DIGITAL RIVER, INC.
1999 STOCK OPTION PLAN
(FORMERLY KNOWN AS THE 1999 NON-OFFICER STOCK OPTION PLAN)
ADOPTED AUGUST 10, 1999
AMENDED FEBRUARY 7, 2000
FURTHER AMENDED FEBRUARY 7, 2001
1. PURPOSES. The principal purposes of the Digital River, Inc. (the
"Corporation") 1999 Stock Option Plan (formerly known as the 1999 Non-Officer
Stock Option Plan) (the "Plan") Plan are: (a) to improve individual performance
by providing long-term incentives and rewards to Employees, Directors and
Consultants of the Corporation; (b) to assist the Corporation in attracting,
retaining and motivating Employees, Directors and Consultants with experience
and ability; and (c) to associate the interests of such persons with those of
the Corporation's stockholders.
Options granted under this Plan may be Non-Qualified Stock Options.
2. DEFINITIONS. For purposes of this Plan, the following terms shall have
the meanings indicated below:
(a) "AFFILIATE" shall mean any parent corporation or subsidiary
corporation of the Corporation, whether now or hereafter existing, as those
terms are defined in Sections 424(e) and (f), respectively, of the Code.
(b) "BOARD" shall mean the Board of Directors of the Corporation.
(c) "CAPITAL STOCK" shall mean any of the Corporation's authorized but
unissued shares of voting common stock, par value of One Cent ($.01) per share.
(d) "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(e) "COMMITTEE" shall mean a committee comprised of one or more members
of the Board appointed by the Board in accordance with Section 4 of the Plan.
(f) "CONSULTANT" shall mean any person, including an advisor or other
form of independent contractor, engaged by the Corporation or an Affiliate to
render consulting services and who is compensated for such services (provided
that such services are not in connection with the offer or sale of securities in
a capital-raising transaction, and do not directly or indirectly promote or
maintain a market for the Corporation's securities), provided that the term
"Consultant" shall not include Employees or Directors.
(g) "CONTINUOUS SERVICE" shall mean the Optionee's service with the
Corporation or an Affiliate, whether as an Employee, Director or Consultant, is
not interrupted or terminated. The Optionee's Continuous Service shall not be
deemed to have terminated merely because of a change in the capacity in which
the Optionee renders service to the Corporation or an Affiliate as
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an Employee, Consultant or Director or a change in the entity for which the
Optionee renders such service, provided that there is no interruption or
termination of the Optionee's Continuous Service. For example, a change in
status from an Employee of the Corporation to a Consultant of an Affiliate or a
Director of the Corporation will not constitute an interruption of Continuous
Service. The Board or the chief executive officer of the Corporation, 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.
(h) "CORPORATION" shall mean Digital River, Inc., a Delaware
corporation and any of its Affiliates.
(i) "DIRECTOR" shall mean a member of the Board.
(j) "EMPLOYEE" shall mean any person employed by the Corporation or by
any Affiliate. Mere services as a Director or payment of a director's fee by the
Corporation or an Affiliate shall not be sufficient to constitute "employment"
by the Corporation or an Affiliate.
(k) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended.
(l) "FAIR MARKET VALUE" shall mean the price per share determined as
follows: (a) if the security is listed for trading on one or more national
securities exchanges (including the NASDAQ National Market System), the reported
last sales price on such principal exchange on the date in question, or if such
security shall not have been traded on such principal exchange on such date, the
reported last sales price on such principal exchange on the first day prior
thereto on which such security was so traded; or (b) if the security is not
listed for trading on a national securities exchange (including the NASDAQ
National Market System) but is traded in the over-the-counter market, the mean
of the highest and lowest bid prices for such security on the date in question,
or if there are no such bid prices for such security on such date, the mean of
the highest and lowest bid prices on the first day prior thereto on which such
prices existed; or (c) if neither (a) nor (b) is applicable, by any means deemed
fair and reasonable by the Committee (as defined below) which determination
shall be final and binding on all parties.
(m) "NON-QUALIFIED STOCK OPTION" shall mean an Option, not intended to
qualify as an "incentive stock option" as defined in Section 422 of the Code, to
purchase Capital Stock of the Corporation.
(n) "OFFICER" shall mean a person who possesses the authority of an
"officer" as that term is used in Rule 4460(i)(1)(A) of the Rules of the
National Association of Securities Dealers, Inc. For purposes of the Plan, a
person in the position of "Vice President" or higher shall be classified as an
"Officer" unless the Board or the Committee expressly finds that such person
does not possess the authority of an "officer" as that term is used in Rule
4460(i)(1)(A) of the Rules of the National Association of Securities Dealers,
Inc.
(o) "OPTION" shall mean a Non-Qualified Stock Option granted pursuant
to the Plan.
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(p) "OPTION AGREEMENT" shall mean a written agreement pursuant to which
the Corporation grants an Option to an Optionee and sets the terms and
conditions of the Option. Each Option Agreement shall be subject to the terms
and conditions of the Plan.
(q) "OPTION DATE" shall mean the date upon which an Option Agreement
for an Option granted pursuant to the Plan is duly executed by or on behalf of
the Corporation.
(r) "OPTION STOCK" shall mean the voting common stock of the
Corporation, par value of One Cent ($.01) per share (subject to adjustment as
described in Section 7) reserved for Options pursuant to this Plan, or any other
class of stock of the Corporation which may be substituted therefor by exchange,
stock split or otherwise.
(s) "OPTIONEE" shall mean an Employee, Director or Consultant of the
Corporation or one of its Affiliates to whom an Option has been granted under
the Plan or, if applicable, such other person who holds an outstanding Option.
(t) "PLAN" shall mean this 1999 Stock Option Plan (formerly known as
the 1999 Non-Officer Stock Option Plan), as amended hereafter from time to time.
(u) "SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
3. OPTIONS AVAILABLE UNDER PLAN. The Corporation's authorized Capital Stock
in an amount equal to Five Million Four Hundred Fifty Thousand (5,450,000)
shares is hereby made available, and shall be reserved for issuance under this
Plan. The aggregate number of shares available under this Plan shall be subject
to adjustment on the occurrence of any of the events and in the manner set forth
in Section 7. Except as provided in Section 7, in no event shall the number of
shares reserved be reduced below the number of shares issuable upon exercise of
outstanding Options. If an Option shall expire or terminate for any reason
without having been exercised in full, the unpurchased shares shall (unless the
Plan shall have been terminated) become available for other Options under the
Plan.
4. ADMINISTRATION. The Plan shall be administered by the Committee. The
Corporation shall grant Options pursuant to the Plan upon determinations of the
Committee as to which of the eligible persons shall be granted Options, the
number of shares to be optioned and the term during which any such Options may
be exercised. The Committee may from time to time adopt rules and regulations
for carrying out the Plan and shall have authority and discretion to interpret
and construe any provision of the Plan. Each determination, interpretation or
other action made or taken by the Committee pursuant to the provisions of the
Plan shall be final and conclusive. No member of the Committee will be liable
for any action or determination made in good faith with respect to the Plan or
any Option granted under the Plan.
5. ELIGIBILITY FOR NON-QUALIFIED STOCK OPTIONS.
(a) ELIGIBLE PERSONS. Non-Qualified Stock Options may be granted to
Employees, Directors and Consultants.
(b) RESTRICTIONS ON ELIGIBILITY. Notwithstanding the foregoing, the
aggregate number of shares issued pursuant to Options granted to Officers and
Directors cannot exceed
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forty percent (40%) of the number of shares reserved for issuance under the Plan
as determined at the time of each such issuance to an Officer or Director,
except that there shall be excluded from this calculation shares issued to
Officers not previously employed by the Corporation pursuant to Options granted
as an inducement essential to such individuals entering into employment
contracts with the Corporation.
(c) CONSULTANTS.
(i) A Consultant shall not be eligible for the grant of an Option if,
at the time of grant, a Form S-8 Registration Statement under the Securities Act
("Form S-8") is not available to register either the offer or the sale of the
Corporation's securities to such Consultant because of the nature of the
services that the Consultant is providing to the Corporation, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Corporation determines both (i) that
such grant (A) shall be registered in another manner under the Securities Act
(E.G., on a Form S-3 Registration Statement) or (B) does not require
registration under the Securities Act in order to comply with the requirements
of the Securities Act, if applicable, and (ii) that such grant complies with the
securities laws of all other relevant jurisdictions.
(ii) Form S-8 generally is available to consultants and advisors only
if (i) they are natural persons; (ii) they provide bona fide services to the
issuer, its parents, its majority-owned subsidiaries or majority-owned
subsidiaries of the issuer's parent; and (iii) the services are not in
connection with the offer or sale of securities in a capital-raising
transaction, and do not directly or indirectly promote or maintain a market for
the issuer's securities.
6. TERMS AND CONDITIONS OF OPTIONS. Whenever the Committee shall designate
an Optionee, it shall communicate to the Secretary of the Corporation the name
of the Optionee, the number of shares to be optioned and such other terms and
conditions as it shall determine, not inconsistent with the provisions of this
Plan. The chief executive officer or other officer of the Corporation shall then
enter into an Option Agreement with the Optionee, complying with and subject to
the following terms and conditions and setting forth such other terms and
conditions of the Option as determined by the Committee:
(a) NUMBER OF SHARES AND OPTION PRICE. The Option Agreement shall state
the total number of shares to which it pertains. The price of Option Stock for a
Non-Qualified Stock Option shall be determined by the Committee and may be less
than the Fair Market Value at the Option Date. The Option price shall be subject
to adjustment as provided in Section 7 hereof.
(b) TIME AND MANNER OF EXERCISE OF OPTION. Options granted hereunder
shall be exercisable as determined by the Committee at the time of the grant of
such Options. Notwithstanding the foregoing, no Option may be exercised after
ten (10) years from the date on which the Option was granted.
(c) TERMINATION OF CONTINUOUS SERVICE, EXCEPT DEATH OR DISABILITY. In
the event that the Continuous Service of an Optionee shall cease for any reason
other than his or her death, disability or "for cause," any vested outstanding
Options shall terminate three (3) months after the termination of Continuous
Service or at the time specified in the Option Agreement; provided, however,
that such vested outstanding Options shall not be
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exercisable for a period greater than three (3) months after the termination of
Continuous Service. Any vested Options not exercised within the period specified
in the Option Agreement shall terminate at the expiration of such period. If no
such period is specified in the Option Agreement, then any vested outstanding
Options shall terminate at the time of the Optionee's termination of Continuous
Service. In the event that Optionee shall be terminated "for cause" including
but not limited to: (i) willful breach of any agreement entered into with the
Corporation; (ii) misappropriation of the Corporation's property, fraud,
embezzlement, breach of fiduciary duty, other acts of dishonesty against the
Corporation; or (iii) conviction of any felony or crime involving moral
turpitude, the Option shall terminate as of the date of the Optionee's
termination of Continuous Service.
(d) DEATH OR DISABILITY OF OPTIONEE. If the Optionee shall die or
become disabled within the definition of Section 22(e)(3) of the Code while in
the employ of the Corporation or any Affiliate or if the Optionee shall die
within the period after the termination of his or her Continuous Service with
the Corporation or any Affiliate as provided in paragraph (c) of this Section,
and in either case shall not have fully exercised his or her vested Options, any
vested Options granted pursuant to the Plan which were exercisable at the date
of termination of Continuous Service shall terminate at the time specified in
the Option Agreement; provided, however, that such vested Options shall not be
exercisable for a period greater than one (1) year following his or her death or
date of disability. If no such periods are specified in the Option Agreement,
then any vested outstanding Options shall be exercisable only within: (i) six
(6) months following the Optionee's death and (ii) thirty (30) days following
the Optionee's disability. In the case of death, such Option shall be exercised
pursuant to paragraph (e) of this Section by the person or persons to whom the
Optionee's rights under the Option shall pass by the Optionee's will or by the
laws of descent and distribution, and only to the extent that such Options were
exercisable at the time of death.
(e) TRANSFER OF OPTION. Each Option granted hereunder shall, by its
terms, not be transferable by the Optionee other than by will or by the laws of
descent and distribution, and shall be, during the Optionee's lifetime,
exercisable only by the Optionee or Optionee's guardian or legal representative.
Except as permitted by the preceding sentence, each Option granted under the
Plan and the rights and privileges thereby conferred shall not be transferred,
assigned or pledged in any way (whether by operation of law or otherwise) and
shall not be subject to execution, attachment or similar process. Upon any
attempt to so transfer, assign, pledge, or otherwise dispose of the Option, or
of any right or privilege conferred thereby, contrary to the provisions of the
Option or the Plan, or upon levy of any attachment or similar process upon such
rights and privileges, the Option, and such rights and privileges, shall
immediately become null and void.
(f) MANNER OF EXERCISE OF OPTIONS. An Option may be exercised, in whole
or in part, at such time or times and with such rights with respect to such
shares, which have accrued and are in effect. Such Option shall be exercisable
only by: (i) written notice to the Corporation of intent to exercise the Option
with respect to a specified number of shares of stock; (ii) tendering the
original Option Agreement to the Corporation; and (iii) payment to the
Corporation of the amount of the Option purchase price for the number of shares
of stock with respect to which the Option is then exercised. Payment of the
Option purchase price shall be made in the manner set forth in the Option
Agreement, which may be in: (i) cash, check or equivalent form;
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(ii) by delivery of shares of common stock of the Corporation which have been
owned for no less than six (6) months, with a Fair Market Value equal to the
Option purchase price; (iii) by a combination of cash and shares of common stock
of the Corporation, which valued together shall equal the Option purchase price;
provided, however, that there shall be no such exercise at any time as to fewer
than one hundred (100) shares or all of the remaining shares then purchasable by
the Optionee or person exercising the Option. When all shares of optioned stock
covered by the Option Agreement have been issued to the Optionee, or the Option
shall expire, the Option Agreement shall be canceled.
(g) OPTION CERTIFICATE. The Board of Directors shall have discretion to
issue a certificate representing an Option granted pursuant to this Plan. Such
certificate shall be surrendered to the Corporation upon exercise of the Option.
(h) DELIVERY OF CERTIFICATE. Except where shares are held for unpaid
withholding taxes, between fifteen (15) and thirty (30) days after receipt of
the written notice and payment specified above, the Corporation shall deliver to
the Optionee certificates for the number of shares with respect to which the
Option has been exercised, issued in the Optionee's name; provided, however,
that such delivery shall be deemed effected for all purposes when the
Corporation, or the stock transfer agent for the Corporation, shall have
deposited such certificates in the United States mail, postage prepaid,
addressed to the Optionee and the address specified in the written notice of
exercise.
(i) OTHER PROVISIONS. The Option Agreements under this Section shall
contain such other provisions as the Committee shall deem advisable.
7. ADJUSTMENTS.
(a) CAPITALIZATION ADJUSTMENTS. If any change is made in the Capital
Stock subject to the Plan, or subject to any Option, without the receipt of
consideration by the Corporation (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 Corporation), the Plan will be appropriately
adjusted in the class(es) and maximum number of shares subject to the Plan
pursuant to Section 3 and the maximum number of shares subject to award to any
person pursuant to Sections 5 and 6, and the outstanding Options will be
appropriately adjusted in the class(es) and number of shares and price per share
of stock subject to such outstanding Options. Such adjustments shall be made by
the Board of Directors of the Corporation, the determination of which shall be
final, binding and conclusive. (The conversion of any convertible securities of
the Corporation shall not be treated as a transaction "without receipt of
consideration" by the Corporation.)
(b) CHANGE IN CONTROL-ASSET SALE, MERGER, CONSOLIDATION OR REVERSE
MERGER. In the event of (1) a sale of substantially all of the assets of the
Corporation, (2) a merger or consolidation in which the Corporation is not the
surviving corporation or (3) a reverse merger in which the Corporation is the
surviving corporation but the shares of Capital 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 any surviving
corporation or acquiring
6.
corporation shall assume any Options outstanding under the Plan or shall
substitute similar Options (including an award to acquire the same consideration
paid to the stockholders in the transaction described in this Section 7,
paragraph (b)) for those outstanding under the Plan. 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 but subject to
the restrictions in this Section 7, paragraph (d), 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) CHANGE IN CONTROL-SECURITIES ACQUISITION. In the event of an
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
Corporation or an Affiliate) of the beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act, or comparable successor rule) of
securities of the Corporation representing at least fifty percent (50%) of the
combined voting power entitled to vote in the election of directors (other than
an acquisition pursuant to Section 7, paragraph (b) above), then with respect to
Options held by Optionees whose Continuous Service has not terminated and
subject to the restrictions in Section 7, paragraph (d), the vesting of such
Options shall be accelerated in full.
(d) POOLING OF INTERESTS. If the Corporation and the other party to the
transaction constituting a "change in control" as described in this Section 7
agree that such transaction is to be treated as a "pooling of interests" for
financial reporting purposes, and if such transaction in fact is so treated,
then the accelerated vesting of Options described in this Section 7 shall not
occur to the extent that the Corporation's independent public accountants and
such other party's independent public accountants separately determine in good
faith that such acceleration would preclude the use of "pooling of interests"
accounting.
8. NO RIGHTS AS STOCKHOLDER. An Optionee shall not, by reason of any Option
granted hereunder, have any right of a stockholder of the Corporation with
respect to the shares covered by his Option until such shares shall have been
issued to the Optionee.
9. NO OBLIGATION TO EXERCISE OPTION. The granting of an Option shall impose
no obligation upon the Optionee to exercise such Option. Neither shall the Plan
confer upon the Optionee any rights respecting continued Continuous Service nor
limit the Optionee's rights or the Corporation's rights to terminate such
Continuous Service.
10. WITHHOLDING TAXES. Whenever under the Plan shares of Option Stock are to
be issued upon exercise of the Options granted hereunder, and prior to the
delivery of any certificate or certificates for said shares by the Corporation,
the Corporation shall have the right to require the Optionee to remit to the
Corporation an amount sufficient to satisfy any federal and state withholding or
other employment taxes resulting from such exercise. In the event that
withholding taxes are not paid within five days after the date of exercise, to
the extent permitted by law the Corporation shall have the right, but not the
obligation, to cause such withholding taxes to be satisfied by reducing the
number of shares of stock deliverable or by offsetting such withholding taxes
against amounts otherwise due from the Corporation to the Optionee;
7.
provided, however, that no shares are withheld with a value exceeding the
minimum amount of tax required to be withheld by law. If withholding taxes are
paid by reduction of the number of shares deliverable to Optionee, such shares
shall be valued at the Fair Market Value as of the fifth business day following
the date of exercise.
11. MODIFICATION OF OUTSTANDING OPTIONS. The Committee may accelerate the
exercisability of an outstanding Option and may authorize modification of any
outstanding Option with the consent of the Optionee when and subject to such
conditions as are deemed to be in the best interests of the Corporation and in
accordance with the purposes of the Plan.
12. FOREIGN EMPLOYEES. Without amending the Plan, the Committee may grant
Options to eligible Employees, Directors and Consultants who are foreign
nationals on such terms and conditions different from those specified in this
Plan as may in the judgment of the Committee be necessary or desirable to foster
and promote achievement of the purposes of the Plan, and, in furtherance of such
purposes the Committee may make such modification, amendments, procedures,
subplans and the like as may be necessary or advisable to comply with provisions
of laws in other countries in which the Corporation operates or has Employees,
Directors and Consultants.
13. LIQUIDATION. Upon the complete liquidation of the Corporation, any
unexercised Options theretofore granted under this Plan shall be deemed
canceled, except as otherwise provided in Section 7 in connection with a merger,
consolidation or reorganization of the Corporation.
14. CONDITIONS UPON ISSUANCE OF SHARES. The Corporation may require the
Optionee (or any person to whom an Option is transferred under Section 6
paragraph (e)) to execute such documents and to provide such representations,
written assurances or information which the Corporation shall determine is
necessary, desirable or appropriate to comply with applicable securities and
other laws as a condition of granting an Option to such Optionee or permitting
the Optionee (or any person to whom an Option is transferred under Section 6
paragraph (e)) to exercise such Option. The Corporation may, upon advice of
counsel to the Corporation, place legends on stock certificates issued under the
Plan as such counsel deems necessary or appropriate in order to comply with
applicable securities and other laws, including, but not limited to, legends
restricting the transfer of the Option Stock.
15. TERMINATION AND AMENDMENT OF THE PLAN. This Plan shall terminate when
all reserved Option Stock has been issued and cannot return to the reserve or at
such earlier time as the Board of Directors shall determine. Any termination
shall not affect any Options then outstanding under the Plan.
The Board or the Committee at any time, and from time to time, may
amend the Plan.
16. INDEMNIFICATION. In addition to such other rights of indemnification as
they may have and subject to limitations of applicable law, the members of the
Committee shall be indemnified by the Corporation against all costs and expenses
reasonably incurred by them in connection with any action, suit or proceeding to
which they or any of them may be a party by reason of any action taken or
failure to act under or in connection with the Plan or any rights granted
8.
thereunder and against all amounts paid to them in settlement thereof or paid by
them in satisfaction of a judgment of any such action, suit or proceeding. The
Committee member or members shall notify the Corporation in writing, giving the
Corporation an opportunity at its own cost to defend the same before such
Committee member or members undertake to defend the same on their own behalf.
17. GENERAL PROVISIONS. If any day on or before which action under the Plan
must be taken falls on a Saturday, Sunday, or legal holiday, such action may be
taken on the next succeeding day not a Saturday, Sunday or legal holiday. To the
extent that federal laws do not otherwise control, the Plan and all
determinations made and actions taken pursuant hereto shall be governed by and
construed under the laws of the State of Delaware.
9.
DIGITAL RIVER, INC.
NOTICE OF EXERCISE
Digital River, Inc.
Re: Exercise of Stock Options
1999 Stock Option Plan (formerly known as the 1999
Non-Officer Stock Option Plan)
Ladies and Gentlemen:
Pursuant to the terms of that certain Stock Option Agreement under the Digital
River, Inc. 1999 Stock Option Plan (formerly known as the 1999 Non-Officer Stock
Option Plan), this Letter is to notify you that I hereby exercise my outstanding
stock options to purchase_______________ shares of common stock (the "Shares")
of Digital River, Inc. Attached is (indicate by placing an "X" in the
appropriate box):
| | (i) a check in the amount of $__________ made payable to Digital
River, Inc.;
| | (ii) another form of consideration acceptable to Digital River, Inc.
(explain below):_______________________________________________________________
____ in payment of the exercise price of $_________ per share.
I acknowledge prior receipt of a copy of the Digital River, Inc. 1999 Stock
Option Plan (formerly known as the 1999 Non-Officer Stock Option Plan). I
understand that I may suffer adverse tax consequences as the result of my
purchase of Shares. I represent that I have consulted with any tax consultants I
deem advisable in connection with the purchase or disposition of the Shares and
that I am not relying on Digital River, Inc. for any tax advice.
Very Truly Yours,
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Signature
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Print Name
Date:--------------------------
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