EXHIBIT 99.1
PACIFIC SOFTWORKS, INC.
1998 EQUITY INCENTIVE PROGRAM
ADOPTED APRIL 17, 1998
APPROVED BY STOCKHOLDERS APRIL 30, 1998
TERMINATION DATE: DECEMBER 31, 2008
1. PURPOSES.
(A) ELIGIBLE STOCK AWARD RECIPIENTS. The persons eligible to receive
Stock Awards are the Employees, Directors and Consultants of the
Company and its Affiliates.
(B) AVAILABLE STOCK AWARDS. The purpose of the Plan is to provide a
means by which eligible recipients of Stock Awards may be given
an opportunity to benefit from increases in value of the Common
Stock through the granting of the following Stock Awards: (i)
Incentive Stock Options, (ii) Non-Statutory Stock Options, (iii)
Stock Appreciation Rights, (iv) Stock Bonuses, and (v) Rights to
Acquire Restricted Stock.
(C) GENERAL PURPOSE. The Company, by means of the Plan, seeks to
retain the services of the group of persons eligible to receive
Stock Awards, to secure and retain the services of new members
of this group and to provide incentives for such persons to
exert maximum efforts for the success of the Company and its
Affiliates.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary
corporation of the Company, whether now or hereafter existing,
as those terms are defined in Section 424(3) and (f),
respectively, of the Code.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in
accordance with subsection 3(c).
(e) "COMMON STOCK" means the common stock of the Company.
(f) "COMPANY" means Pacific Softworks, Inc., a California
corporation.
(g) "CONSULTANT" means any person, including an advisor, (1) engaged
by the Company, or an Affiliate, to render consulting or
advisory services and who is compensated for such services or
(2) who is a member of the Board of Directors of an Affiliate.
However, the term "Consultant" shall not include either
Directors of the Company who are not
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compensated by the Company for their services as Directors or
Directors of the Company who are merely paid a director's fee by
the Company for their services as Directors.
(h) "CONTINUOUS SERVICE" means that the Participant's service with
the Company, or an Affiliate, whether as an Employee, Director
or Consultant, is not interrupted or terminated. The
Participant's Continuous Service shall not be deemed to have
terminated merely because of a change in the capacity in which
the Participant renders service to the Company or an Affiliate
as an Employee, Consultant or Director or a change in the entity
for which the Participant renders such service, provided that
there is no interruption or termination of the Participant's
Continuous Service. For example, a change in status from an
Employee of the Company to a Consultant of an Affiliate or a
Director of the Company will not constitute an interruption of
Continuous Service. The Board or the Chief Executive Officer of
the Company, in that party's sole discretion, may determine
whether Continuous Service shall be considered interrupted in
the case of any leave of absence approved by that party,
including sick leave, military leave or any other personal
leave.
(i) "COVERED EMPLOYEE" means the Chief Executive Officer and the
four (4) other highest compensated officers of the Company for
whom total compensation is required to be reported to
stockholders under the Exchange Act, as determined for purposes
of Section 162(m) of the Code.
(j) "DIRECTOR" means a member of the Board of Directors of the
Company.
(k) "DISABILITY" means the permanent and total disability of a
person within the meaning of Section 22(e) (3) of the Code.
(l) "EMPLOYEE" means any person employed by the Company, or an
Affiliate. Mere service as a Director or payment of a director's
fee by the Company or an Affiliate shall not be sufficient to
constitute "employment" by the Company or an Affiliate.
(m) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(n) "FAIR MARKET VALUE" means, as of any date, the value of the
Common Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or traded on the Nasdaq National Market or the
Nasdaq SmallCap Market, the Fair Market Value of a share
of Common Stock shall be the closing sales price of such
stock (or the closing bid, if no sales were reported) as
quoted on such exchange or market (or the exchange or
market with the greatest volume of trading in the Common
Stock) on the last market trading day prior to the day
of determination, as reported in The Wall Street Journal
or such other source as the Board deems reliable.
(ii) The absence of such markets for the Common Stock, the
Fair Market Value shall be determined in good faith by
the Board.
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(o) "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.
(p) "NON-EMPLOYEE DIRECTOR" means a Director of the Company who
either (i) is not a current Employee or Officer of the Company
or its parent or a subsidiary, does not receive compensation
(directly or indirectly) from the Company or its parent or a
subsidiary for services rendered as a consultant or in any
capacity other than as a Director (except for an amount as to
which disclosure would not be required under Item 404(a) of
Regulation S-K of the Securities and Exchange commission
("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item
404(a) of Regulation S-K and is not engaged in a business
relationship as to which disclosure would be required under Item
404(b) of Regulation S-K; or (ii) is otherwise considered a
"non-employee director" for purposes of Rule 16b-3.
(q) "NON-STATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(r) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and
regulations promulgated thereunder.
(s) "OPTION" means an Incentive Stock Option or a Non-Statutory
Stock Option granted pursuant to the Plan.
(t) "OPTION AGREEMENT" means a written agreement between the Company
and the Optionee evidencing the terms and conditions of an
individual Option grant. Each Option Agreement shall be subject
to the terms and conditions of the Plan.
(u) "OPTIONEE" means a person to whom an Option is granted pursuant
to the Plan or, if applicable, such other person who holds an
outstanding Option.
(v) "OUTSIDER DIRECTOR" means a Director of the Company who either
(i) is not a current employee of the Company or an "affiliated
corporation" (within the meaning of Treasury Regulations
promulgated under Section 162(m) of the Code), is not a former
employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax
qualified pension plan), was not an officer of the Company or an
"affiliated corporation" at any time and is not currently
receiving direct or indirect remuneration from the Company or an
"affiliated corporation" for services in any capacity other than
as a Director or (ii) is otherwise considered an "outside
director" for purposes of Section 162(m) of the Code.
(w) "PARTICIPANT" means a person to whom a Stock Award is granted
pursuant to the Plan or, if applicable, such other person who
holds an outstanding Stock Award.
(x) "PLAN" means this Pacific Softworks, Inc. 1998 Equity Incentive
Plan.
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(y) "RULE 16b-3" means Rule 16b-3 promulgated under the Exchange Act
or any successor to Rule 16b-3, as in effect from time to time.
(z) "SECURITIES ACT" means the Securities Act of 1933, as amended.
(aa) "STOCK AWARD" means any right granted under the Plan, including
an Option, a stock appreciation right, a stock bonus and a right
to acquire restricted stock.
(bb) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and
conditions of an individual Stock Award grant. Each Stock Award
Agreement shall be subject to the terms and conditions of the
Plan.
(cc) "TEN PERCENT STOCKHOLDER" means a person who owns (or is deemed
to own pursuant to Section 424(d) of the Code) stock possessing
more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company or of any of its
Affiliates.
2. ADMINISTRATION
(a) ADMINISTRATION OF THE BOARD. The Board will administer the Plan
unless and until the Board delegates administration to a
Committee, as provided in Subsection 3(c).
(b) POWERS OF BOARD. The Board shall have the power, subject to, and
within the limitations of, the express provisions of the Plan:
(i) To determine from time to time which of the persons
eligible under the Plan shall be granted Stock Awards;
when and how each Stock Award shall be granted; what
type of combination of types of Stock Award shall be
granted; the provisions of each Stock Award granted
(which need not be identical), including the time or
times when a person shall be permitted to receive stock
pursuant to a Stock Award; and the number of shares with
respect to which a Stock Award shall be granted to each
such person.
(ii) To construe and interpret the Plan and Stock Awards
granted under it, and to establish, amend and revoke
rules and regulations for its administration. The Board,
in the exercise of this power, may correct any defect,
omission or inconsistency in the Plan or in any Stock
Award Agreement, in a manner and to the extent it shall
deem necessary or expedient to make the Plan fully
effective.
(iii) To amend the Plan or a Stock Award as provided in
Section 12.
(iv) Generally, to exercise such powers and to perform such
acts as the Board deems necessary or expedient to
promote the best interests of the Company which are not
in conflict with the provisions of the Plan.
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(c) DELEGATION TO COMMITTEE.
(i) GENERAL. The Board may delegate administration of the
Plan to a Committee or Committees of one or more members
of the Board, and the term "Committee" shall apply to
any person or persons to whom such authority has been
delegated. If administration is delegated to a
Committee, the Committee shall have, in connection with
the administration of the Plan, the powers theretofore
possessed by the Board, including the power to delegate
to a subcommittee any of the administrative powers the
Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the
Committee or subcommittee), subject, however, to such
resolutions, not inconsistent with the provisions of the
Plan, as may be adopted from time to time by the Board.
The Board may abolish the Committee at any time and
revest in the Board the administration of the Plan.
(ii) COMMITTEE COMPOSITION. As long as the Common Stock is
publicly traded, in the discretion of the Board, a
Committee may consist solely of two or more Outside
Directors, in accordance with Section 16(m) of the Code,
and/or solely of two or more Non-Employee Directors, in
accordance with Rule 16b-3. Within the scope of such
authority, the Board or the Committee may (i) delegate
to a committee of one or more members of the Board who
are not Outside Directors, the authority to grant Stock
Awards to eligible persons who are either (a) not then
Covered Employees and are not expected to be Covered
Employees at the time of recognition of income resulting
from such Stock Award or (b) not persons with respect to
whom the Company wishes to comply with Section 162(m) of
the Code and/or (ii) delegate to a committee of
authority to grant Stock Awards to eligible persons who
are not then subject to Section 16 of the Exchange Act.
4. SHARES SUBJECT TO THE PLAN.
(a) SHARE REVERSE. Subject to the provisions of Section 11 relating
to adjustments upon changes in stock, the stock that may be
issued pursuant to Stock Awards shall not exceed in the
aggregate Ten Percent (10%) of the outstanding shares of the
Company's Common Stock.
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(b) REVERSION OF SHARES TO THE SHARE RESERVE. If any Stock Award
shall for any reason expire or otherwise terminate, in whole or
in part, without having been exercised in full (or vested in the
case of Restricted Stock), the stock not acquired under the
Stock Award shall revert to and again become available for
issuance under the Plan. Shares subject to stock appreciation
rights exercised in accordance with the Plan shall not be
available for subsequent issuance under the Plan. If any Common
Stock acquired pursuant to the exercise of an Option shall for
any reason be repurchased by the Company under an unvested share
repurchase option provided under the Plan, the stock repurchased
by the Company under such repurchase option shall not revert to
and again become available for issuance under the Plan.
(c) SOURCE OF SHARES. The stock subject to the Plan may be unissued
shares or reacquired shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) ELIGIBILITY FOR SPECIFIC STOCK AWARDS. Incentive Stock Options
may be granted only to Employees. Stock Awards other than
Incentive Stock Options may be granted to Employees, Directors
and Consultants.
(b) TEN PERCENT STOCKHOLDERS. No Ten Percent (10%) Stockholder shall
be eligible for the grant of an Incentive Stock Option unless
the exercise price of such Option is at least one hundred ten
percent (110%) of the Fair Market Value of the Common Stock at
the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) SECTION 162(m) LIMITATION. Subject to the provisions of Section
11 relating to adjustments upon changes in stock, no employee
shall be eligible to be granted Options covering more than
(______) shares of the Common Stock during any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. All Options shall be
separately designated Incentive Stock Options or Non-Statutory Stock
Options at the time of grant, and a separate certificate or
certification will be issued for shares purchased on exercise of each
type of Option. The provisions of separate Options need not be
identical, but each Option shall include (through incorporation of
provisions hereof by reference in the Option or otherwise) the substance
of each of the following provisions:
(a) TERM. Subject to the provisions of subsection 5(b) regarding Ten
Percent Stockholders, no Incentive Stock Option shall be
exercisable after the expiration of ten (10) years from the date
it was granted.
(b) EXERCISE PRICE OF AN INCENTIVE STOCK OPTION. Subject to the
provisions
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of subsection 5(b) regarding Ten Percent Stockholders, the
exercise price of each Incentive Stock Option shall be not less
than one hundred percent (100%) of the Fair Market Value of the
stock subject to the Option on the date the Option is granted.
Notwithstanding the foregoing, an Incentive Stock Option may be
granted with an exercise price lower than that set forth in the
preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
(c) EXERCISE PRICE OF A NON-STATUTORY STOCK OPTION. The exercise
price of each Non-statutory Stock Option shall be not less than
eighty-five percent (85%) of the Fair Market Value of the stock
to the Option on the date the Option was granted.
Notwithstanding the foregoing, a Non-statutory Stock Option may
be granted with an exercise price lower than that set forth in
the preceding sentence if such Option is granted pursuant to an
assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
(d) CONSIDERATION. The purchase price of stock acquired pursuant to
an Option shall be paid, to the extent permitted by applicable
statutes and regulations, either (i) in cash at the time the
Option is exercised or (ii) at the discretion of the Board at
the time of the grant of the Option (or subsequently in the case
of Non-Statutory Stock Option) by delivery to the Company of
other Common Stock, according to a deferred payment or other
arrangement (which may include, without limiting the generality
of the foregoing, the use of other Common Stock) with the
Participant or in any other form of legal consideration that may
be acceptable to the Board; provided, however, that at any time
the Company is incorporated in California, payment of the Common
Stock's "par value", as defined in the California General
Corporation Law, shall not be made by deferred payment.
In the case of any deferred payment arrangement, interest shall
be compounded at least annually and shall be charged at the
minimum rate of interest necessary to avoid the treatment as
interest, under any applicable provisions of the Code, of any
amounts other than amounts stated to be interest under the
deferred payment arrangement.
(e) TRANSFERABILITY OF AN INCENTIVE STOCK OPTION. An Incentive Stock
Option shall not be transferable except by will or by the laws
of descent and distribution and shall be exercisable during the
lifetime of the Optionee only by the Optionee. Notwithstanding
the foregoing provisions of this subsection 6(e), the Optionee
may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the
event of the death of the Optionee, shall thereafter be entitled
to exercise the Option.
(f) TRANSFERABILITY OF A Non-Statutory STOCK OPTION. A Non-Statutory
Stock Option shall be transferable to the extent provided in the
Option Agreement. If the Non-Statutory Stock Option does not
provide for transferability, then the Non-Statutory Stock Option
shall not be transferable except by will or by the laws of
descent and distribution
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and shall be exercisable during the lifetime of the Optionee
only by the Optionee. Notwithstanding the foregoing provisions
of this subsection 6(f), the Optionee may, by delivering written
notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the
Optionee, shall thereafter be entitled to exercise the Option.
(g) VESTING GENERALLY. The total number of shares of Common Stock
subject to an Option may, but need not, vest and therefore
become exercisable in periodic installments which may, but need
not, be equal. The Option may be subject to such other terms and
conditions on the time or times when it may be exercised (which
may be based on performance or other criteria) as the Board may
deem appropriate. The vesting provisions of individual Options
may vary. The provisions of this subsection 6(g) are subject to
any Option provisions governing the minimum number of shares as
to which an Option may be exercised.
(h) TERMINATION OF CONTINUOUS SERVICE. In the event an Optionee's
Continuous Service terminates (other than upon the Optionee's
death or disability), the Optionee may exercise his or her
Option (to the extent that the Optionee was entitled to exercise
it as of the date of termination) but only within such period of
time ending on the earlier of (i) the date thirty (30) days
following the termination of the Optionee's Continuous Service
(or such longer or shorter period specified in the Option
Agreement), or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, after termination, the
Optionee does not exercise his or her Option within the time
specified in the Option Agreement, the Option shall terminate.
(i) EXTENSION OF TERMINATION DATE. An Optionee's Option Agreement
may also provide that if the exercise of the Option following
the termination of the Optionee's Continuous Service (other than
upon the Optionee's death or disability) would be prohibited at
any time solely because the issuance of the shares would violate
the registration requirements under the Securities Act, then the
Option shall terminate on the earlier of (i) the expiration of
the term of the Option set forth in subsection 6(a) or (ii) the
expiration of a period of thirty (30) days after the termination
of the Optionee's Continuous Service during which the exercise
of the Option would not be in violation of such registration
requirements.
(j) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Service terminates as a result of the Optionee's Disability, the
Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of
termination), but only within such period of time ending on the
earlier of (i) the date twelve (12) months following such
termination (or such longer or shorter period specified in the
Option Agreement) or (ii) the expiration of the term of the
Option as set forth in the Option Agreement. If, after
termination, the Optionee does not exercise his or her Option
within the time specified herein, the Option shall terminate.
(k) DEATH OF OPTIONEE. In the event (i) an Optionee's Continuous
Service terminates
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as a result of the Optionee's death or (ii) the Optionee dies
within the period (if any) specified in the Option Agreement
after the termination of the Optionee's Continuous Service for a
reason other than death, then the Option may be exercised (to
the extent the Optionee was entitled to exercise the Option as
of the date of death) by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or
inheritance or by a person designated to exercise the Option
upon the Optionee's death pursuant to subsection 6(e) or 6(f),
but only within the period ending on the earlier of (1) the date
eighteen (18) months following the date of death (or such longer
or shorter period specified in the Option Agreement) or (2) the
expiration of the term of such Option as set forth in the Option
Agreement. If, after death, the Option is not exercised within
the time specified herein, the Option shall terminate.
(l) EARLY EXERCISE. The Option may, but need not, include a
provision whereby the Optionee may elect at any time before the
Optionee's Continuous Service terminates to exercise the Option
as to any part or all of the shares subject to the Option prior
to the full vesting of the Option. Any unvested shares so
purchased may be subject to an unvested share repurchase option
in favor of the Company or to any other restriction the Board
determines to be appropriate.
7. PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS.
(a) STOCK BONUS AWARDS. Each stock bonus agreement shall be in such
form and shall contain such terms and conditions as the Board
shall deem appropriate. The terms and conditions of stock bonus
agreements may change from time to time, and the terms and
conditions of separate stock bonus agreements need not be
identical, but each stock bonus agreement shall include (through
incorporation of provisions hereof by reference in the agreement
or otherwise) the substance of each of the following provisions:
(i) CONSIDERATION. A stock bonus shall be awarded in
consideration for past services actually rendered to the
Company or for its benefit.
(ii) VESTING. Shares of Common Stock awarded under the stock
bonus agreement may, but need not, be subject to a share
repurchase option in favor of the Company in accordance
with the vesting schedule to be determined by the Board
of Directors.
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(iii) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the
event a Participant's Continuous Service terminates, the
Company may reacquire any or all of the shares of Common
Stock held by the Participant which have not vested as
of the date of termination under the terms of the stock
bonus agreement.
(iv) TRANSFERABILITY. Rights to acquire shares under the
stock bonus agreement shall be transferable by the
Participant only upon such terms and conditions as set
forth in the stock bonus agreement, as the Board shall
determine in its discretion, so long as stock awarded
under the stock bonus agreement remains subject to the
terms of the stock bonus agreement.
(b) RESTRICTED STOCK AWARDS. Each restricted stock purchase
agreement shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The terms and
conditions of the restricted stock purchase agreements may
change from time to time, and the terms and conditions of
separate restricted stock purchase agreements need not be
identical, but each restricted stock purchase agreement shall
include (through incorporation of provisions hereof by reference
in the agreement or otherwise) the substance of each of the
following provisions:
(i) PURCHASE PRICE. The purchase price under each restricted
stock purchase agreement shall be such amount as the
Board shall determine and designate in such restricted
stock purchase agreement. The purchase price shall not
be less than eighty-five percent (85%) of the stock's
Fair Market Value on the date such award is made or at
the time the purchase is consummated.
(ii) CONSIDERATION. The purchase price of stock acquired
pursuant to the restricted stock purchase agreement
shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board, according
to a deferred payment or other arrangement with the
Participant; or (iii) in any other form of legal
consideration that may be acceptable to the Board in its
discretion; provided, however, the at any time that the
Company is incorporated in California, payment of the
Common Stock's "par value," as defined in the California
General Corporation Law, shall not be made by deferred
payment.
(iii) VESTING. Shares of Common Stock acquired under the
restricted stock purchase agreement may, but need not,
be subject to a share repurchase option in favor of the
Company in accordance with the vesting schedule to be
determined by the Board.
(iv) TERMINATION OF PARTICIPANT'S CONTINUOUS SERVICE. In the
event a Participant's Continuous Service terminates, the
Company may repurchase or otherwise reacquire any or all
of the shares of Common Stock held by the Participant
which have not vested as of the date of termination
under the terms of the restricted stock purchase
agreement.
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(v) TRANSFERABILITY. Rights to acquire shares under the
restricted stock purchase agreement shall be
transferable by the Participant only upon such terms and
conditions as are set forth in the restricted stock
purchase agreement, as the Board shall determine in its
discretion, so long as stock awarded under the
restricted stock purchase agreement remains subject to
the terms of the restricted stock purchase agreement.
(c) STOCK APPRECIATION RIGHTS.
(i) AUTHORIZED RIGHTS. The following three types of stock
appreciation rights shall be authorized for issuance
under the Plan:
(1) TANDEM RIGHTS. A "Tandem Right" means a stock
appreciation right granted appurtenant to an Option
which is subject to the same terms and conditions
applicable to the particular Option grant to which it
pertains with the following exceptions: The Tandem Right
shall require the holder to elect between the exercise
of the underlying Option for shares of Common Stock and
the surrender, in whole or in part, of such Option for
an appreciation distribution. The appreciation
distribution payable on the exercised Tandem Right shall
be in cash (or, if so provided, in an equivalent number
of shares of Common Stock based on the Fair Market Value
on the date of the Option surrender) in an amount up to
the excess of (A) the Fair Market Value (on the date of
the Option surrender) of the number of shares of Common
Stock covered by that portion of the surrendered Option
in which the Optionee is vested over (B) the aggregate
exercise price payable for such vested shares.
(2) CONCURRENT RIGHTS. A "Concurrent Right" means a stock
appreciation right granted appurtenant to an Option
which applies to all or a portion of the shares of
Common Stock subject to the underlying Option and which
is subject to the same terms and conditions applicable
to the particular Option shall be exercised
automatically at the same time the underlying Option is
exercised with respect to the particular shares of
Common Stock to which the Concurrent Right pertains. The
appreciation distribution payable on an exercised
Concurrent Right shall be in cash (or, if so provided,
in an equivalent number of shares of Common Stock based
on Fair Market Value on the date of the exercise of the
Concurrent Right) in an amount equal to such portion as
determined by the Board at the time of the grant of the
excess of (A) the aggregate Fair Market Value (on the
date of the exercise of the Concurrent Right) of the
vested shares of Common Stock purchased under the
underlying Option which have Concurrent Rights
appurtenant to them over (B) the aggregate exercise
price paid for such shares.
(3) INDEPENDENT RIGHTS. An "Independent Right" means a stock
appreciation right granted independently of any Option
but which is subject to the same terms and conditions
applicable to a Non-Statutory Stock Option with the
following exceptions: An Independent Right shall be
denominated in share equivalents. The
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appreciation distribution payable on the exercised
Independent Right shall be not greater than an amount
equal to the excess of (a) the aggregate Fair Market
Value (on the date of the exercise of the Independent
Right) of a number of shares of Company stock equal to
the number of share equivalents in which the holder is
vested under such Independent Right, and with respect to
which the holder is exercising the Independent Right on
such date, over (b) the aggregate Fair Market Value (on
the date of the grant of the Independent Right) of such
number of shares of Company stock. The appreciation
distribution payable on the exercised Independent Right
shall be in cash, or if so provided, in an equivalent
number of shares of Common Stock based on Fair Market
Value on the date of the exercise of the Independent
Right.
(ii) RELATIONSHIP TO OPTIONS. Stock appreciation rights
appurtenant to Incentive Stock Options may be granted
only to Employees. The "Section 162(m) Limitation"
provided in subsection 5(c) and any authority to reprice
Options shall apply as well to the grant of stock
appreciation rights.
(iii) EXERCISE. To exercise any outstanding stock appreciation
right, the holder shall provide written notice of
exercise to the Company in compliance with the
provisions of the Stock Award Agreement evidencing such
right. Except as provided in subsection 5(c) regarding
the "Section 162(m) Limitation," no limitation shall
exist on the aggregate amount of cash payments that the
Company may make under the Plan in connection with the
exercise of the stock appreciation right.
8. COVENANTS OF THE COMPANY.
(a) AVAILABILITY OF SHARES. During the terms of the Stock Awards,
the Company shall keep available at all times the number of
shares of Common Stock required to satisfy such Stock Awards.
(b) SECURITIES LAW COMPLIANCE. The Company shall seek to obtain from
each regulatory commission or agency having jurisdiction over
the Plan such authority as may be required to grant Stock Awards
and to issue and sell shares of Common Stock upon exercise of
the Stock Awards; provided, however, that this undertaking shall
not require the Company to register under the Securities Act the
Plan, any such Stock Award or any stock issued or issuable
pursuant to any such Stock Award. If, after reasonable efforts,
the Company is unable to obtain from any such regulatory
commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under
the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Stock
Awards unless and until such authority is obtained.
9. USE OF PROCEEDS FROM STOCK.
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Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
10. MISCELLANEOUS.
(a) ACCELERATION OF EXERCISABILITY AND VESTING. The Board shall have
the power to accelerate the time at which a Stock Award may
first be exercised or the time during which the Stock Award or
any part thereof will vest in accordance with the Plan,
notwithstanding the provisions in the Stock Award stating the
time at which a Stock Award or any part thereof will vest in
accordance with the Plan, notwithstanding the provisions in the
Stock Award stating the time at which it may first be exercised
or the time during which it will vest.
(b) STOCKHOLDER RIGHTS. No Participant shall be deemed to be the
holder of, or to have any of the rights of a holder with respect
to, any shares subject to such Stock Award unless and until such
Participant has satisfied all requirements for exercise of the
Stock Award pursuant to its terms.
(c) NO EMPLOYMENT OR OTHER SERVICE RIGHTS. Nothing in the Plan or
any instrument executed or Stock Award granted pursuant thereto
shall confer upon any Participant or other holder of Stock
Awards any right to continue to serve the Company or an
Affiliate in the capacity in effect at the time the Stock Award
was granted or shall affect the right of the Company or an
Affiliate to terminate (i) the employment of an Employee with or
without notice and with or without cause, (ii) the service of a
Consultant pursuant to the terms of such Consultant's agreement
with the Company or an Affiliate or (iii) the service of a
Director pursuant to the Bylaws of the Company or an Affiliate,
and any applicable provisions of the corporate law of the state
in which the Company or the Affiliate is incorporated, as the
case may be.
(d) INCENTIVE STOCK OPTION $100,000 LIMITATION. To the extent that
the aggregate Fair Market Value (determined at the time of
grant) of stock with respect to which Incentive Stock Options
are exercisable for the first time by any Optionee during any
calendar year (under all plans of the Company and its
Affiliates) exceeds one hundred thousand dollars ($100,000), the
Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as
Non-Statutory Stock Options.
(e) INVESTMENT ASSURANCES. The Company may require a Participant, as
a condition of exercising or acquiring stock under any Stock
Award, (i) to give written assurances satisfactory to the
Company as to the Participant's knowledge and experience in
financial and business matters and/or to employ a purchaser
representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters
and that he or she is capable of evaluating, alone or together
with the purchaser representative, the merits and risks of
exercising the Stock Award; and (ii) to give written assurances
satisfactory to the Company stating that the Participant is
acquiring the stock subject to the Stock Award for the
Participant's own account and not with any present
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intention of selling or otherwise distributing the stock. The
foregoing requirements, and any assurances given pursuant to
such requirements, shall be inoperative if (iii) the issuance of
the shares upon the exercise or acquisition of stock under the
Stock Award has been registered under a then currently effective
registration statement under the Securities Act or (iv) as to
any particular requirement, a determination is made by counsel
for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The
Company may, upon advise of counsel to the Company, place
legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with
applicable securities laws, including, but not limited to,
legends restricting the transfer of the stock.
(f) WITHHOLDING OBLIGATIONS. To the extent provided by the terms of
a Stock Award Agreement, the Participant may satisfy any
federal, state or local tax withholding obligation relating to
the exercise or acquisition of stock under a Stock Award by any
of the following means (in addition to the Company's right to
withhold from any compensation paid to the Participant by the
Company) or by a combination of such means: (i) tendering a cash
payment; (ii) authorizing the Company to withhold shares from
the shares of the Common Stock otherwise issuable to the
participant as a result of the exercise of acquisition of stock
under the Stock Award; or (iii) delivering to the Company owned
and unencumbered shares of the Common Stock.
11. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or
subject to any Option, without the receipt of consideration by
the Company (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in
property other than cash, stock split, liquidating dividend,
combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of
consideration by the Company), the Plan and the outstanding
Options will be appropriately adjusted in the class(es) and
number of securities and price per share of stock subject to
such outstanding Options. Such adjustments shall be made by the
Board, the determination of which shall be final, binding and
conclusive. (The conversion of convertible securities, cashless
exercise of options and net exercise of warrants shall not be
treated as transactions "without receipt of consideration" by
the Company.)
(b) In the event of: (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the Company is
not the surviving corporation; or (3) a reverse merger in which
the Company is the surviving corporation but the shares of the
Company's common stock outstanding immediately preceding the
merger are converted by virtue of the merger into other
property, whether in the form of securities, cash or otherwise,
then subject to paragraph (c) of this Section 11, at the sole
discretion of the Board and to the extent permitted by
applicable law: (i) any surviving corporation shall assume any
Options outstanding under the Plan or shall substitute similar
Options for those outstanding under the Plan, (ii) such Stock
Awards shall continue in full force and effect, or (iii) the
time during which such Stock Awards become vested or may be
-14-
exercised shall be accelerated and any outstanding unexercised
rights under any Stock Awards terminated if not exercised prior
to such event. In the event any surviving corporation or
acquiring corporation refuses to assume such Options or to
substitute similar Options for those outstanding under the Plan,
then with respect to Options held by Optionees whose Continuous
Service has not terminated, the vesting shall be accelerated in
full, and the Options shall terminate if not exercised at or
prior to such event. With respect to any other Options
outstanding under the Plan, such Options shall terminate if not
exercised prior to such event.
(c) In the event of either (i) the acquisition by any person, entity
or group within the meaning of Section 13(d) or 14(d) of the
Exchange Act or any comparable successor provisions (excluding
any employee benefit plan, or related trust, sponsored or
maintained by the Company or an Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable successor
rule) of securities of the Company representing at least fifty
percent (50%) of the combined voting power entitled to vote in
the election of directors, which acquisition has not been
approved by resolution of the Company's Board of Directors, or
(ii) a change in a majority of the membership of the Company's
Board of Directors within a twenty-four (24) month period where
the selection of such majority either (A) was not approved by a
majority of the members of the Board of Directors at the
beginning of such twenty-four (24) month period or (B) occurred
as a result of an actual or threatened "Election Contest" (as
described in Rule 14a-11 promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents
by or on behalf of any person other than the Board (a "Proxy
Contest"), including by reason of any agreement intended to
avoid or settle any Election Contest or Proxy Contest, then to
the extent not prohibited by any applicable law, the time during
which options outstanding under the Plan may be exercised shall
be accelerated prior to such event, but only to the extent that
such options would have become exercisable within thirty (30)
months of the date of such event, and the options terminated if
not exercised after such acceleration and at or prior to such
event.
12. TIME OF GRANTING OPTIONS.
The date of grant of an Option shall, for all purposes, be the date on
which the Board makes the determination granting such Option. Notice of
the determination shall be given to each Employee or Consultant to whom
an Option is so granted within a reasonable time after the date of such
grant.
13. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem
advisable.
(b) EFFECT OF AMENDMENT OR TERMINATION. Options granted before
amendment of the Plan shall not be impaired by any amendment
unless mutually agreed otherwise
-15-
between the Optionee and the Company, which agreement must be in
writing and signed by the Optionee and the Company.
14. SECURITIES LAW COMPLIANCE.
Notwithstanding any provisions relating to vesting contained herein or
in an Option, no Option granted hereunder may be exercised unless the
shares issuable under exercise of such Option are then registered under
the Securities Act of 1933, as amended.
15. 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.
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.
16. OPTION AGREEMENT.
Options shall be evidenced by written Option Agreements in such form or
forms as the Board or the Committee shall approve.
17. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(a) AMENDMENT OF PLAN. The Board at any time, and from time to time,
may amend the Plan. However, except as provided in Section 11
relating to adjustments upon changes in stock, no amendment
shall be effective unless approved by the stockholders of the
Company to the extent stockholder approval is necessary to
satisfy the requirements of Section 422 of the Code, Rule 16b-3
or any Nasdaq or securities exchange listing requirements.
(b) STOCKHOLDER APPROVAL. The Board may, in its sole discretion,
submit any other amendment to the Plan for stockholder approval,
including but not limited to, amendments to the Plan intended to
satisfy the requirements of section 162(m) of the Code and the
regulations thereunder regarding the exclusion of
performance-based compensation from the limit on corporate
deductibility of compensation paid to certain executive
officers.
(c) CONTEMPLATED AMENDMENTS. It is expressly contemplated that the
Board may amend the Plan in any respect the Board deems
necessary or advisable to provide eligible Employees with the
maximum benefits provided or to be provided under the provisions
of the Code and the regulations promulgated thereunder relating
to the Incentive Stock Options and/or to bring the Plan and/or
Incentive Stock Options granted under it into
-16-
compliance therewith.
(d) NO IMPAIRMENT OF RIGHTS. Rights under any Stock Award granted
before amendment of the Plan shall not be impaired by any
amendment of the Plan unless (i) the Company requests the
consent of the Participant and (ii) the Participant consents in
writing.
(e) AMENDMENT OF STOCK AWARDS. The Board at any time, and from time
to time, may amend the terms of any one or more Stock Awards;
provided, however, that the rights under any Stock Award shall
not be impaired by any such amendment unless (i) the Company
requests the consent of the Participant and (ii) the Participant
consents in writing.
18. TERMINATION OR SUSPENSION OF THE PLAN.
(a) PLAN TERM. The Board may suspend or terminate the Plan at any
time. Unless sooner terminated, the Plan shall terminate on the
day before the tenth (10th) anniversary of the date the Plan is
adopted by the Board or approved by the stockholders of the
Company, whichever is earlier. No Stock Awards may be granted
under the Plan while the Plan is suspended or after it is
terminated.
(b) NO IMPAIRMENT OF RIGHTS. Rights and obligations under any Stock
Award granted while the Plan is in effect shall not be impaired
by suspension or termination of the Plan, except with the
written consent of the Participant.
-17-
19. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Stock
Award shall be exercised (or, in the case of a stock bonus, shall be
granted) unless and until the Plan has been approved by the stockholders
of the Company, which approval shall be within twelve (12) months before
or after the date the Plan is adopted by the Board.
-18-
EXHIBIT__
PACIFIC SOFTWORKS, INC.
INCENTIVE STOCK OPTION
(1998 EQUITY PLAN)
________________________, Optionee:
PACIFIC SOFTWORKS, INC. (The "Company"), pursuant to its 1998 EQUITY
INCENTIVE PLAN (the "Plan"), has granted to you, the Optionee named above, an
option to purchase shares of the Common Stock of the Company ("Common Stock").
This Option is not intended to qualify as and will not be treated as an
"Incentive Stock Option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
The details of the Option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number
of shares of Common Stock subject to this Option is
_______________________ (_____________).
2. VESTING. Subject to the limitations contained herein, 1/4th of
the shares covered by this Option will vest (become exercisable)
on _______________ , 19__ (12 months after the date of grant)
and 1/48th of the shares will then vest each month thereafter
until either (i) you cease to provide services to the Company
for any reason, or (ii) this Option becomes fully vested.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this Option is
_____________ ($________) per share, being not less that
85% of the Fair Market Value of the Common Stock on the
date of grant of this Option.
(b) METHOD OF PAYMENT. Payment of the exercise price per
share is due in full upon exercise of all or any part of
each installment that has accrued to you. You may elect,
to the extent permitted by applicable statutes and
regulations, to make payment of the exercise price under
one of the following alternatives:
(i) Payment of the exercise price per share in cash
(including check) at the time of exercise.
(ii) Payment pursuant to a program developed under
Regulation T as promulgated by the Federal
Reserve Board which, prior to the issuance of
Common Stock, results in either the receipt of
cash (or check) by the Company or the receipt of
irrevocable instructions to pay the aggregate
exercise price to the Company from the sales
proceeds;
-19-
(iii) Provided that at the time of exercise the
Company's Common Stock is publicly traded and
quoted regularly in the Wall Street Journal,
payment by delivery of already-owned shares of
Common Stock, held for the period required to
avoid a charge to the Company's reported
earnings, and owned free and clear of any liens,
claims, encumbrances or security interests,
which Common Stock shall be valued at its Fair
Market Value on the date of exercise; or
(iv) Payment by a combination of the methods of
payment permitted by subsection 3(b) (i) through
3(b) (ii) above.
4. WHOLE SHARES. This Option may not be exercised for any number of
shares that would require the issuance of anything other than
whole shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this Option may not be exercised
unless the shares issuable upon exercise of this Option are then
registered under the Securities Act of 1933, as amended (the
"Securities Act"), or if such shares are not then so registered,
the Company has determined that such exercise and issuance would
be exempt from the registration requirements of the Securities
Act.
6. TERM. The term of this Option commences on _____________, 19__ ,
the date of grant, and expires at midnight on the ____________,
19__ , (the "Expiration Date," which is the day before the tenth
(10th) anniversary from the date of grant), unless this Option
expires sooner as set forth below or in the Plan. In no event
may this Option be exercised on or after the Expiration Date.
This Option shall terminate prior to the Expiration Date of its
term as follows: three (3) months after the termination of your
Continuous Service as an Employee, Director or Consultant (as
defined in the Plan) with the Company or an Affiliate of the
Company unless one of the following circumstances exists:
(a) If your termination of Continuous Status as an Employee,
Director or Consultant is due to your permanent
disability (within the meaning of Section 422(c) (6) of
the Code), then this Option will then expire on the
earlier of the Expiration Date set forth above or twelve
(12) months following such termination.
(b) If your termination of Continuous Status as an Employee,
Director or Consultant is due to your death or your
death occurs within thirty (30) days following such
termination, then this Option will then expire on the
earlier of the Expiration Date set forth above or
eighteen (18) months after your death.
(c) If during any part of such thirty (30) day period you
may not exercise your Option solely because of the
conditions set forth in Section 5 above, then your
Option will not expire until the earlier of the
Expiration Date set forth above or until the Option
shall have been exercisable for an aggregate period of
thirty (30) days after your termination of Continuous
Status as an Employee, Director or Consultant.
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However, this Option may be exercised following termination of
Continuous Service as an Employee, Director or Consultant only as to
that number of shares to which it was exercisable on the date of such
termination under the schedule set forth in Section 2 of this Option.
7. EXERCISE.
(a) This Option may be exercised, to the extent specified
above, by delivering a notice of exercise (in a form
designated by the Company) together with the exercise
price to the Secretary of the Company, or to such other
person as the Company may designate, during regular
business hours, together with such additional documents
as the Company may then require pursuant to subsection
10(e) of the Plan.
-21-
22
(b) By exercising this Option you agree that, as a
precondition to the completion of any exercise of this
Option, the Company may require you to enter an
agreement providing for the payment by you to the
Company of any tax withholding obligation of the Company
arising by reason of (1) the exercise of this Option;
(2) the lapse of any substantial risk of forfeiture to
which the shares are subject at the time of exercise; or
(3) the disposition of shares acquired upon such
exercise.
8. TRANSFERABILITY. This Option is not transferable, except by will
or by the laws of descent and distribution, and is exercisable
during your life only by you. Notwithstanding the foregoing, by
delivering written notice to the Company, in a form satisfactory
to the Company, you may designate a third party who, in the
event of your death, shall thereafter be entitled to exercise
this Option.
9. OPTION NOT A SERVICE CONTRACT. This Option is not an employment
contract and nothing in this Option shall be deemed to create in
any way whatsoever any obligation on your part to continue in
the employ of the Company or an Affiliate, or of the Company or
an Affiliate to continue your employment. In addition, nothing
in this Option shall obligate the Company or any Affiliate of
the Company, or their respective stockholders, Board of
Directors, officers or employees to continue any relationship
that you might have as a Director or Consultant for the Company
or Affiliate.
10. NOTICES. Any Notices provided for in this Option or the Plan
shall be given in writing and shall be deemed effectively given
upon receipt or, in the case of notices delivered by the Company
to you, five (5) days after deposit in the United States mail,
postage prepaid, addressed to you at the address specified below
or at such other address as you hereafter designate by written
notice to the Company.
11. CHANGE OF CONTROL.
(a) In the event of (1) a dissolution or liquidation of the
Company; (2) a merger or consolidation in which the
Company is not the surviving corporation; or (3) a
reverse merger in which the Company is the surviving
corporation but the shares of the Company's Common Stock
outstanding immediately preceding the merger are
converted by virtue of the merger into other property,
whether in the form of securities, cash or otherwise,
then, subject to paragraph (c) of this Section 11, at
the sole discretion of the Board and to the extent
permitted by applicable law: (i) any surviving
corporation shall assume any Options outstanding under
the Plan or shall substitute similar Options for those
outstanding under the Plan, (ii) such Stock Awards shall
continue in full force and effect, or (iii) the time
during which such Stock Awards become vested or may be
exercised shall be accelerated and any outstanding
unexercised rights under any Stock Awards terminated if
not exercised prior to such event. In the event any
surviving corporation or acquiring corporation refuses
to assume such Options or to substitute similar Options
for those outstanding under the Plan, then with respect
to Options held by Optionee
-22-
whose Continuous Service has not terminated, the vesting
shall be accelerated in full, and the Options shall
terminate if not exercised at or prior to such event.
With respect to any other Options outstanding under the
Plan, such Options shall terminate if not exercised
prior to such event.
(b) In the event of either (i) the acquisition by any
person, entity or group within the meaning of Section
13(d) or 14(d) of the Exchange Act or any comparable
successor provisions (excluding any employee benefit
plan, or related trust, sponsored or maintained by the
Company or an Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act, or comparable
successor rule) of securities of the Company
representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election
of directors, which acquisition has not been approved by
resolution of the Company's Board of Directors, or (ii)
a change in the majority of the membership of the
Company's Board of Directors within a twenty-four (24)
month period where the selection of such majority either
(A) was not approved by a majority of the members of the
Board of Directors at the beginning of such twenty-four
(24) month period or (B) occurred as the result of an
actual or threatened "Election Contest" (as described in
Rule 14a-11 promulgated under the Exchange Act or other
actual or threatened solicitation of proxies or consents
by or on behalf of any person other than the Board (a
"Proxy Contest"), including by reason of any agreement
intended to avoid or settle any Election Contest or
Proxy Contest, then to the extent not prohibited by
applicable law, the time during which options
outstanding under the Plan may be exercised shall be
accelerated prior to such event, but only to the extent
that such options would have become exercisable within
thirty (30) months of the date of such event, and the
options terminate if not exercised after such
acceleration and at or prior to such event.
12. GOVERNING PLAN DOCUMENT. This Option is subject to all the
provisions of the Plan, a copy of which is attached hereto and
its provisions are hereby made a part of this Option, including
without limitation the provisions of Section 6 of the Plan
relating to option provisions and Section 13 relating to
adjustments upon changes in stock, and is further subject to all
interpretations, amendments, rules and regulations which may
from time to time be promulgated and adopted pursuant to the
Plan. In the event of any conflict between the provisions of
this Option and those of the Plan, the provisions of the Plan
shall control.
Dated this _________ day of ____________________ , 19 ___.
Very truly yours,
PACIFIC SOFTWORKS, INC.
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By
-------------------------------
Duly Authorized on Behalf of
the Board of Directors
ATTACHMENTS:
Pacific Softworks, Inc. 1998 Equity Incentive Plan
Notice of Exercise
The Undersigned:
(a) Acknowledges receipt of the foregoing Option and the
attachments referenced therein and understands that all
rights and liabilities with respect to this Option are
set forth in the Option and the Plan; and
-24-
(b) Acknowledges that as of the date of grant of this
Option, it sets forth the entire understanding between
the undersigned Optionee and the Company and its
Affiliates regarding the acquisition of stock in the
Company under this Option and supersedes all prior oral
and written agreements on that subject with the
exception of (i) the options previously granted and
delivered to the undersigned under stock option plans of
the Company, and (ii) the following agreements only:
None ____________________
(Initial)
Other ________________________________________
________________________________________
______________________________________
OPTIONEE
Address:_______________________________
______________________________________
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