-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GzLhcoM22y9FENCqkMG2lmg1cFAzlCtTl65FplQBeGx69JBVTyLKQ29yyDTfo/l8 RP9vSFt3IQRZiQuL1Two0A== /in/edgar/work/20000824/0001095811-00-003014/0001095811-00-003014.txt : 20000922 0001095811-00-003014.hdr.sgml : 20000922 ACCESSION NUMBER: 0001095811-00-003014 CONFORMED SUBMISSION TYPE: S-8 PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20000824 EFFECTIVENESS DATE: 20000824 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRITICAL PATH INC CENTRAL INDEX KEY: 0001060801 STANDARD INDUSTRIAL CLASSIFICATION: [7389 ] IRS NUMBER: 911788300 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-8 SEC ACT: SEC FILE NUMBER: 333-44418 FILM NUMBER: 708951 BUSINESS ADDRESS: STREET 1: 320 FIRST STREET CITY: SAN FRANCISCO STATE: CA ZIP: 94105 BUSINESS PHONE: 4158088800 MAIL ADDRESS: STREET 1: 320 FIRST STREET CITY: SAN FRNACISCO STATE: CA ZIP: 94105 S-8 1 s-8.txt FORM S-8 1 As filed with the Securities and Exchange Commission on August , 2000 Registration No. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM S-8 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 CRITICAL PATH, INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) 320 FIRST STREET CALIFORNIA SAN FRANCISCO, CALIFORNIA 94105 91-17883000 (STATE OF INCORPORATION (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (I.R.S. EMPLOYER) IDENTIFICATION NO.)
NETMOSPHERE 1997 STOCK OPTION PLAN NETMOSPHERE 1999 EQUITY INCENTIVE PLAN (FULL TITLE OF THE PLANS) DOUGLAS T. HICKEY CHIEF EXECUTIVE OFFICER CRITICAL PATH, INC. 320 1ST STREET SAN FRANCISCO, CALIFORNIA 94105 (415) 808-8800 (NAME, ADDRESS, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) Copy to: MARK L. REINSTRA, ESQ. WILSON SONSINI GOODRICH & ROSATI PROFESSIONAL CORPORATION 650 PAGE MILL ROAD PALO ALTO, CA 94304 (650) 493-9300 CALCULATION OF REGISTRATION FEE
==================================================================================================================================== PROPOSED PROPOSED MAXIMUM MAXIMUM MAXIMUM AMOUNT OFFERING AGGREGATE AMOUNT OF TITLE OF SECURITIES TO BE PRICE OFFERING REGISTRATION TO BE REGISTERED REGISTERED (1) PER SHARE PRICE FEE - ------------------------------------------------------------------------------------------------------------------------------------ Common Stock, par value $0.001 to be issued upon exercise of options granted and outstanding and options authorized and unissued under the Netmosphere 1997 Stock Option Plan...................... 20,268 shares $ 5.24 (2) $2,741,067 $723.64 Common Stock, par value $0.001 to be issued upon exercise of options granted and outstanding and options authorized and unissued under the Netmosphere 1999 Equity Incentive Plan.................. 165,048 shares $20.57 (3) $ 106,223 $ 28.04 Total........................ 185,316 shares $2,847,290 $751.68 ====================================================================================================================================
(1) This Registration Statement shall also cover any additional shares of Common Stock which become issuable under the Plan being registered pursuant to this Registration Statement by reason of any stock dividend, stock split, recapitalization or any other similar transaction effected without the receipt of consideration which results in an increase in the number of the Registrant's outstanding shares of Common Stock. (2) Computed in accordance with Rules 457(h) and 457(c) under the Securities Act of 1933. Such computation is based on the weighted average exercise price of $3.46 per share covering 19,563 authorized but unissued shares that are subject to options that have been granted and the estimated exercise price of $54.66 per share covering 705 authorized but unissued shares that are subject to options that have not been granted. The $54.66 estimated exercise price was computed by averaging the high and low prices of a share of Critical Path, Inc. Common Stock as reported on the Nasdaq National Market on August 23, 2000. (3) Computed in accordance with Rules 457(h) and 457(c) under the Securities Act of 1933. Such computation is based on the weighted average exercise price of $18.37 per share covering 125,155 authorized but unissued shares that are subject to options that have been granted and the estimated exercise price of $54.66 per share covering 8,070 authorized but unissued shares that are subject to options that have not been granted. The $54.66 estimated exercise price was computed by averaging the high and low prices of a share of Critical Path, Inc. Common Stock as reported on the Nasdaq National Market on August 23, 2000. ================================================================================ 2 CRITICAL PATH, INC. REGISTRATION STATEMENT ON FORM S-8 PART II Item 3. Incorporation of Documents by Reference. The following documents previously filed by Critical Path, Inc. (the "Registrant") with the Securities and Exchange Commission (the "SEC") are hereby incorporated by reference in this Registration Statement: (a) The Registrant's Current Report on Form 8-K, dated August 23, 2000; (b) The Registrant's Current Report on Form 8-K/A, dated March 8, 2000; (c) The Registrant's Current Report on Form 8-K, dated February 3, 2000; (d) The Registrant's Annual Report on Form 10-K/A for the fiscal year ended December 31, 1999; (e) The Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2000; (f) The Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 2000; and (g) The description of the Registrant's Common Stock contained in the Registrant's Registration Statement on Form 8-A, dated February 1, 1999. All documents filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, on or after the date of this Registration Statement prior to the filing of a post-effective amendment which indicates that all securities offered hereby have been sold or which deregisters all securities then remaining unsold, shall be deemed to be incorporated by reference in this Registration Statement and to be part hereof from the date of the filing of such documents. Any statement contained in this Registration Statement or in a document incorporated by reference in this Registration Statement shall be deemed to be modified or superseded for purposes of this Registration Statement to the extent that a statement contained in this Registration Statement or in any subsequently filed document that is deemed to be incorporated by reference in this Registration Statement modifies or supersedes such statement. Item 4. Description of Securities. Not applicable. Item 5. Interests of Named Experts and Counsel. Not applicable. 2 3 Item 6. Indemnification of Directors and Officers. The Registrant's Amended and Restated Articles of Incorporation limit the liability of the Registrant's directors for monetary damages to the maximum extent permitted by California law. Such limitation of liability has no effect on the availability of equitable remedies, such as injunctive relief or rescission. The Registrant's Amended and Restated Bylaws provide that the Registrant will indemnify its directors and officers and may indemnify its employees and agents (other than officers and directors) against certain liabilities to the maximum extent permitted by California law. The Registrant has entered into indemnification agreements with each of its current directors and officers and certain of its key employees that provide for indemnification of, and advancement of expenses to, such persons to the maximum extent permitted by California law, including by reason of action or inaction occurring in the past and circumstances in which indemnification and advancement of expenses are discretionary under California law. At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of the Registrant in which indemnification would be required or permitted. The Registrant is not aware of any threatened litigation or proceeding that may result in a claim for such indemnification. Item 7. Exemption from Registration Claimed. Not applicable. Item 8. Exhibits.
EXHIBIT NUMBER DESCRIPTION ------- ---------------------------------------------------------------------- 5.1 Opinion of Wilson Sonsini Goodrich & Rosati 10.1 Netmosphere 1997 Stock Option Plan 10.2 Netmosphere 1999 Equity Incentive Plan 23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants 23.2 Consent of Arthur Andersen LLP, Independent Accountants 23.3 Consent of Wilson Sonsini Goodrich & Rosati (contained in Exhibit 5.1) 24.1 Power of Attorney (see signature page)
Item 9. Undertakings. 1. The Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement to include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3 4 (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. 2. The Registrant hereby undertakes that, for purposes of determining any liability under the Securities Act, each filing of the Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the Exchange Act that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. 3. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Registrant pursuant to law, the Registrant's Articles of Incorporation, Bylaws or indemnification agreements, the Registrant has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in a successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. 4 5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Francisco, State of California, on this 23rd day of August, 2000. CRITICAL PATH, INC. By: /s/ DOUGLAS T. HICKEY ------------------------------------ Douglas T. Hickey Chief Executive Officer and Director POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS, that the person whose signature appears below constitutes and appoints Douglas T. Hickey and Mark J. Rubash, or either of them, his or her attorney-in-fact, with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Registration Statement on Form S-8, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in- fact, or his substitute or substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ DOUGLAS T. HICKEY Chief Executive Officer and Director August 23, 2000 - --------------------------------------------- (Principal Executive Officer) Douglas T. Hickey /s/ MARK J. RUBASH Executive Vice-President, Chief August 23, 2000 - --------------------------------------------- Financial Officer (Principal Financial Mark J. Rubash and Accounting Officer) /s/ DAVID C. HAYDEN Chairman of the Board August 23, 2000 - --------------------------------------------- David C. Hayden /s/ CHRISTOS COTSAKOS Director August 23, 2000 - --------------------------------------------- Christos M. Cotsakos /s/ LISA GANSKY Director August 23, 2000 - --------------------------------------------- Lisa Gansky /s/ KEVIN HARVEY Director August 23, 2000 - --------------------------------------------- Kevin R. Harvey
5 6
SIGNATURE TITLE DATE --------- ----- ---- Director August 23, 2000 - --------------------------------------------- James A. Smith /s/ G. ZACHARY Director August 23, 2000 - --------------------------------------------- George Zachary
6 7 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION ------- ---------------------------------------------------------------------- 5.1 Opinion of Wilson Sonsini Goodrich & Rosati 10.1 Netmosphere 1997 Stock Option Plan 10.2 Netmosphere 1999 Equity Incentive Plan 23.1 Consent of PricewaterhouseCoopers LLP, Independent Accountants 23.2 Consent of Arthur Andersen LLP, Independent Accountants 23.3 Consent of Wilson Sonsini Goodrich & Rosati (contained in Exhibit 5.1) 24.1 Power of Attorney (see signature page)
EX-5.1 2 ex5-1.txt EXHIBIT 5.1 1 Exhibit 5.1 [Letterhead of Wilson Sonsini Goodrich & Rosati] August 23, 2000 Critical Path, Inc. 320 1st Street San Francisco, California 94105 Re: Registration Statement on Form S-8 Ladies and Gentlemen: We have examined the Registration Statement on Form S-8 to be filed by you with the Securities and Exchange Commission on or about August 24, 2000 (the "Registration Statement"), in connection with the registration under the Securities Act of 1933, as amended, of an aggregate of 185,316 shares of Common Stock, par value $0.001(the "Shares"), both issued and outstanding and unissued and reserved for issuance pursuant to the Netmosphere 1997 Stock Option Plan and the Netmosphere 1999 Equity Incentive Plan (the "Plans"). As your legal counsel, we have examined the proceedings taken and are familiar with the proceedings proposed to be taken by you in connection with the sale and issuance of the Shares under the Plans. It is our opinion that the Shares will be, when issued and sold in the manner referred to in the Plans, legally and validly issued, fully paid and nonassessable. We consent to the use of this opinion as an exhibit to the Registration Statement and further consent to the use of our name wherever appearing in the Registration Statement and any subsequent amendment thereto. Very truly yours, WILSON SONSINI GOODRICH & ROSATI Professional Corporation /s/ Wilson Sonsini Goodrich & Rosati ------------------------------------ EX-10.1 3 ex10-1.txt EXHIBIT 10.1 1 EXHIBIT 10.1 NETMOSPHERE, INC. 1997 STOCK OPTION PLAN As Adopted Effective February 25, 1997 Amended January 12, 1998 and Amended September 11, 1998 1. Purpose. (a) The purpose of the Netmosphere, Inc. 1997 Stock Option Plan (the "Plan") is to provide a means whereby selected eligible employees and officers and directors of and consultants to Netmosphere, Inc., a California corporation (the "Company"), and its Affiliates, if any, as defined below, may be given a favorable opportunity to acquire common stock of the Company (the "Common Stock"), thereby encouraging such persons to accept or continue a qualifying relationship with the Company; increasing the interest of such persons in the Company's welfare through participation in the growth and value of the Common Stock; and furnishing such persons with an incentive to improve operations and increase profits of the Company. The terms "Affiliate" or "Affiliates" as used in the Plan shall mean any parent corporation or subsidiary corporation of the Company, as those terms are defined in Sections 424(e) and (f) of the Internal Revenue Code of 1986, as amended (the "Code"). (b) To accomplish the foregoing objectives, this Plan provides a means whereby employees, directors, and consultants may receive options to purchase Common Stock. 2. Stock Options. Stock options granted pursuant to the Plan may, at the discretion of the Board of Directors of the Company, be granted either as an Incentive Stock Option ("ISO") or as a Nonstatutory Stock Option ("NSO"). An ISO shall mean an option described in Section 422 of the Code. An NSO shall mean any option not meeting the requirements of Section 422 of the Code. An option designated as an NSO will not be treated as an ISO. 3. Administration. The Board of Directors (the "Board"), whose authority shall be plenary, shall administer the Plan, unless and until such time as the Board delegates administration of the Plan pursuant to subsection 3(b), below. (a) The Board, whose determinations shall be conclusive, shall have the power, subject to and within the limits of the express provisions of the Plan: (i) To grant options pursuant to the Plan. (ii) To determine from time to time which of the eligible persons described in Section 5, below, shall be granted options under the Plan, the number of shares for which each option shall be granted, the term of each granted option and the time or times during the term of each option within which all or portions of each option may be exercised (which at the Board's discretion may be accelerated, if allowed under applicable law). 2 (iii) To construe and interpret the Plan and options granted under it and to establish, amend, and revoke rules and regulations for its administration. The Board, in the exercise of this power, shall generally determine all questions of policy and expediency that may arise and may correct any defect, omission or inconsistency in the Plan or in any option agreement with respect to the Plan in a manner and to the extent it shall deem necessary or expedient to make the Plan fully effective. (iv) To grant options in exchange for cancellation of options granted earlier at different exercise prices; provided, however, nothing contained herein shall empower the Board to grant an ISO under conditions or pursuant to terms that are inconsistent with the requirements of subsection 4(b), below, or Section 422 of the Code. (v) To prescribe the terms and provisions of each option granted (which need not be identical) and the form of written instrument that shall constitute the option agreement. (vi) To amend the Plan as provided in Section 11, below. (vii) Generally, to exercise such powers and to perform such acts as are deemed necessary or expedient to promote the best interests of the Company. (viii) To take appropriate action to cause any option granted hereunder to cease to be an ISO; provided, however, no such action may be taken by the Board without the written consent of the affected optionee. (b) The Board may, by resolution, delegate administration of the Plan (including, without limitation, the Board's powers under subsection 3(b) above) to a committee acting under the authority of the Board. In the event that the Company has registered any equity security under Section 12 of the Securities and Exchange Act of 1934, as amended (the "Act"), such committee shall consist of not less than two (2) members of the Board each of whom shall be a "disinterested person" and an "outside director". A member of the Board is a "disinterested person" if at the time she exercises discretion in administering the Plan she is not eligible and has not at any time within one year prior thereto been eligible for selection as a person to whom stock may be allocated or to whom stock options or stock appreciation rights may be granted pursuant to the Plan or any other plan of the Company (or Affiliate) entitling the participants therein to acquire stock, stock options or stock appreciation rights of the Company or (Affiliate), or if she otherwise satisfies the requirements of a "disinterested person" within the meaning of Rule 16b-3 of the Act. A member of the Board is an "outside director" if she is not a current employee of the Corporation (or Affiliate), is not a former employee of the Corporation (or Affiliate) who is receiving compensation for prior services, was not an officer of the Corporation (or Affiliate) at any time, and currently is not receiving compensation for personal services to the Corporation (or Affiliate) in any capacity other than as a member of the Board, or if she otherwise satisfies the requirements of an "outside director" as such term is defined for purposes of Section 162(m) of the Code. The Board shall have complete discretion to determine the composition, structure, form, term and operation of any committee established to administer the Plan. The Board at any time may revest in the Board the administration of the Plan. 2 3 4. Shares Subject to Plan and to Option. (a) Subject provisions of Section 10, below (relating to adjustments upon changes in stock), the stock which may be sold pursuant to options granted under the Plan shall not exceed in the aggregate Two Million Six Hundred Thousand (2,600,000) shares of the Company's authorized Common Stock and may be unissued shares, reacquired shares, or shares bought on the market for the purpose of issuance under the Plan. If any options granted under the Plan shall for any reason terminate or expire without having been exercised in full, the stock not purchased under such options shall be available again for the purpose of the Plan. (b) If the aggregate fair market value of stock with respect to which ISOs are exercisable for the first time by any individual during any calendar year exceeds the amount provided in Section 442(d) of the Code, such options representing stock in excess of the Section 422(d) annual limitation shall be deemed to be a grant of an NSO to the extent of such excess. 5. Eligibility. (a) All employees of the Company and its Affiliates are eligible to receive ISOs and only employees of the Company and its Affiliates may be granted ISOs. Directors of the Company who are not also employees of the Company shall not be eligible for ISOs, but are eligible for NSOs. Employees and independent contractors s hall also be eligible for NSOs. (b) No option issued under the Plan, may be granted to a person who, at the time such option would be granted, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of outstanding capital stock of the Company or its Affiliate unless the option price is at least one hundred percent (100%) in the case of an NSO, one hundred ten percent (110%) in the case of an ISO, of the fair market value of the stock subject to the option and such option by its terms is not exercisable after five (5) years from the date such option is granted. Any employee may hold more than one (1) option at any time. For purposes of this subsection 3(b), in determining stock ownership, an optionee shall be considered as owning the voting capital stock owned, directly or indirectly, by or for his brothers and sisters, spouse, ancestors and lineal descendants. Voting capital stock owned, directly or indirectly, by or for a corporation, partnership, estate or trust shall be considered as being owned proportionately by or for its shareholders, partners or beneficiaries, as applicable. Common Stock with respect to which any such optionee holds an option shall not be counted. Additionally, for purposes of this subsection 3(b), outstanding capital stock shall include all capital stock actually issued and outstanding immediately after the grant of the option to the optionee. Outstanding capital stock shall not include capital stock authorized for issue under outstanding options held by the optionee or by any other person. 6. Terms of Options. Options granted pursuant to the Plan need not be identical, but each option shall be granted within ten (10) years from the date the Plan is adopted by the Board or approved by the shareholders, whichever is earlier, shall specify the number of shares to which it pertains and shall be subject to the following terms and conditions: 3 4 (a) The purchase price of each option shall be determined by the administrator of the Plan at the time the option is granted, but shall in no event, except as otherwise set forth in Section 5, above, be less than eighty-five percent (85%) in the case of an NSO, or one hundred percent (100%) in the case of an ISO, of the fair market value of the stock subject to the option on the date the option is granted. For all purposes of the Plan, the fair market value of the Common Stock shall be, if the Stock is publicly traded, its closing bid price on NASDAQ or the over-the-counter market, or if is traded on another exchange, the last price at which it traded on such exchange. If the stock is not publicly traded, the fair market value shall be such value as is determined in good faith by the Board of Directors by taking into consideration the following factors: the Company's net worth, prospective earning power and dividend-paying capacity, and other relevant factors. "Other relevant factors" include the goodwill of the business; the economic outlook in the particular industry; the Company's position in the industry and its management, the degree of control of the business represented by the block of stock to be valued; and the values of securities of corporations engaged in the same or similar lines of business which are listed on a stock exchange. In addition to the relevant factors described above, consideration shall also be given to nonoperating assets including proceeds of life insurance policies payable to or for the benefit of the Company, to the extent such nonoperating assets have not been taken into account in the determination of net worth, prospective earning power, and dividend-earning capacity. (b) Except as otherwise set forth in Section 5, above, the term of any option shall not be greater than ten (10) years from the date it was granted. (c) An option by its terms, shall not be transferable otherwise than by will or the laws of descent and distribution and may be exercisable, during the lifetime of the option holder, only by the individual to whom the option is granted. Notwithstanding the above, if an employee is determined to be incompetent by a court of proper jurisdiction, her legal representative may exercise the option on her behalf. (d) Each option shall become exercisable on an annual basis as to not less than twenty percent (20%) of the total number of shares subject thereto. (e) Options under the Plan may be exercised by a participant regardless of whether she is employed by the Company or an Affiliate at the time of exercise. (f) Upon the termination of a participant's employment (defined as the date the participant is no longer employed by either the Company or any of its Affiliates), her rights to exercise an option then held by her shall be only as follows: (i) If a participant's employment is terminated for any reason other than death of the participant, she may, within not less than three (3) months following such termination, or within such longer period as the Board may fix, exercise the option to the extent such option was exercisable by the participant on the date of termination of his employment, or to the extent otherwise specified by the Board, which may so specify at a time that is subsequent 4 5 to the date of the termination of his employment, provided, the date of exercise is in no event after the expiration of the term of the option. However, if the participant's employment is terminated due the Disability (within the meaning of Section 22(e) of the Code) of the participant, then this paragraph 6(e)(ii) shall apply to such participant by substituting twelve (12) months for three (3) months. (ii) If a participant's employment is terminated by death, his estate shall have the right for a period of not less than twelve (12) months following the date of death, or for such longer period as the Board may fix, to exercise the option to the extent the participant was entitled to exercise such option on the date of death, or to the extent otherwise specified by the Board, which may so specify, at a time that is subsequent to the date of death, provided the actual date of exercise is in no event after the expiration of the term of the option. A participant's estate shall mean his legal representative or any person who acquires the right to exercise an option by reason of the participant's death. (g) Options may also contain such other provisions, which shall not be inconsistent with any of the foregoing terms, as the Board shall deem appropriate. No option, however. nor anything contained in the Plan, shall confer upon any, employee any right to continue in the employ of the Company (or Affiliate) nor limit in any way the right of the Company (or Affiliate) to terminate her employment at any time. (h) Subject to any required action by the Company's shareholders, if the Company shall be the surviving corporation in any merger or consolidation, each outstanding option shall pertain and apply to the securities to which a holder of the number of shares subject to the option would have been entitled, provided, the excess of the aggregate fair market value of the shares subject to the option immediately after such merger or consolidation over the aggregate option price of such shares is not more than the excess of the aggregate fair market value of all shares subject to the option immediately before such merger or consolidation over the aggregate option price of such shares. A dissolution or liquidation of the Company or a merger or consolidation in which the Company is not the surviving corporation shall cause each outstanding option to terminate, unless the surviving corporation in the case of a merger or consolidation assumes outstanding options or replaces them with substitute options and (i) the excess of the aggregate fair market value of the shares subject to the option immediately after the substitution or assumption over the aggregate option price of such shares is not more than the excess of the aggregate fair market value of all shares subject to the option immediately before such substitution or assumption over the aggregate option price of such shares; and (ii) the new option or the assumption of the old option does not give the employee additional benefits which she did not have under the old option. 7. Payments and Loans Upon Exercise. (a) The purchase price of stock sold pursuant to an option shall be paid either in full in cash or by certified check at the time the option is exercised or to the extent permitted under the applicable provisions of California General Corporation Law, pursuant to any deferred payment arrangement that the Board in its discretion may approve; provided, however, that any 5 6 interest to be paid by an optionee in connection with any such deferred payment arrangement shall be charged interest at the applicable federal rate as defined in Section 1274(d) of the Code. (b) The Company may make loans or guarantee loans made by an appropriate Financial institution to individual optionees, including officers, on such terms as may be approved by the Board for the purpose of financing the exercise of options granted under the Plan and the payment of any taxes that may be due by reason of such exercise. (c) In addition, if and to the extent authorized by the Board, optionees may make all or any portion of any payment due to the Company upon exercise of an option by delivery of any property (including securities of the Company) other than cash, so long as such property constitutes valid consideration for the stock under applicable law. (d) Where the Company has or will have a legal obligation to withhold taxes relating to the exercise of any stock option, such option may not be exercised, in whole or in part, unless such tax obligation is first satisfied in a manner satisfactory to the Company. 8. Use of Proceeds from Stock. Proceeds from the sale of stock pursuant to options granted under the Plan shall be used for general corporate purposes. 9. Stock Transfer Restrictions; Repurchase Provisions. Stock issued pursuant to the exercise of options granted under the Plan shall be subject to those stock transfer restrictions and repurchase provisions which shall be set forth in a Stock Restriction Agreement (the "Agreement"), substantially in the form attached hereto as Exhibit A. Each individual shall be required to execute the Agreement prior to receiving his shares. 10. Adjustments of and Changes in the Stock. Subject to the provisions set forth in subsection 6(h), above, in the event the shares of Common Stock of the Company, as presently constituted, shall be changed into or exchanged for a different number or kind of shares of stock or other securities of the Company or of another corporation (whether by reason of merger, consolidation, recapitalization, reclassification, split-up, combination of shares, or otherwise), or if the number of shares of Common Stock of the Company shall be increased through the payment of a stock dividend, then there shall be substituted for or added to each share of Common Stock of the Company theretofore appropriated or thereafter subject or which may become subject to an option under the Plan, the number and kind of shares of stock or other securities into which each outstanding share of Common Stock of the Company shall be so changed, or for which each such share shall be exchanged or to which each such share shall be entitled, as the case may be. Outstanding options shall also be amended as to price and other terms if necessary to reflect the foregoing events. In the event there shall be any other change in the number or kind of the outstanding shares of Common Stock of the Company, or of any stock or other securities into which such Common Stock shall have been changed, or for which it shall have been exchanged, then if the Board of Directors shall, in its sole discretion, determine that such change equitably requires an adjustment in any option theretofore granted or which may be granted under the Plan, such adjustment shall be made in accordance with such determination. No right to purchase fractional shares shall result from any adjustment in options pursuant to this Section 10. In case of any such adjustment, the shares subject to the option shall be rounded 6 7 down to the nearest whole share. Notice of any adjustment shall be given by the Company to each holder of an option which shall have been so adjusted and such adjustment (whether or not such notice is given) shall be effective and binding for all purposes of the Plan. 11. Amendment of the Plan. The Board at any time and from time to time, may amend the Plan, subject to the limitation, however, that, except as provided in Section 10 (relating to adjustments upon changes in stock), no amendment shall be effective, unless approved, within twelve (12) months before or after the date of such amendment's adoption, by the vote or written consent of a majority of the outstanding shares of the Company entitled to vote, where such amendment will: (a) increase the number of shares reserved for options under the Plan; (b) materially modify the requirements of Section 5 as to eligibility for participation in the Plan; or (c) materially increase the benefits accruing to participants under the Plan. It is expressly contemplated that the Board may amend the Plan in any respect necessary to provide the Company's employees with the maximum benefits provided or to be provided under Section 422 of the Code and the regulations promulgated thereunder relating to employee incentive stock options and/or to bring the plan or options granted under it into compliance therewith. Rights and obligations under any option granted before any amendment of the Plan shall not be altered or impaired by amendment of the Plan, except with the consent, which may be obtained in any manner deemed by the Board to be appropriate, of the person to whom the option was granted. 12. Termination or Suspension of the Plan. The Board at any time may suspend or terminate the Plan. The Plan, unless sooner terminated, shall terminate at the end of ten (10) years from the date the Plan is adopted by the Board or approved by the stockholders of the Company, whichever is earlier. An option may not be granted under the Plan while the Plan is suspended or after it is terminated. Rights and obligations under any option granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except with the consent of the person to whom the option was granted, which may be obtained in any manner that the Board deems appropriate. 13. Time of Granting Options. The date of grant of an option hereunder shall, for all purposes, be the date on which the Board (or committee under authority of the Board) makes the determination granting such option. 14. Listing, Qualification or Approval of Stock; Approval of Options. All options granted under the Plan are subject to the requirement that if at any time the Board shall determine 7 8 in its discretion that the listing or qualification of the shares of stock subject thereto on any securities exchange or under any applicable law, or the consent or approval by any governmental regulatory body or the shareholders of the Company, is necessary or desirable as a condition of or in connection with the issuance of shares under the option, the option may not be exercised in whole or in part, unless such listing, qualification, consent or approval shall have been effected or obtained free of any condition not acceptable to the Board. 15. Binding Effect of Conditions. The conditions and stipulations hereinabove contained or in any option granted pursuant to the Plan shall be and constitute a covenant running with all of the shares of the Company owned by the participant at any time, directly or indirectly whether the same have been issued or not, and those shares of the Company owned by the participant shall not be sold, assigned or transferred by any person save and except in accordance with the terms and conditions herein provided, and the participant shall agree to use his best efforts to cause the officers of the Company to refuse to record on the books of the Company any assignment or transfer made or attempted to be made, except as provided in the Plan and to cause said officers to refuse to cancel old certificates or to issue or deliver new certificates therefor where the purchaser or assignee has acquired certificates for the stock represented thereby, except strictly in accordance with the provisions of this Plan. 16. Effective Date of Plan. The Plan shall become effective as determined by the Board but no options granted under it shall be exercisable until the Plan has been approved by the vote or written consent of the holders of a majority of the outstanding shares of the Company entitled to vote. If such shareholder approval is not obtained within twelve (12) months before or after the date of the Board's adoption of the Plan, then all options previously granted under the Plan shall terminate,and no further options shall be granted and no shares shall be issued. Subject to such limitation, the Board may grant options under the Plan at any time after the effective date and before the date fixed herein for termination of the Plan. 17. Gender. The use of any gender specific pronoun or similar term is intended to be without legal significance as to gender. 18. Financial Reports. The Company shall provide financial and other information regarding the Company, on an annual or more frequent basis, to each individual holding an outstanding option under the Plan as required pursuant to Section 260.140.46 of Title 10, California Code of Regulations. 8 9 EXHIBIT A Form of Stock Restriction Agreement 10 NETMOSPHERE, INC., 1997 STOCK OPTION PLAN STOCK RESTRICTION AGREEMENT THIS STOCK RESTRICTION AGREEMENT (this "Agreement") is made this ___ day of ____________, 199__, by and between Netmosphere, Inc., a California corporation (the "Company"), and _______________ (the "Purchaser"), with respect to those shares of common stock issued to Purchaser pursuant to the Netmosphere, Inc., 1997 Stock Option Plan as amended (the "Plan"). RECITALS WHEREAS, it is in the best interest of the Company and its shareholders that the shares of the common stock of the Company be owned by those persons who are engaged in the conduct of its business; and WHEREAS, as of the date of this Agreement, Purchaser has exercised an option to acquire ____________________ (____________) shares of the common stock of the Company (the "Shares") through the Plan. (The term "Shares" as used herein refers to all Shares acquired by Purchaser as of the date of this Agreement or subsequent to the execution of this Agreement pursuant to the Plan, and includes all securities received (a) in replacement of the Shares; (b) as a result of stock dividends or stock splits in respect of the Shares; and (c) all securities received in replacement of the Shares in a recapitalization, merger, reorganization, or the like.) NOW, THEREFORE, in consideration of the obligations herein assumed by the respective parties, it is mutually agreed as follows: 1. Restriction Against Transfer. (a) Restrictions Imposed by this Agreement. Purchaser agrees that he or she will not transfer, assign, hypothecate, or in any way dispose of any of Purchaser's Shares, or any right or interest therein, whether voluntarily or by operation of law, or by gift or otherwise, without the prior written consent of the Company, except to the extent that a transfer is made in accordance with the terms of this Agreement. Any purported transfer in violation of any provision of this Agreement shall be void and ineffectual, and shall not operate to transfer any interest or title to the purported transferee. (b) Federal Law Restrictions on Transfer. Purchaser hereby acknowledges that in addition to the restrictions imposed by subsection l(a), above, the following restrictions also apply with respect to Purchaser's Shares: (i) The Shares held by Purchaser must be held indefinitely unless registered under the Securities Act of 1933, as amended (the "Act"), or unless, in the opinion of counsel of the Company, an exemption from such registration is available; 11 (ii) Only the Company may file a registration statement with the Securities and Exchange Commission (the "SEC") and the Company is under no obligation to do so with respect to the Shares; (iii) Exemption from registration may not be available or may not permit Purchaser to transfer Shares in the amounts or at the times proposed by Purchaser; (iv) Purchaser has been advised that Rule 144 promulgated by the SEC under the Act, ("Rule 144") which provides for certain limited, routine sales of unregistered securities through brokers, is not presently available with respect to the Shares and may never be available, and in any event, requires that the Shares be held and fully paid for within the meaning of Rule 144 for a minimum of one (1) year, and possibly longer, before they may be resold under Rule 144; (v) The Company is under no obligation to file any disclosure statement with the SEC or to furnish Purchaser with information to sell any of the Shares under Rule 144; (vi) In reliance upon the representations of Purchaser set forth in Section 2 below, the Company has not registered the Shares with the SEC under the Act. 2. Representations of Purchaser. Purchaser represents and warrants to the Company that: (a) Purchaser is purchasing the Shares for Purchaser's own account for investment only and not with a view to, or for sale in connection with, a distribution of the Shares within the meaning of the Act; (b) Purchaser has no present intention of selling or otherwise disposing of all or any portion of the Shares, and no other person has any beneficial ownership in the Shares; (c) Purchaser has had access to all information regarding the Company and its present and prospective business, assets, liabilities and financial condition; (d) Purchaser was not at any time presented with or solicited by any publicly issued or circulated newspaper, mail, radio or television advertisement, or any other form of general advertising; (e) Purchaser has had ample opportunity to ask questions of and receive answers from the Company's representatives concerning this investment and to obtain any and all documents requested in order to supplement or verify any of the information supplied, (f) Purchaser recognizes that this investment in the Shares involves special and substantial risks; (g) Purchaser recognizes (i) the highly speculative nature of the investment, (ii) the financial hazards involved, (iii) the lack of liquidity of the Shares and restrictions upon 2 12 transferability thereof (e.g., that the undersigned may not be able to sell or dispose of them or use them as collateral for loans), and (iv) the qualifications and backgrounds of the principals of the Company, among other matters; (h) Purchaser specifically represents and warrants that Purchaser is financially capable of bearing a total loss of this investment; and (i) If Purchaser is married, Purchaser's spouse shall execute the consent of spouse form attached hereto and Purchaser understands that if such form is not signed, then the Company shall be entitled to rely on such fact that Purchaser is unmarried at the time of purchase. 3. Obligations of Subsequent Transferees. On the occurrence of a transfer of Shares pursuant to the terms of this Agreement, the transferee or any subsequent transferee shall be required to sell or transfer Purchaser's Shares as provided in this Agreement in the same manner and to the same extent as the transferring shareholder would have been required to sell or transfer the Shares. All references in this Agreement to Shares shall be deemed to include Shares owned by any transferee, except that payment for the Shares shall be made to the record owner. 4.Right of First Refusal. As provided in the Company's bylaws and any amendments thereto, the Company has the right of first refusal with respect to any or all of Purchaser's Shares if certain events take place. A copy of the Company's bylaws detailing the Company's right of first refusal is available for inspection at the Company's principal place of business. 5. Company Repurchase Right. If (1) Purchaser has exercised his option under the Plan and (2) such Purchaser leaves the employment of the Company, for any or no reason, voluntarily or involuntarily, at any time, then the Company shall have the right to repurchase the Shares. The Company shall have the right to repurchase the Shares by offering to pay Purchaser the fair market value of the Shares purchased under the option. For purposes hereof, the fair market value of the Shares shall be the price set by the Board of Directors for incentive stock options or common stock at its most recent meeting at which options were awarded or common stock was issued. If no such options were awarded or common stock issued within sixty (60) days prior to the date that the Company makes the repurchase offer, then the fair market value of the shares to be repurchased shall be that set by the Board of Directors in good faith. The repurchase right shall be exercised by Company, if at all, within ninety (90) days after the later to occur of (a) Purchaser's last date of employment or (b) the date of this Agreement. The repurchase right shall occur upon the Company's giving written notice to Purchaser of its desire to repurchase the Shares. The Company shall pay cash in a lump sum for such stock and/or cancel existing indebtedness for the repurchase price. The Company may assign such repurchase right to any other person in its discretion. 6. Sub-Chapter S Election and Status. Purchasers who have exercised their options shall cooperate with the Company, at Company's request, in maintaining its Sub-Chapter S status, to the extent that such status exists at and after the time the option is exercised. If such Purchaser does not so execute the requested documents or provide such assistance promptly after 3 13 Company's request therefor, the Company's President shall be appointed as Purchaser's attorney-in-fact for the sole and limited purpose of executing any and all such documents relating to such Sub-Chapter S election in such Purchaser's name as if Purchaser had actually signed same, all without further liability to Purchaser. 7. Restrictions on Purchase by Company. The right of the Company to exercise its option and to purchase any of the Shares is subject to the restrictions governing the right of a Company to purchase its own stock contained in the California Corporations Code, and such other pertinent governmental restrictions as are now, or may hereafter become effective. 8. Termination. Except with respect to those restrictions set forth in subsection l(b), above, the restrictions on the transfer of Shares set forth in this Agreement shall terminate upon the happening of any of the following events: (a) All of the Company's outstanding shares are held by only one person, entity, corporation or association; (b) The parties to this Agreement agree in writing or the Company's Board of Directors so determines in writing that such restrictions shall terminate; (c) The Company dissolves; or, (d) At the time of the first sale of common stock of the Company to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Act. 9. Notices. All notices required or desired to be given pursuant to this Agreement shall be in writing and shall be personally served (including by commercial delivery or courier service) or given by mail. Any notice given by mail shall be deemed to have been given and received when ninety-six (96) hours have elapsed from the time such notice was deposited in the United States mails, certified or registered and first-class postage prepaid, addressed, if intended to a party to this Agreement, at the address set forth below its signature or to such other address as such party may have designated by like written notice to each of the other parties from time to time. 10. Refusal to Transfer. The Company shall not be required: (a) To transfer on its books any Shares that have been sold, given away, or otherwise transferred in violation of any provision set forth in this Agreement; or (b) To treat as owner of such Shares or to accord the right to receive dividends to any purchaser, donee, or other transferee to whom such Shares shall have been so transferred. 4 14 11. Restriction on Certificates. (a) Legends. The Company and Purchaser agree that all certificates representing all Shares of the Company which at any time are subject to the provisions of this Agreement shall have endorsed upon them the following legends: THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS AGAINST TRANSFER UNDER THE TERMS OF AN AGREEMENT ENTERED INTO BY THE CORPORATION AND THE SHAREHOLDER, DATED _______________, 199__, AND THE COMPANY'S BYLAWS, COPIES OF WHICH ARE ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION. THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED ON _______________, WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 IN RELIANCE UPON THE EXEMPTION CONTAINED IN SECTION 4(2) THEREOF. NO TRANSFER OF THESE SHARES OR ANY INTEREST THEREIN MAY BE MADE, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT UNLESS THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH TRANSFER DOES NOT REQUIRE REGISTRATION UNDER THE ACT. ANY LEGAL OPINION REQUIRED PURSUANT TO THIS LEGEND REQUIREMENT BY THE COMPANY SHALL BE PREPARED BY THE COMPANY'S COUNSEL. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE CORPORATION AND/OR ITS ASSIGNEE(S), AS PROVIDED IN THE BYLAWS OF THE CORPORATION. THE SHARES ARE ISSUED PURSUANT TO A STOCK OPTION PLAN ALL THE TERMS OF WHICH ARE INCORPORATED BY REFERENCE AS IF FULLY SET FORTH HEREIN. Under no circumstances shall any sale or other transfer of any Shares be valid until the proposed transferee shall have executed and become a party to this Agreement, unless this requirement is waived by written consent of all the parties; and, notwithstanding any other provision of this Agreement, no such sale or other transfer shall in any event result in the nonapplicability of the provisions of this Agreement. (b) Stop Transfer Instructions. Purchaser agrees that in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate "stop transfer" instructions to its transfer agent, if any, with respect to such certificates or instruments and, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. 12. Severability. In the event that any of the provisions of this Agreement are held to be unenforceable or invalid by any court of competent jurisdiction, the validity and enforceability of the remaining provisions shall not be affected thereby. 5 15 13. Construction. All pronouns used in this Agreement shall be deemed to refer to the masculine, feminine, neuter, singular or plural as identification of the person or persons, firm or firms, corporation or corporations may require. 14. Governing Law. This Agreement shall be governed by the laws of the State of California as if fully executed and performed in such State. 15. Amendment. No amendment or variation of the terms of this Agreement, with or without consideration, shall be valid unless made in writing and signed by all of the parties to this Agreement at the time of such amendment. 16. Inurement. Subject to the restrictions against transfer or assignment contained herein, the provisions of this Agreement shall inure to the benefit of and shall be binding upon the assigns, successors in interest, personal representatives, estates, heirs, and legatees of each of the parties. Purchaser agrees that he/she will not hypothecate or otherwise create or suffer to exist any lien, claim, or encumbrance upon any of Purchaser's Shares at any time subject hereto, other than an encumbrance created or permitted by this Agreement. 17. Entire Agreement. This Agreement contains the entire understanding between the parties concerning the subject matter contained herein. There are no representations, agreements, arrangements, or understandings, oral or written, between or among the parties, relating to the subject matter of this Agreement, which are not fully expressed herein. 18. Further Instruments. The parties agree to execute such further instruments and to take such further action as may be reasonably necessary to carry out the purposes and intent of this Agreement. 6 16 IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date and year first above written. COMPANY: Netmosphere, Inc. a California corporation By: ____________________________________ (NAME) (TITLE) PURCHASER: ________________________________________ (signature) Name: __________________________________ (print) Address: _______________________________ ________________________________________ ________________________________________ 7 17 SPOUSE'S CONSENT TO AGREEMENT I acknowledge that I have read the foregoing Agreement, that I know its contents, and that I have had an opportunity to consult independent counsel. I am aware that by its provisions, my spouse agrees to sell all shares of the Company, including any community interest in them, upon the happening of certain events. I hereby consent to the sale, approve of the provisions of the Agreement, and agree that I will not bequeath the shares or any of them or any interest in them by my Will if I predecease my spouse. I further agree that the Company shall be entitled to rely upon any action or document signed by my spouse with regard to the Shares the same as if I had taken such action or signed such document as well. I direct that the residuary clause in my Will shall not be deemed to apply to my community interest in the shares. ________________________________________ (signature) Name: __________________________________ EX-10.2 4 ex10-2.txt EXHIBIT 10.2 1 EXHIBIT 10.2 NETMOSPHERE, INC. 1999 EQUITY INCENTIVE PLAN AS ADOPTED MARCH 8, 1999 AND AMENDED SEPTEMBER 17, 1999 AND FEBRUARY 14, 2000 1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain and motivate eligible persons whose present and potential contributions are important to the success of the Company, its Parent and Subsidiaries, by offering them an opportunity to participate in the Company's future performance through awards of Options and Restricted Stock. Capitalized terms not defined herein are defined in Section 22. This Plan is intended to be a written compensatory benefit plan within the meaning of Rule 701 promulgated under the Securities Act; provided, however, that Awards may be granted hereunder that are intended to comply with a different exemption from the Securities Act, if such Award specifically states that a different exemption will be relied upon by the Company in issuing such Award. 2. SHARES SUBJECT TO THE PLAN. 2.1 Number of Shares Available. Subject to Sections 2.2 and 17, the total number of Shares reserved and available for grant and issuance pursuant to this Plan will be 4,100,000 Shares or such lesser number of Shares as permitted under Section 260.140.45 of Title 10 of the California Code of Regulations. Subject to Sections 2.2 and 17, Shares will again be available for grant and issuance in connection with future Awards under this Plan that: (a) are subject to issuance upon exercise of an Option but cease to be subject to such Option for any reason other than exercise of such Option, (b) are subject to an Award that otherwise terminates without Shares being issued or ( c) are purchased by the holder of the Award but are repurchased or reacquired by the Company. At all times the Company will reserve and keep available a sufficient number of Shares as will be required to satisfy the requirements of all Awards granted under this Plan. 2.2 Adjustment of Shares. In the event that the number of outstanding shares of the Company's Common Stock is changed by a stock dividend, recapitalization, stock split, reverse stock split, subdivision, combination, reclassification or similar change in the capital structure of the Company without consideration, then (a) the number of Shares reserved for issuance under this Plan, (b) the Exercise Prices of and number of Shares subject to outstanding Options and (c) the Purchase Prices of and number of Shares subject to other outstanding Awards will be proportionately adjusted, subject to any required action by the Board or the shareholders of the Company and compliance with applicable securities laws; provided, however, that fractions of a Share will not be issued but will either be paid in cash at Fair Market Value of such fraction of a Share or will be rounded down to the nearest whole Share, as determined by the Committee. 3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted only to employees (including officers and directors who are also employees) of the Company or of a Parent or Subsidiary of the Company. All other Awards may be granted to employees, officers, directors and consultants of the Company or any Parent or Subsidiary of the Company; provided such consultants render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction. No person will be eligible to receive more than 500,000 Shares (as such number may be adjusted for stock splits, stock dividends and the like) in any calendar year under this Plan pursuant to the grant of Awards hereunder, other than new employees of the Company or of a Parent or Subsidiary of the Company (including new employees who are also officers and directors of the Company or any Parent or Subsidiary of the Company), who are eligible to receive up to a maximum of 750,000 Shares (as such number may be adjusted for stock splits, stock dividends and the like) in the calendar year in which they commence their employment. A person may be granted more than one Award under this Plan. 4. ADMINISTRATION. 4.1 Committee Authority. This Plan will be administered by the Committee or the Board acting as the Committee. Subject to the general purposes, terms and conditions of this Plan, and to the direction of 2 the Board, the Committee will have full power to implement and carry out this Plan. Without limitation, the Committee will have the authority to: (a) construe and interpret this Plan, any Award Agreement and any other agreement or document executed pursuant to this Plan; (b) prescribe, amend and rescind rules and regulations relating to this Plan; (c) select persons to receive Awards; (d) determine the form and terms of Awards; (e) determine the number of Shares or other consideration subject to Awards; (f) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or awards under any other incentive or compensation plan of the Company or any Parent or Subsidiary of the Company; (g) grant waivers of Plan or Award conditions; (h) determine the vesting, exercisability and payment of Awards; (i) correct any defect, supply any omission, or reconcile any inconsistency in this Plan, any Award, any Award Agreement, any Exercise Agreement or any Restricted Stock Purchase Agreement; (j) determine whether an Award has been earned; and (k) make all other determinations necessary or advisable for the administration of this Plan. 4.2 Committee Discretion. Any determination made by the Committee with respect to any Award will be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of this Plan or Award, and subject to Section 5.9, at any later time, and such determination will be final and binding on the Company and on all persons having an interest in any Award under this Plan. The Committee may delegate to one or more officers of the Company the authority to grant an Award under this Plan to Participants who are not Insiders of the Company. 5. OPTIONS. The Committee may grant Options to eligible persons and will determine whether such Options will be Incentive Stock Options within the meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may be exercised, and all other terms and conditions of the Option, subject to the following. 5.1 Form of Option Grant. Each Option granted under this Plan will be evidenced by an Award Agreement which will expressly identify the Option as an ISO or an NQSO ("STOCK OPTION AGREEMENT"), and will be in such form and contain such provisions (which need not be the same for each Participant) as the Committee may from time to time approve, and which will comply with and be subject to the terms and conditions of this Plan. 5.2 Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, unless otherwise specified by the Committee. The Stock Option Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option. 5.3 Exercise Period. Options may be exercisable immediately (whether or not subject to repurchase pursuant to Section 11 of this Plan) or may be exercisable within the times or upon the events determined by the Committee as set forth in the Stock Option Agreement governing such Option; provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted; and provided further that no ISO granted to a person who directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary of the Company ("TEN PERCENT SHAREHOLDER") will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time 2 3 or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines. Subject to earlier termination of the Option as provided herein, each Participant who is not an officer, director or consultant of the Company or of a Parent or Subsidiary of the Company shall have the right to exercise an Option granted hereunder at the rate of at least twenty percent (20%) per year over five (5) years from the date such Option is granted. 5.4 Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted and may not be less than 85% of the Fair Market Value of the Shares on the date of grant; provided that (i) the Exercise Price of an ISO will not be less than 100% of the Fair Market Value of the Shares on the date of grant and (ii) the Exercise Price of any Option granted to a Ten Percent Shareholder will not be less than 110% of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased must be made in accordance with Section 7 of this Plan. 5.5 Method of Exercise. Options may be exercised only by delivery to the Company of a written stock option exercise agreement (the "EXERCISE AGREEMENT") in a form approved by the Committee (which need not be the same for each Participant), stating the number of Shares being purchased, the restrictions imposed on the Shares purchased under such Exercise Agreement, if any, and such representations and agreements regarding Participant's investment intent and access to information and other matters, if any, as may be required or desirable by the Company to comply with applicable securities laws, together with payment in full of the Exercise Price, and any applicable taxes, for the number of Shares being purchased. 5.6 Termination. Subject to earlier termination pursuant to Sections 17 and 18 and notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an Option will always be subject to the following: (a) If the Participant is Terminated for any reason except death, Disability or for Cause, then the Participant may exercise such Participant's Options only to the extent that such Options are exercisable upon the Termination Date and must be exercised no later than three (3) months after the Termination Date (or within such shorter time period, not less than thirty (30) days, or such longer time period not exceeding five (5) years after the Termination Date as may be determined by the Committee and set forth in the Stock Option Agreement, with any exercise beyond three (3) months after the Termination Date deemed to be an NQSO), but in any event, no later than the expiration date of the Options. (b) If the Participant is Terminated because of Participant's death or Disability (or the Participant dies within three (3) months after a Termination other than because of Participant's Disability) and other than a Termination for Cause, then Participant's Options may be exercised only to the extent that such Options are exercisable by Participant on the Termination Date and must be exercised by Participant (or Participant's legal representative or authorized assignee) no later than twelve (12) months after the Termination Date (or within such shorter time period, not less than six (6), or such longer time period not exceeding five (5) years after the Termination Date, as may be determined by the Committee and set forth in the Stock Option Agreement, with any exercise beyond (a) three (3) months after the Termination Date when the Termination is for any reason other than the Participant's death or disability, within the meaning of Section 22(e)(3) of the Code, or (b) twelve (12) months after the Termination Date when the Termination is for Participant's disability, within the meaning of Section 22(e)(3) of the Code, deemed to be an NQSO), but in any event no later than the expiration date of the Options. (c) If the Participant is terminated for Cause, then Participant's Options shall expire on such Participant's Termination Date, or at such later time and on such conditions as determined by the Committee. 5.7 Limitations on Exercise. The Committee may specify a reasonable minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent Participant from exercising the Option for the full number of Shares for which it is then exercisable. 5.8 Limitations on ISOs. The aggregate Fair Market Value (determined as of the date of grant) of Shares with respect to which ISOs are exercisable for the first time by a Participant during any calendar 3 4 year (under this Plan or under any other incentive stock option plan of the Company or any Parent or Subsidiary of the Company) will not exceed $100,000. If the Fair Market Value of Shares on the date of grant with respect to which ISOs are exercisable for the first time by a Participant during any calendar year exceeds $100,000, then the Options for the first $100,000 worth of Shares to become exercisable in such calendar year will be ISOs and the Options for the amount in excess of $100,000 that become exercisable in that calendar year will be NQSOs. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date (as defined in Section 18 below) to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment. 5.9 Modification, Extension or Renewal. The Committee may modify, extend or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant's rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the Code. The Committee may reduce the Exercise Price of outstanding Options without the consent of Participants affected by a written notice to them; provided, however, that the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted under Section 5.4 of this Plan for Options granted on the date the action is taken to reduce the Exercise Price. 5.10 No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code. 6. RESTRICTED STOCK. A Restricted Stock Award is an offer by the Company to sell to an eligible person Shares that are subject to restrictions. The Committee will determine to whom an offer will be made, the number of Shares the person may purchase, the Purchase Price, the restrictions to which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the following: 6.1 Form of Restricted Stock Award. All purchases under a Restricted Stock Award made pursuant to this Plan will be evidenced by an Award Agreement ("RESTRICTED STOCK PURCHASE AGREEMENT") that will be in such form (which need not be the same for each Participant) as the Committee will from time to time approve, and will comply with and be subject to the terms and conditions of this Plan. The Restricted Stock Award will be accepted by the Participant's execution and delivery of the Restricted Stock Purchase Agreement and full payment for the Shares to the Company within thirty (30) days from the date the Restricted Stock Purchase Agreement is delivered to the person. If such person does not execute and deliver the Restricted Stock Purchase Agreement along with full payment for the Shares to the Company within thirty (30) days, then the offer will terminate, unless otherwise determined by the Committee. 6.2 Purchase Price. The Purchase Price of Shares sold pursuant to a Restricted Stock Award will be determined by the Committee and will be at least 85% of the Fair Market Value of the Shares on the date the Restricted Stock Award is granted or at the time the purchase is consummated, except in the case of a sale to a Ten Percent Shareholder, in which case the Purchase Price will be 100% of the Fair Market Value on the date the Restricted Stock Award is granted or at the time the purchase is consummated. Payment of the Purchase Price must be made in accordance with Section 7 of this Plan. 6.3 Restrictions. Restricted Stock Awards may be subject to the restrictions set forth in Section 11 of this Plan or such other restrictions not inconsistent with Section 25102(o) of the California Corporations Code. 7. PAYMENT FOR SHARE PURCHASES. 7.1 Payment. Payment for Shares purchased pursuant to this Plan may be made in cash (by check) or, where expressly approved for the Participant by the Committee and where permitted by law: 4 5 (a) by cancellation of indebtedness of the Company to the Participant; (b) provided that a public market for the Company's stock exists, by surrender of shares that either: (1) have been owned by Participant for more than six (6) months and have been paid for within the meaning of SEC Rule 144 (and, if such shares were purchased from the Company by use of a promissory note, such note has been fully paid with respect to such shares); or (2) were obtained by Participant in the public market; (c) by waiver of compensation due or accrued to the Participant for services rendered; (d) with respect only to purchases upon exercise of an Option, and provided that a public market for the Company's stock exists: (1) through a "same day sale" commitment from the Participant and a broker-dealer that is a member of the National Association of Securities Dealers (an "NASD DEALER") whereby the Participant irrevocably elects to exercise the Option and to sell a portion of the Shares so purchased to pay for the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; or (2) through a "margin" commitment from the Participant and an NASD Dealer whereby the Participant irrevocably elects to exercise the Option and to pledge the Shares so purchased to the NASD Dealer in a margin account as security for a loan from the NASD Dealer in the amount of the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to forward the Exercise Price directly to the Company; (e) for stock purchases described in Section 6 above and for options that are exercisable in full on the date of the grant and subject to repurchase by the Company in whole or in part, by tender of a full recourse promissory note having such terms as may be approved by the Committee and bearing interest at a rate sufficient to avoid imputation of income under Sections 483 and 1274 of the Code; provided, however, that Participants who are not employees or directors of the Company will not be entitled to purchase Shares with a promissory note unless the note is adequately secured by collateral other than the Shares; or (f) by any combination of the foregoing. 7.2 Loan Guarantees. The Committee may help the Participant pay for Shares purchased under this Plan by authorizing a guarantee by the Company of a third-party loan to the Participant. 8. WITHHOLDING TAXES. 8.1 Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan, the Company may require the Participant to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such Shares. Whenever, under this Plan, payments in satisfaction of Awards are to be made in cash, such payment will be net of an amount sufficient to satisfy federal, state, and local withholding tax requirements. 8.2 Stock Withholding. When, under applicable tax laws, a Participant incurs tax liability in connection with the exercise or vesting of any Award that is subject to tax withholding and the Participant is obligated to pay the Company the amount required to be withheld, the Committee may in its sole discretion allow the Participant to satisfy the minimum withholding tax obligation by electing to have the Company withhold from the Shares to be issued that number of Shares having a Fair Market Value equal to the minimum amount required to be withheld, determined on the date that the amount of tax to be withheld is to be determined. All elections by a Participant to have Shares withheld for this purpose will be made in accordance with the requirements established by the Committee for such elections and be in writing in a form acceptable to the Committee. 5 6 9. PRIVILEGES OF STOCK OWNERSHIP. 9.1 Voting and Dividends. No Participant will have any of the rights of a shareholder with respect to any Shares until the Shares are issued to the Participant. After Shares are issued to the Participant, the Participant will be a shareholder and have all the rights of a shareholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided, further, that the Participant will have no right to retain such stock dividends or stock distributions with respect to Unvested Shares that are repurchased pursuant to Section 11. The Company will comply with Section 260.140.1 of Title 10 of the California Code of Regulations with respect to the voting rights of Common Stock. 9.2 Financial Statements. The Company will provide financial statements to each Participant prior to such Participant's purchase of Shares under this Plan, and to each Participant annually during the period such Participant has Awards outstanding, or as otherwise required or permitted under Section 260.140.46 of Title 10 of the California Code of Regulations. Notwithstanding the foregoing, the Company will not be required to provide such financial statements to Participants whose services in connection with the Company assure them access to equivalent information. 10. TRANSFERABILITY. Awards granted under this Plan, and any interest therein, will not be transferable or assignable by Participant, and may not be made subject to execution, attachment or similar process, otherwise than by will or by the laws of descent and distribution. During the lifetime of the Participant an Award will be exercisable, and any elections with respect to an Award may be made, only by the Participant. 11. RESTRICTIONS ON SHARES. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) in the Award Agreement (a) a right of first refusal to purchase all Shares that a Participant (or a subsequent transferee) may propose to transfer to a third party, unless otherwise not permitted by Section 25102(o) of the California Corporations Code, provided, that such right of first refusal terminates upon the Company's initial public offering of Common Stock pursuant an effective registration statement filed under the Securities Act and/or (b) a right to repurchase Shares held by a Participant for cash and/or cancellation of purchase money indebtedness following such Participant's Termination at any time within the later of ninety (90) days after Participant's Termination Date and the date the Participant purchases shares under the Plan, at: (A) with respect to Vested Shares, the Fair Market Value of such Shares on Participant's Termination Date, provided, that such right of repurchase terminates when the Company's securities become publicly traded; or (B) with respect to Unvested Shares, the Participant's Exercise Price or Purchase Price, as the case may be, provided, that unless the Participant is an officer, director or consultant of the Company or of a Parent or Subsidiary of the Company, such right of repurchase at the Exercise Price or Purchase Price, as the case may be, lapses at the rate of at least twenty percent (20%) per year over five (5) years from: (i) the date of grant of the Option or (ii) in the case of Restricted Stock, the date the Participant purchases the Shares. 12. CERTIFICATES. All certificates for Shares or other securities delivered under this Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable securities law, or any rules, regulations and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted. 13. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participant's Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of Participant's obligation to the Company under the promissory note; provided, 6 7 however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant's Shares or other collateral. In connection with any pledge of the Shares, Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid. 14. EXCHANGE AND BUYOUT OF AWARDS. The Committee may, at any time or from time to time, authorize the Company, with the consent of the respective Participants, to issue new Awards in exchange for the surrender and cancellation of any or all outstanding Awards. The Committee may at any time buy from a Participant an Award previously granted with payment in cash, shares of Common Stock of the Company or other consideration, based on such terms and conditions as the Committee and the Participant may agree. 15. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. This Plan is intended to comply with Section 25102(o) of the California Corporations Code, although grants pursuant to Section 25102(f) of such Code, or any other exemption provided by such Code or the regulations thereunder, may be made under this Plan. Any provision of the Plan which is inconsistent with Section 25102(o) shall, without further act or amendment by the Company or the Board, be reformed to comply with the requirements of Section 25102(o). An Award will not be effective unless such Award is in compliance with all applicable federal and state securities laws, rules and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable, and/or (b) compliance with any exemption, completion of any registration or other qualification of such Shares under any state or federal law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the exemption, registration, qualification or listing requirements of any state securities laws, stock exchange or automated quotation system, and the Company will have no liability for any inability or failure to do so. 16. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent or Subsidiary of the Company or limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate Participant's employment or other relationship at any time, with or without Cause. 17. CORPORATE TRANSACTIONS. 17.1 Assumption or Replacement of Awards by Successor. In the event of (a) a merger or consolidation (other than a merger or consolidation with a wholly owned subsidiary of the Company), in which the shareholders of the Company immediately prior to such merger or consolidation cease to hold at least a majority of the voting power of the surviving corporation; (c) the sale of all or substantially all of the assets of the Company as a going concern in a single transaction or series of related transactions; or (d) the sale or transfer by the shareholders of the Company of at least a majority of the voting power of the Company in a single transaction or a series of related transactions other than market transactions to unrelated purchasers, then any or all outstanding Awards may be assumed, converted or replaced by the successor corporation (if any), which assumption, conversion or replacement will be binding on all Participants. In the alternative, the successor corporation may substitute equivalent Awards or provide substantially similar consideration to Participants as was provided to shareholders (after taking into account the existing provisions of the Awards). The successor corporation may also issue, in place of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject to repurchase restrictions and other provisions no less favorable to the Participant than those which applied to such outstanding Shares immediately prior to such transaction described in this Subsection 17.1. In the event such successor corporation (if any) does not assume or substitute Awards, as provided above, pursuant to a transaction described in this Subsection 17.1, then notwithstanding any other provision in this Plan to the contrary, if such 7 8 Awards are not exercised prior to the consummation of the corporate transaction, they shall terminate and cease to be exercisable at such consummation in accordance with the provisions of this Plan. 17.2 Other Treatment of Awards. Subject to any greater rights granted to Participants under the foregoing provisions of this Section 17, in the event of the occurrence of any transaction described in Section 17.1, any outstanding Awards will be treated as provided in the applicable agreement or plan of merger, consolidation, dissolution, liquidation or sale of assets. 17.3 Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either (a) granting an Award under this Plan in substitution of such other company's award or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the exercise price and the number and nature of shares issuable upon exercise of any such option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option rather than assume an existing option, such new Option may be granted with a similarly adjusted Exercise Price. 18. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become effective on the date that it is adopted by the Board (the "EFFECTIVE DATe"). This Plan will be approved by the shareholders of the Company (excluding Shares issued pursuant to this Plan), consistent with applicable laws, within twelve (12) months before or after the Effective Date. Upon the Effective Date, the Board may grant Awards pursuant to this Plan; provided, however, that no Option may be exercised prior to shareholder approval of this Plan. In the event that initial shareholder approval is not obtained within twelve (12) months before or after the date this Plan is adopted by the Board, all Awards granted hereunder will be canceled, any Shares issued pursuant to any Award will be canceled and any purchase of Shares hereunder will be rescinded. 19. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this Plan will terminate ten (10) years from the Effective Date or, if earlier, the date of shareholder approval. This Plan and all agreements hereunder shall be governed by and construed in accordance with the laws of the State of California. 20. AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9, the Board may at any time terminate or amend this Plan in any respect, including without limitation amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that the Board will not, without the approval of the shareholders of the Company, amend this Plan in any manner that requires such shareholder approval pursuant to Section 25102(o) of the California Corporations Code or the Code or the regulations promulgated thereunder as such provisions apply to ISO plans. 21. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the submission of this Plan to the shareholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases. 22. DEFINITIONS. As used in this Plan, the following terms will have the following meanings: "AWARD" means any award under this Plan, including any Option or Restricted Stock Award. "AWARD AGREEMENT" means, with respect to each Award, the signed written agreement between the Company and the Participant setting forth the terms and conditions of the Award. "BOARD" means the Board of Directors of the Company. 8 9 "CAUSE" means Termination because of (a) any willful material violation by the Participant of any law or regulation applicable to the business of the Company or a Parent or Subsidiary of the Company, the Participant's conviction of, or guilty plea to, a felony or a crime involving moral turpitude, any willful perpetration by the Participant of a common law fraud, (b) the Participant's commission of an act of personal dishonesty which involves personal profit in connection with the Company or any other entity having a business relationship with the Company, (c) any material breach by the Participant of any provision of any agreement or understanding between the Company, or any Parent or Subsidiary of the Company and the Participant regarding the terms of the Participant's service as an employee, director or consultant to the Company or a Parent or Subsidiary of the Company, including without limitation, the willful and continued failure or refusal of the Participant to perform the material duties required of such Participant as an employee, director or consultant of the Company or a Parent or Subsidiary of the Company, other than as a result of having a Disability, or a breach of any applicable invention assignment and confidentiality agreement or similar agreement between the Company and the Participant, (d) Participant's disregard of the policies of the Company, or any Parent or Subsidiary of the Company, so as to cause loss, damage or injury to the property, reputation or employees of the Company or a Parent or Subsidiary of the Company, or (e) any other misconduct by the Participant which is materially injurious to the financial condition or business reputation of, or is otherwise materially injurious to, the Company or a Parent or Subsidiary of the Company. "CODE" means the Internal Revenue Code of 1986, as amended. "COMMITTEE" means the committee appointed by the Board to administer this Plan, or if no committee is appointed, the Board. "COMPANY" means Netmosphere, Inc., or any successor corporation. "DISABILITY" means a disability, whether temporary or permanent, partial or total, as determined by the Committee. "EXERCISE PRICE" means the price at which a holder of an Option may purchase the Shares issuable upon exercise of the Option. "FAIR MARKET VALUE" means, as of any date, the value of a share of the Company's Common Stock determined as follows: (a) if such Common Stock is then quoted on the Nasdaq National Market, its closing price on the Nasdaq National Market on the date of determination as reported in The Wall Street Journal; (b) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal; (c) if such Common Stock is publicly traded but is not quoted on the Nasdaq National Market nor listed or admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported by The Wall Street Journal (or, if not so reported, as otherwise reported by any newspaper or other source as the Board may determine); or (d) if none of the foregoing is applicable, by the Committee in good faith. "INSIDER" means an officer or director of the Company or any other person whose transactions in the Company's Common Stock are subject to Section 16 of the Securities and Exchange Act of 1934, as amended. "OPTION" means an award of an option to purchase Shares pursuant to Section 5. "PARENT" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. "PARTICIPANT" means a person who receives an Award under this Plan. 9 10 "PLAN" means this 1998 Equity Incentive Plan, as amended from time to time. "PURCHASE PRICE" the price at which a Participant may purchase Restricted Stock. "RESTRICTED STOCK" means Shares purchased pursuant to a Restricted Stock Award. "RESTRICTED STOCK AWARD" means an award of Shares pursuant to Section 6. "SEC" means the Securities and Exchange Commission. "SECURITIES ACT" means the Securities Act of 1933, as amended. "SHARES" means shares of the Company's Common Stock reserved for issuance under this Plan, as adjusted pursuant to Sections 2 and 17, and any successor security. "SUBSIDIARY" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. "TERMINATION" or "TERMINATED" means, for purposes of this Plan with respect to a Participant, that the Participant has for any reason ceased to provide services as an employee, officer, director or consultant to the Company or a Parent or Subsidiary of the Company. An employee will not be deemed to have ceased to provide services in the case of (a) sick leave, (b) military leave, or (c) any other leave of absence approved by the Committee, provided that such leave is for a period of not more than ninety (90) days unless reinstatement (or, in the case of an employee with an ISO, reemployment) upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to formal policy adopted from time to time by the Company and issued and promulgated in writing. In the case of any participant on (a) sick leave, (b) military leave or (c) on an approved leave of absence, the Committee may make such provisions respecting suspension of vesting of the Award while on leave from the Company or a Parent or Subsidiary of the Company as it may deem appropriate, except that in no event may an Option be exercised after the expiration of the term set forth in the Stock Option Agreement. The Committee will have sole discretion to determine whether a Participant has ceased to provide services and the effective date on which the Participant ceased to provide services (the "TERMINATION DATE"). "UNVESTED SHARES" means "Unvested Shares" as defined in the Award Agreement. "VESTED SHARES" means "Vested Shares" as defined in the Award Agreement. ---------- 10 EX-23.1 5 ex23-1.txt EXHIBIT 23.1 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of Critical Path, Inc. of our report dated March 17, 2000 relating to the consolidated financial statements of Critical Path, Inc., which appears in Critical Path, Inc.'s Annual Report on Form 10-K/A for the year ended December 31, 1999. We also consent to the incorporation by reference in this Registration Statement on Form S-8 of Critical Path, Inc. of our report dated March 9, 2000 relating to the consolidated financial statements of ISOCOR, and of our report dated March 7, 2000, except as to the second paragraph of Note 10 which is as of March 16, 2000 relating to the financial statements of RemarQ Communities Inc. which appear in the Critical Path, Inc.'s Current Report on Form 8-K/A (No. 000-25331). /s/ PricewaterhouseCoopers LLP San Francisco, California August 22, 2000 EX-23.2 6 ex23-2.txt EXHIBIT 23.2 1 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation by reference in this Registration Statement on Form S-8 of Critical Path, Inc. of our report dated August 20, 1999 relating to the financial statements of The docSpace Company Inc., which appears in Critical Path, Inc.'s Current Report on Form 8-K/A dated March 20, 2000. /s/ ARTHUR ANDERSEN LLP August 22, 2000 Toronto, Ontario -----END PRIVACY-ENHANCED MESSAGE-----