on the date of
exercise over their aggregate Exercise Price. If
-3-
the Optionee is an Employee or a former Employee, the Company will
be required to withhold from his or her compensation or collect from
Optionee and pay to the applicable taxing authorities an amount in cash
equal to a percentage of this compensation income at the time of exercise,
and may refuse to honor the exercise and refuse to deliver Shares
if such withholding amounts are not delivered at the time of
exercise.
(ii) INCENTIVE STOCK OPTION. If this Option
qualifies as an ISO, the Optionee will have no regular federal
income tax liability upon its exercise, although the excess, if
any, of the Fair Market Value of the Exercised Shares on the date
of exercise over their aggregate Exercise Price will be treated as
an adjustment to alternative minimum taxable income for federal tax
purposes and may subject the Optionee to alternative minimum tax in
the year of exercise. In the event that the Optionee ceases to be
an Employee but remains a Service Provider, any Incentive Stock
Option of the Optionee that remains unexercised shall cease to
qualify as an Incentive Stock Option and will be treated for tax
purposes as a Nonstatutory Stock Option on the date three (3)
months and one (1) day following such change of status.
(b) DISPOSITION OF SHARES.
(i) NSO. If the Optionee holds NSO Shares for at
least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal income tax
purposes.
(ii) ISO. If the Optionee holds ISO Shares for
at least one year after exercise and two years after the grant
date, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes.
If the Optionee disposes of ISO Shares within one year after
exercise or two years after the grant date, any gain realized on
such disposition will be treated as compensation income (taxable at
ordinary income rates) to the extent of the excess, if any, of the
lesser of (A) the difference between the Fair Market Value of the
Shares acquired on the date of exercise and the aggregate Exercise
Price, or (B) the difference between the sale price of such Shares
and the aggregate Exercise Price. Any additional gain will be
taxed as capital gain, short-term or long-term depending on the
period that the ISO Shares were held.
(c) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If
the Optionee sells or otherwise disposes of any of the Shares
acquired pursuant to an ISO on or before the later of (i) two years
after the grant date, or (ii) one year after the exercise date, the
Optionee shall immediately notify the Company in writing of such
disposition. The Optionee agrees that he or she may be subject to
income tax withholding by the Company on the compensation income
recognized from such early disposition of ISO Shares by payment in
cash or out of the current earnings paid to the Optionee.
7. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated
herein by reference. The Plan and this Option Agreement constitute
the entire agreement of the parties with respect to the subject
matter hereof and supersede in their entirety all prior
undertakings and agreements of the
-4-
Company and Optionee with respect to the subject matter hereof, and
may not be modified adversely to the Optionee's interest except by
means of a writing signed by the Company and Optionee. This agreement
is governed by the internal substantive laws, but not the choice of
law rules, of California.
8. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES
AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING
SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER
AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING HIRED,
BEING GRANTED AN OPTION OR PURCHASING SHARES HEREUNDER). OPTIONEE
FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE
TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET
FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF
CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE'S
RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S RELATIONSHIP
AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
By your signature and the signature of the Company's
representative below, you and the Company agree that this Option is
granted under and governed by the terms and conditions of the Plan
and this Option Agreement. Optionee has reviewed the Plan and this
Option Agreement in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and
Option Agreement. Optionee hereby agrees to accept as binding,
conclusive and final all decisions or interpretations of the
Administrator upon any questions relating to the Plan and Option
Agreement. Optionee further agrees to notify the Company upon any
change in the residence address indicated below.
OPTIONEE: INTERNATIONAL NETWORK SERVICES
___________________________________ ______________________________________
Signature By
____________________________________ ______________________________________
Print Name Title
____________________________________
Residence Address
____________________________________
-5-
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and hereby approves
the terms and conditions of the Plan and this Option Agreement. In
consideration of the Company's granting his or her spouse the right
to purchase Shares as set forth in the Plan and this Option
Agreement, the undersigned hereby agrees to be irrevocably bound by
the terms and conditions of the Plan and this Option Agreement and
further agrees that any community property interest shall be
similarly bound. The undersigned hereby appoints the undersigned's
spouse as attorney-in-fact for the undersigned with respect to any
amendment or exercise of rights under the Plan or this Option
Agreement.
_______________________________________
Spouse of Optionee
-6-
EXHIBIT A
1996 STOCK PLAN
EXERCISE NOTICE
International Network Services
650 Castro Street, Suite 260
Mountain View, CA 94041
Attention: Corporate Secretary
1. EXERCISE OF OPTION. Effective as of today,
________________, 199__, the undersigned ("Purchaser") hereby
elects to purchase ______________ shares (the "Shares") of the
Common Stock of International Network Services (the "Company")
under and pursuant to the 1996 Stock Plan (the "Plan") and the
Stock Option Agreement dated , 19___ (the "Option
Agreement"). The purchase price for the Shares shall be $
, as required by the Option Agreement.
2. DELIVERY OF PAYMENT. Purchaser herewith delivers to the
Company the full purchase price for the Shares.
3. REPRESENTATIONS OF PURCHASER. Purchaser acknowledges that
Purchaser has received, read and understood the Plan and the Option
Agreement and agrees to abide by and be bound by their terms and
conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the Shares, no right
to vote or receive dividends or any other rights as a shareholder
shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Shares so acquired shall be issued to
the Optionee as soon as practicable after exercise of the Option.
No adjustment will be made for a dividend or other right for which
the record date is prior to the date of issuance, except as pro-
vided in Section 13 of the Plan.
5. TAX CONSULTATION. Purchaser understands that Purchaser may
suffer adverse tax consequences as a result of Purchaser's purchase
or disposition of the Shares. Purchaser represents that Purchaser
has consulted with any tax consultants Purchaser deems advisable in
connection with the purchase or disposition of the Shares and that
Purchaser is not relying on the Company for any tax advice.
6. ENTIRE AGREEMENT; GOVERNING LAW. The Plan and Option
Agreement are incorporated herein by reference. This Agreement,
the Plan and the Option Agreement constitute the entire agreement
of the parties with respect to the subject matter hereof and
supersede in their entirety all prior undertakings and agreements
of the Company and Purchaser with respect to the subject matter
hereof, and may not be modified adversely to the Purchaser's
interest except by means of a writing
signed by the Company and Purchaser. This agreement is governed by the
internal substantive laws, but not the choice of law rules, of California.
Submitted by: Accepted by:
PURCHASER: INTERNATIONAL NETWORK SERVICES
__________________________________ _____________________________________
Signature By
__________________________________ _____________________________________
Print Name Its
ADDRESS: ADDRESS:
_________________________________ 650 Castro Street, Suite 260
Mountain View, CA 94041
_________________________________
_____________________________________
Date Received
-2-