-----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, TldZOWzbQVJBv1JF+4S/5+9BYuLRwhQuSe14i+/OM/mn9QTzElU1Tpq/Wo1l7xlZ FlI7uIBfFYVyRcQnWHIVeg== 0001021408-01-501333.txt : 20010627 0001021408-01-501333.hdr.sgml : 20010627 ACCESSION NUMBER: 0001021408-01-501333 CONFORMED SUBMISSION TYPE: SC TO-I PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20010524 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: INTERTRUST TECHNOLOGIES CORP CENTRAL INDEX KEY: 0001089717 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 521672106 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I SEC ACT: SEC FILE NUMBER: 005-57859 FILM NUMBER: 1647554 BUSINESS ADDRESS: STREET 1: 4750 PATRICK HENRY BLVD. CITY: SANTA CLARA STATE: CA ZIP: 95054 BUSINESS PHONE: 4088550100 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: INTERTRUST TECHNOLOGIES CORP CENTRAL INDEX KEY: 0001089717 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 521672106 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-I BUSINESS ADDRESS: STREET 1: 4750 PATRICK HENRY BLVD. CITY: SANTA CLARA STATE: CA ZIP: 95054 BUSINESS PHONE: 4088550100 SC TO-I 1 dsctoi.txt SCHEDULE T/O-I SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE TO (Rule 13e-4) TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) OR 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 INTERTRUST TECHNOLOGIES CORPORATION (Name of Subject Company (Issuer)) INTERTRUST TECHNOLOGIES CORPORATION (Name of Filing Person (Offeror)) Options Under InterTrust Technologies Corporation's 1995 Stock Plan, 1999 Equity Incentive Plan and 2000 Supplemental Plan to Purchase Common Stock, Par Value $0.001 Per Share, Having an Exercise Price of $5.00 or More (Title of Class of Securities) 46113Q 10 9 (CUSIP Number of Class of Securities) (Underlying Common Stock) Victor Shear Chief Executive Officer and Chairman of the Board InterTrust Technologies Corporation 4750 Patrick Henry Drive Santa Clara, California 95054 (408) 855-0100 (Name, address and telephone number of person authorized to receive notices and communications on behalf of filing person) Copy to: Bennett L. Yee, Esq. Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP 155 Constitution Drive Menlo Park, California 94025 (650) 321-2400 CALCULATION OF FILING FEE ------------------------- Transaction valuation* Amount of filing fee ---------------------- -------------------- $81,000,000 $16,200 ---------- ------ * Calculated solely for purposes of determining the filing fee. This amount assumes that options to purchase 7,300,000 shares of common stock of InterTrust Technologies Corporation having an aggregate value of $81,000,000 as of May 24, 2001 will be exchanged pursuant to this offer. The aggregate value of such options was calculated based on the Black-Scholes option pricing model. The amount of the filing fee, calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the value of the transaction. [_] Check box if any part of the fee is offset as provided by Rule 0- 11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Not applicable. Form or Registration No.: Not applicable. Filing party: Not applicable. Date filed: Not applicable. [_] Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: [_] third party tender offer subject to Rule 14d-1. [X] issuer tender offer subject to Rule 13e-4. [_] going-private transaction subject to Rule 13e-3. [_] amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer. [_] Item 1. Summary Term Sheet. The information set forth under "Summary Term Sheet" in the Offer to Exchange All Outstanding Options Under Eligible Option Plans, dated May 24, 2001 (the "Offer to Exchange"), attached hereto as Exhibit (a)(1), is incorporated herein by reference. Item 2. Subject Company Information. (a) The name of the issuer is InterTrust Technologies Corporation, a Delaware corporation (the "Company"), the address of its principal executive offices is 4750 Patrick Henry Drive, Santa Clara, CA 95054 and the telephone number is (408) 855-0100. The information set forth in the Offer to Exchange under Section 9 ("Information Concerning InterTrust") is incorporated herein by reference. (b) This Tender Offer Statement on Schedule TO relates to an offer by the Company to exchange all options outstanding under the eligible option plans to purchase shares of the Company's common stock, par value $0.001 per share (the "Common Stock"), having an exercise price of $5.00 or more (after giving effect to the Company's two-for-one stock split on February 24, 2000) (the "Options") for new options (the "New Options") to purchase shares of Common Stock, to be granted under an eligible option plan, upon the terms and subject to the conditions described in the Offer to Exchange and the related Letter of Transmittal (the "Letter of Transmittal" and, together with the Offer to Exchange, as they may be amended from time to time, the "Offer"), attached hereto as Exhibit (a)(2). The number of shares of Common Stock subject to the New Options will be equal to one hundred percent (100%) of the number of shares of Common Stock subject to the Options that are accepted for exchange and canceled. The information set forth in the Offer to Exchange under "Summary Term Sheet," "Introduction," Section 1 ("Number of Options; Expiration Date"), Section 5 ("Acceptance of Options for Exchange and Issuance of New Options") and Section 8 ("Source and Amount of Consideration; Terms of New Options") is incorporated herein by reference. (c) The information set forth in the Offer to Exchange under Section 7 ("Price Range of Common Stock Underlying the Options") is incorporated herein by reference. Item 3. Identity and Background of Filing Person. (a) The Filing Person is the Subject Company. The information set forth under Item 2(a) above is incorporated herein by reference. Item 4. Terms of the Transaction. (a)(1) The information set forth in the Offer to Exchange under "Summary Term Sheet," "Introduction," Section 1 ("Number of Options; Expiration Date"), Section 3 ("Procedures for Tendering Options"), Section 4 ("Withdrawal Rights"), Section 5 ("Acceptance of Options for Exchange and Issuance of New Options"), Section 6 ("Conditions of the Offer"), Section 8 ("Source and Amount of Consideration; Terms of New Options"), Section 11 ("Status of Options Acquired by Us in the Offer; Accounting Consequences of the Offer"), Section 12 ("Legal Matters; Regulatory Approvals"), Section 13 ("Material Federal Income Tax Consequences") and Section 14 ("Extension of Offer; Termination; Amendment") is incorporated herein by reference. (a)(2) Not applicable. (b) The information set forth in the Offer to Exchange under "Summary Term Sheet" and Section 10 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Options") is incorporated herein by reference. Directors and Officers are ineligible to participate in the Offer. Item 5. Past Contacts, Transactions, Negotiations and Agreements. (e) The information set forth in the Offer to Exchange under Section 10 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Options") is incorporated herein by reference. The eligible option plans attached hereto as Exhibit (d)(1), Exhibit (d)(3) and Exhibit (d)(5) and the form option agreements attached hereto as Exhibit (d)(2), Exhibit (d)(4) and Exhibit (d)(6) contain information regarding the subject securities. Item 6. Purposes of the Transaction and Plans or Proposals. (a) The information set forth in the Offer to Exchange under Section 2 ("Purpose of the Offer") is incorporated herein by reference. (b) The information set forth in the Offer to Exchange under Section 5 ("Acceptance of Options for Exchange and Issuance of New Options") and Section 11 ("Status of Options Acquired by Us in the Offer; Accounting Consequences of the Offer") is incorporated herein by reference. (c) The information set forth in the Offer to Exchange under Section 2 ("Purpose of the Offer") is incorporated herein by reference. Item 7. Source and Amount of Funds or Other Consideration. (a) The information set forth in the Offer to Exchange under Section 8 ("Source and Amount of Consideration; Terms of New Options") and Section 15 ("Fees and Expenses") is incorporated herein by reference. (b) The information set forth in the Offer to Exchange under Section 6 ("Conditions of the Offer") is incorporated herein by reference. (d) Not applicable. Item 8. Interest in Securities of the Subject Company. (a) Not applicable. (b) The information set forth in the Offer to Exchange under Section 10 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Options") is incorporated herein by reference. Item 9. Person/Assets, Retained, Employed, Compensated or Used. (a) Not applicable. Item 10. Financial Statements. (a) The information set forth in the Offer to Exchange under Section 9 ("Information Concerning InterTrust") and Section 16 ("Additional Information"), and on pages F-1 through F-23 of the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 2000 is incorporated herein by reference. (b) Not applicable Item 11. Additional Information. (a) The information set forth in the Offer to Exchange under Section 10 ("Interests of Directors and Officers; Transactions and Arrangements Concerning the Options") and Section 12 ("Legal Matters; Regulatory Approvals") is incorporated herein by reference. (b) Not applicable. Item 12. Exhibits. (a) (1) Offer to Exchange, dated May 22, 2001. (2) Form of Letter of Transmittal. (3) Form of Letter to Eligible Option Holders Distributed by E- mail. (4) Form of Letter to Tendering Option Holders. (5) Form of Notice of Acceptance of Outstanding Options for Exchange. (6) InterTrust Technologies Corporation Annual Report on Form 10-K for its fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on April 2, 2001 and incorporated herein by reference. (7) InterTrust Technologies Corporation Annual Report on Form 10-K/A for its fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on April 30, 2001 and incorporated herein by reference. (8) InterTrust Technologies Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, filed with the Securities and Exchange Commission on May 15, 2001 and incorporated herein by reference. (b) Not applicable. (d) (1) InterTrust Technologies Corporation 2000 Supplemental Plan. Filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on April 2, 2001 and incorporated herein by reference. (2) Form of Option Agreement Pursuant to the InterTrust Technologies Corporation 2000 Supplemental Plan. (3) InterTrust Technologies Corporation 1999 Equity Incentive Plan. Filed as Exhibit 10.2 to the Company's Registration Statement on Form S-1 (File No. 333-84033) and incorporated herein by reference. (4) Form of Option Agreement Pursuant to the InterTrust Technologies Corporation 1999 Equity Incentive Plan. (5) InterTrust Technologies Corporation 1995 Stock Plan. (6) Form of Option Agreement pursuant to the InterTrust Technologies Corporation 1995 Stock Plan. (g) Not applicable. (h) Not applicable. Item 13. Information Required by Schedule 13E-3. (a) Not applicable. SIGNATURE After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule TO is true, complete and correct. InterTrust Technologies Corporation /s/ David Ludvigson ___________________________________ David Ludvigson President Date: May 24, 2001 Index to Exhibits Exhibit Number Description ----------- (a)(1) - Offer to Exchange, dated May 24, 2001. (a)(2) - Form of Letter of Transmittal. (a)(3) - Form of Letter to Eligible Option Holders Distributed by E-mail. (a)(4) - Form of Letter to Tendering Option Holders. (a)(5) - Form of Notice of Acceptance of Outstanding Options for Exchange. (a)(6) - InterTrust Technologies Corporation Annual Report on Form 10-K for its fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on April 2, 2001 and incorporated herein by reference. (a)(7) - InterTrust Technologies Corporation Annual Report on Form 10-K/A for its fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on April 30, 2001 and incorporated herein by reference. (a)(8) - InterTrust Technologies Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 2001, filed with the Securities and Exchange Commission on May 15, 2001 and incorporated herein by reference. (d)(1) - InterTrust Technologies Corporation 2000 Supplemental Plan. Filed as Exhibit 10.21 to the Company's Annual Report on Form 10-K for its fiscal year ended December 31, 2000, filed with the Securities and Exchange Commission on April 2, 2001 and incorporated herein by reference. (d)(2) - Form of Option Agreement Pursuant to the InterTrust Technologies Corporation 2000 Supplemental Plan. (d)(3) - InterTrust Technologies Corporation 1999 Equity Incentive Plan. Filed as Exhibit 10.2 to the Company's Registration Statement on Form S-1 (File No. 333-84033) and incorporated herein by reference. (d)(4) - Form of Option Agreement Pursuant to the InterTrust Technologies Corporation 1999 Equity Incentive Plan. (d)(5) - InterTrust Technologies Corporation 1995 Stock Plan. (d)(6) - Form of Option Agreement pursuant to the InterTrust Technologies Corporation 1995 Stock Plan. EX-99.(A)(1) 2 dex99a1.txt OFFER TO EXCHANGE, DATED MAY 24, 2001 Exhibit (a)(1) INTERTRUST TECHNOLOGIES CORPORATION OFFER TO EXCHANGE ALL OUTSTANDING OPTIONS UNDER ELIGIBLE OPTION PLANS THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 9:00 P.M., PACIFIC TIME, ON JUNE 22, 2001, UNLESS THE OFFER IS EXTENDED. ----------------------------- InterTrust Technologies Corporation ("InterTrust", "we" or "us") is offering to exchange all outstanding options to purchase shares of our common stock granted under the InterTrust Technologies Corporation 1995 Stock Plan (the "1995 option plan"), the InterTrust Technologies Corporation 1999 Equity Incentive Plan (the "1999 option plan") and the InterTrust Technologies Corporation 2000 Supplemental Plan (the "2000 option plan") (collectively, the "eligible option plans") that have an exercise price of $5.00 per share or more (after giving effect to InterTrust's two-for-one stock split on February 24, 2000) for new options we will grant under an eligible option plan. We are making this offer upon the terms and subject to the conditions set forth in this offer to exchange and in the related letter of transmittal (which together, as they may be amended from time to time, constitute the "offer"). The number of shares of common stock subject to new options to be granted to each option holder will be equal to one hundred percent (100%) of the number of shares subject to the options tendered by such option holder and accepted for exchange. We will grant the new options on the date of the first meeting of the compensation committee of the InterTrust Board of Directors held more than six months and one day following the date we cancel the options accepted for exchange (the "replacement grant date"). You may tender options for all or any portion of the shares of common stock subject to your options. However, if you wish to participate in this program, you are required to cancel all options granted to you on or after November 24, 2000, including options granted to you that are below the $5.00 per share exercise price. This offer is not conditioned upon a minimum number of options being tendered. This offer is subject to conditions which we describe in section 6 of this offer to exchange. If you tender options for exchange as described in the offer, we will grant you new options under an eligible option plan and a new option agreement between us and you. The exercise price of the new options will be equal to the last reported sale price of our common stock on the Nasdaq Market on the date of grant, as reported in the print edition of The Wall Street Journal. The new options will vest on the same schedule as the options you elect for exchange, as if the new options were granted on the original grant date of the cancelled options, and will have other terms and conditions that are substantially the same as those of the cancelled options (in other words, if you would have vested in 100 shares under your old option by the replacement grant date, you will have 100 shares vested in the new option on the replacement grant date). The new options will be "blacked out", and you will not be able to exercise them for two weeks following the replacement grant date to allow us to handle administrative matters relating to the new grant. ALTHOUGH OUR BOARD OF DIRECTORS HAS APPROVED THIS OFFER, NEITHER WE NOR OUR BOARD OF DIRECTORS MAKES ANY RECOMMENDATION AS TO WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR OPTIONS FOR EXCHANGE. YOU MUST MAKE YOUR OWN DECISION WHETHER TO TENDER YOUR OPTIONS. WE RECOMMEND THAT YOU CONSULT WITH YOUR OWN INVESTMENT OR TAX ADVISORS IN MAKING YOUR DECISION WHETHER TO TENDER YOUR OPTIONS. Shares of our common stock are quoted on the Nasdaq Market under the symbol "ITRU." On May 23, 2001, the last reported sale price of the common stock on the Nasdaq Market was $2.19 per share. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK BEFORE DECIDING WHETHER TO TENDER YOUR OPTIONS. You should direct questions about this offer or requests for assistance or for additional copies of the offer to exchange or the letter of transmittal to John Amster, Vice President, Corporate Development, InterTrust Technologies Corporation, 4750 Patrick Henry Drive, Santa Clara, California 95054, by email at jamster@intertrust.com or by telephone at (408) 855-0100. ---------------------- 1 IMPORTANT If you wish to tender your options for exchange, you must complete and sign the letter of transmittal in accordance with its instructions, and mail or otherwise deliver it and any other required documents to us by fax at (408) 855-0144 or, by email at jamster@intertrust.com or by post at InterTrust Technologies ---------------------- Corporation, 4750 Patrick Henry Drive, Santa Clara, California 95054, Attn: John Amster, Vice President, Corporate Development. We are not making this offer to, nor will we accept any tender of options from or on behalf of, option holders in any jurisdiction in which the offer or the acceptance of any tender of options would not be in compliance with the laws of such jurisdiction. However, we may, at our discretion, take any actions necessary for us to make this offer to option holders in any such jurisdiction. WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR OPTIONS PURSUANT TO THE OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFER OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT OR IN THE RELATED LETTER OF TRANSMITTAL. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US. 2 TABLE OF CONTENTS
Page ---- SUMMARY TERM SHEET........................................................................ 1 INTRODUCTION.............................................................................. 6 THE OFFER................................................................................. 7 1. Number of Options; Expiration Date.............................................. 7 2. Purpose of the Offer............................................................ 7 3. Procedures for Tendering Options................................................ 8 4. Withdrawal Rights............................................................... 9 5. Acceptance of Options for Exchange and Issuance of New Options.................. 9 6. Conditions of the Offer......................................................... 10 7. Price Range of Common Stock Underlying the Options.............................. 12 8. Source and Amount of Consideration; Terms of New Options........................ 12 9. Information Concerning InterTrust............................................... 13 10. Interests of Directors and Officers; Transactions and Arrangements Concerning the Options..................................................... 14 11. Status of Options Acquired by Us in the Offer; Accounting Consequences of the Offer............................................................... 14 12. Legal Matters; Regulatory Approvals............................................. 14 13. Material Federal Income Tax Consequences........................................ 15 14. Extension of Offer; Termination; Amendment...................................... 15 15. Fees and Expenses............................................................... 16 16. Additional Information.......................................................... 16 17. Miscellaneous................................................................... 17
SCHEDULE A Information Concerning the Directors and Executive Officers of InterTrust Technologies Corporation i SUMMARY TERM SHEET The following are answers to some of the questions that you may have about this offer. We urge you to read carefully the remainder of this offer to exchange and the accompanying letter of transmittal because the information in this summary is not complete, and additional important information is contained in the remainder of this offer to exchange and the letter of transmittal. We have included page references to the remainder of this offer to exchange where you can find a more complete description of the topics in this summary. . WHAT SECURITIES ARE WE OFFERING TO EXCHANGE? We are offering to exchange all stock options having an exercise price of $5.00 per share or more (after giving effect to InterTrust's two-for-one stock split on February 24, 2000) which are outstanding under the eligible option plans, or any lesser number of options that option holders properly tender in the offer, for new options under eligible option plans. If you tender any options, you will be required to tender all options granted since November 24, 2000 regardless of exercise price (including options granted to you that are below the $5.00 per share exercise price). (Page 7) . WHY ARE WE MAKING THE OFFER? Many of our outstanding options, whether or not they are currently exercisable, have exercise prices that are significantly higher than the current market price of our common stock. By making this offer to exchange outstanding options for new options that will have an exercise price equal to the market value of our common stock on the grant date, we intend to provide our employees with the benefit of owning options that over time may have a greater potential to increase in value, create better performance incentives for employees and thereby maximize stockholder value. (Page 7) . WHO IS ELIGIBLE? Except for members of InterTrust's Board of Directors, executive officers, and vice presidents in the corporate development and finance departments, any current employee of InterTrust with a current stock option under an eligible option plan having an exercise price of at least $5.00 per share (after giving effect to InterTrust's two-for-one stock split on February 24, 2000) is eligible. . WILL ALL THE OVERSEAS EMPLOYEES BE ELIGIBLE TO PARTICIPATE? Except as noted above, all employees with a current stock option from an eligible option plan are eligible. Special considerations may apply to employees located in Australia, Hong Kong, Japan and the United Kingdom. Employees in the United Kingdom should particularly note the required tax election described below. In some of these countries, the application of local taxation rules may have an impact upon the re-grant. The Company is planning a series of communication forums for those countries so affected. (Page 7) . WHAT ARE THE CONDITIONS TO THE OFFER? The offer is not conditioned upon a minimum number of options being tendered. The offer is subject to a number of conditions, including the conditions described in section 6. (Page 10) . ARE THERE ANY ELIGIBILITY REQUIREMENTS I MUST SATISFY AFTER THE EXPIRATION DATE OF THE OFFER TO RECEIVE THE NEW OPTIONS? To receive a grant of new options pursuant to the offer and under the terms of the eligible option plan, you must be an employee of InterTrust or one of its subsidiaries from the date you tender options through the date we grant the new options. As discussed below, we will not grant the new options until the first meeting of the compensation committee of InterTrust's Board of Directors at least six months and one day following the date we cancel the options accepted for exchange (the "replacement grant date"). IF YOU ARE NOT AN EMPLOYEE OF INTERTRUST OR ONE OF OUR SUBSIDIARIES FROM THE DATE YOU TENDER OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS, YOU WILL NOT RECEIVE ANY NEW OPTIONS IN EXCHANGE FOR YOUR TENDERED OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE. YOU ALSO WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR THE OPTIONS TENDERED IF YOU ARE NOT AN EMPLOYEE FROM THE DATE YOU TENDER OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS. (Pages 9,10) 1 . HOW MANY NEW OPTIONS WILL I RECEIVE IN EXCHANGE FOR MY TENDERED OPTIONS? We will grant you new options to purchase the number of shares of our common stock which is equal to one hundred percent (100%) of the number of shares of common stock subject to the options you tender. All new options will be granted under an eligible option plan and will be subject to the terms and conditions of an eligible option plan and a new option agreement between you and us. The new option agreement will be in substantially the same form as the option agreement or agreements for your current options. (Page 7) . WHEN WILL I RECEIVE MY NEW OPTIONS? Provided you are an employee of InterTrust or one of its subsidiaries from the date you tender your options through the date we grant the new options, we will grant the new options on the date of the first meeting of the compensation committee of the InterTrust Board of Directors held at least six months and one day after the date we cancel the options accepted for exchange. If we cancel tendered options on June 25, 2001, which is one business day after the scheduled expiration date of the offer, the grant date of the new options will be on or after December 26, 2001. We will provide you with prompt notification of the acceptance for exchange and cancellation of the options that you elect to tender in the exchange. To give us time to prepare and distribute the new option documentation, the new options will be blacked out for two weeks following the replacement grant date. (Page 9) . WHY WON'T I RECEIVE MY NEW OPTIONS IMMEDIATELY AFTER THE EXPIRATION DATE OF THE OFFER? If we were to grant the new options on any date which is earlier than six months and one day after the date we cancel the options accepted for exchange, we would be required for financial reporting purposes to record a compensation expense against our operating results. By deferring the grant of the new options for at least six months and one day, we believe we will not have to record such a compensation expense. (Page 14) . IS THIS A REPRICING? This is not a stock option repricing in the traditional sense. Under a traditional stock option repricing, an employee's current options would be immediately repriced and InterTrust would have a variable accounting charge against earnings. (Page 14) . WHY CAN'T INTERTRUST JUST REPRICE MY OPTIONS, AS I HAVE SEEN DONE AT OTHER COMPANIES? In 1998, the Financial Accounting Standards Board adopted unfavorable accounting charge consequences for companies that reprice options. If we were to simply reprice options, our progress toward profitability would be in serious jeopardy, as we would be required to take a charge against earnings on any future appreciation of the repriced options. (Page 14) . WOULDN'T IT BE EASIER TO JUST QUIT INTERTRUST AND THEN GET REHIRED? This is not an available alternative because a rehire and resulting re-grant within six months of the option cancellation date would be treated the same as a repricing. Again, such a repricing would cause InterTrust to incur a variable accounting charge against earnings. (Page 14) . IF I TENDER OPTIONS IN THE OFFER, WILL I BE ELIGIBLE TO RECEIVE OTHER OPTION GRANTS BEFORE I RECEIVE MY NEW OPTIONS? Because of the accounting limitations, participants in this program will not be granted any additional stock options until after the replacement grant date. (Page 10) . WHAT WILL THE EXERCISE PRICE OF THE NEW OPTIONS BE? The exercise price of the new options will be equal to the last reported sale price of our common stock on the Nasdaq Market on the date we grant the new options. Accordingly, we cannot predict the exercise price of the new options. The exercise price of any option you tender must be at least $5.00 per share (after giving effect to InterTrust's two-for-one stock split on February 24, 2000). This price is higher than the current market price of our common stock, which was $2.19 per share on May 23, 2001. HOWEVER, BECAUSE WE WILL NOT GRANT NEW OPTIONS UNTIL AT LEAST SIX MONTHS AND ONE DAY AFTER THE DATE WE CANCEL THE OPTIONS ACCEPTED FOR EXCHANGE, THE NEW OPTIONS MAY HAVE A HIGHER EXERCISE PRICE THAN SOME 2 OR ALL OF YOUR CURRENT OPTIONS. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK BEFORE DECIDING WHETHER TO TENDER YOUR OPTIONS. (PAGE 12) . WHEN WILL THE NEW OPTIONS VEST? The vesting schedule for all new options granted in this program will be exactly the same as the vesting schedule for the cancelled options. On the replacement grant date, you will have vested in the same number of options as if you had not exchanged your options under this offer. Therefore, no employee will lose nor gain vesting in the replacement option, but rather the new option will vest on the same schedule as the prior option. (Page 12) . WHAT WILL BE THE TERMS AND CONDITIONS OF MY NEW OPTIONS? Except for the new option exercise price and the black out period, the terms and conditions of your new options will be substantially the same as the cancelled options. As noted above, the vesting schedule for the replacement option will be exactly the same as the cancelled option. (Page 12) . WHAT HAPPENS IF INTERTRUST IS SUBJECT TO A CHANGE OF CONTROL AFTER THE NEW OPTIONS ARE GRANTED? The new options will include the same vesting acceleration provisions, if any, as the cancelled options. Therefore, your new options would accelerate under the same conditions and to the same extent as your current options. (Page 12) . WHAT HAPPENS IF INTERTRUST IS SUBJECT TO A CHANGE OF CONTROL BEFORE THE NEW OPTIONS ARE GRANTED? There are several different types of change of control transactions that can occur. If we are a party to a change of control transaction typically referred to as a merger, stock acquisition or consolidation of InterTrust with or into another entity or any other corporate reorganization before the new options are granted, the surviving corporation would inherit our obligation to grant new options at the replacement date. The new options would still be granted on the replacement grant date, but they would be options to purchase the shares of the surviving corporation. The exercise price would be equal to the market price of the surviving company's stock on the date of grant. For example, if we were acquired by means of a merger, the number of shares would be equal to the number of our shares that you would have received, multiplied by the exchange ratio that was used in the merger. The vesting schedule of the new options would give you the benefit of any acceleration provisions you may have under your existing InterTrust options. (Page 10) If we are a party to a change of control transaction typically referred to as an asset acquisition, where a company purchased just the assets of InterTrust, it would be entirely within the discretion of the acquiring company to assume our obligation under this plan. IN ADDITION, IN THE EVENT OF ANY TYPE OF CHANGE OF CONTROL TRANSACTION, THERE CAN BE NO ASSURANCE THAT YOU WILL NOT BE HIRED OR INVOLUNTARILY TERMINATED BY THE SUCCESSOR ENTITY BEFORE THE NEW OPTIONS ARE GRANTED, IN WHICH CASE YOU WOULD NOT RECEIVE ANY NEW OPTIONS. . DO I HAVE TO TENDER ALL OF MY OPTION GRANTS? You can optionally elect to cancel one or more options granted under the eligible option plans with an exercise price of at least $5.00 per share (after giving effect to InterTrust's two-for-one stock split on February 24, 2000). However, if you elect to participate in this offer, in addition to the options that you optionally elect to cancel, all options granted to you from November 24, 2000 to May 24, 2001 will be cancelled regardless of their exercise price. In addition, you will have to tender all options in each specific grant. If you have partially exercised an option, any remaining outstanding, unexercised options can be cancelled. The re-grant will be only in replacement of cancelled options, however, we cannot partially cancel an outstanding option. (Page 7) . WILL I HAVE TO PAY TAXES IF I EXCHANGE MY OPTIONS IN THE OFFER? If you exchange your current options for new options, you will not be required under current law to recognize income for federal income tax purposes at the time of the exchange. We believe that the exchange will be treated as a non- taxable exchange. Further, at the date of grant of the new options, you will not be required under current law to recognize income for federal income tax purposes. The grant of options is not recognized as taxable income. Again, special considerations apply to employees located in Australia, Hong Kong, Japan and the United Kingdom. In some of these countries, this application of local taxation rules may have an impact upon the re-grant. 3 We recommend that you consult with your own tax advisor to determine the tax consequences of tendering options pursuant to the offer. (Page 15) . WILL MY NEW OPTIONS BE INCENTIVE STOCK OPTIONS OR NONSTATUTORY OPTIONS? The new options will be nonstatutory options. (Page 13) We advise you to contact your accountant or other tax advisor to learn the difference in the tax treatment between incentive stock options and nonstatutory stock options. . WHEN DOES THE OFFER EXPIRE? CAN THE OFFER BE EXTENDED, AND IF SO, HOW WILL I BE NOTIFIED IF IT IS EXTENDED? The offer expires on June 22, 2001, at 9:00 p.m., Pacific time, unless it is extended by us. We may, in our discretion, extend the offer at any time, but we cannot assure you that the offer will be extended or, if extended, for how long. If the offer is extended, we will make a public announcement of the extension no later than 9:00 a.m., Pacific Time, on the next business day following the previously scheduled expiration of the offer period. (Page 15) . HOW DO I TENDER MY OPTIONS? If you decide to tender your options, you must deliver, before 9:00 p.m., Pacific time, on June 22, 2001, a properly completed and duly executed letter of transmittal and any other documents required by the letter of transmittal to InterTrust Technologies Corporation, 4750 Patrick Henry Drive, Santa Clara, California 95054, Attn.: John Amster, Vice President, Corporate Development. If the offer is extended by us beyond that time, you must deliver these documents before the extended expiration of the offer. We reserve the right to reject any or all tenders of options that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept properly and timely tendered options which are not validly withdrawn. Subject to our rights to extend, terminate and amend the offer, we currently expect that we will accept all such properly tendered options promptly after the expiration of the offer. . IF I PARTICIPATE, WHAT WILL HAPPEN TO MY CURRENT OPTIONS? Options designated to be exchanged under this program will be cancelled after 9:00 p.m. Pacific Time on June 22, 2001. (Page 14) . WHAT WILL HAPPEN IF I DO NOT TURN IN MY FORM BY THE DEADLINE? If you do not turn in your election form by the deadline, then you will not participate in the option exchange, and all stock options currently held by you will remain intact at their original price and original terms. (Page 8) . DURING WHAT PERIOD OF TIME MAY I WITHDRAW PREVIOUSLY TENDERED OPTIONS? You may withdraw your tendered options at any time before 9:00 p.m., Pacific time, on June 22, 2001. If the offer is extended by us beyond that time, you may withdraw your tendered options at any time until the extended expiration of the offer. To withdraw tendered options, you must deliver to us a written notice of withdrawal, or a facsimile thereof, with the required information while you still have the right to withdraw the tendered options. Once you have withdrawn options, you may re-tender options only by again following the delivery procedures described above. (Page 9) . HOW SHOULD I DECIDE WHETHER OR NOT TO PARTICIPATE? We understand that this will be a challenging decision for all employees. The program does carry considerable risk, and there are no guarantees of our future stock performance. So, the decision to participate must be each individual employee's personal decision, and it will depend largely on each employee's assumptions about the future overall economic environment, the performance of the Nasdaq National Market and our own stock price, and our business. 4 . AFTER THE RE-GRANT, WHAT HAPPENS IF I AGAIN END UP UNDERWATER? We are conducting this offer only at this time, considering the unusual stock market conditions that have affected many companies throughout the country. This is therefore considered a one-time offer and is not expected to be offered again in the future. As your stock options are valid for ten years (or, in some cases, five years) from the date of initial grant, subject to continued employment, the price of our common stock may appreciate over the long term even if your options are underwater for some period of time after the grant date of the new options. HOWEVER, WE CAN PROVIDE NO ASSURANCE AS TO THE PRICE OF OUR COMMON STOCK AT ANY TIME IN THE FUTURE. . WHAT DO WE AND OUR BOARD OF DIRECTORS THINK OF THE OFFER? Although our Board of Directors has approved this offer, neither we nor our Board of Directors makes any recommendation as to whether you should tender or refrain from tendering your options. You must make your own decision whether to tender options. Our executive officers and directors are not eligible to participate in the offer. . WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER? For additional information or assistance, you should contact: John Amster Vice President, Corporate Development InterTrust Technologies Corporation, 4750 Patrick Henry Drive Santa Clara, California 95054 (telephone: (408) 855-0100) (facsimile: (408) 855-0144) (e-mail: jamster@intertrust.com) 5 INTRODUCTION InterTrust Technologies Corporation is offering to exchange all outstanding options to purchase shares of our common stock granted under the InterTrust Technologies Corporation 1995 Stock Plan, the InterTrust Technologies Corporation 1999 Equity Incentive Plan and the InterTrust Technologies Corporation 2000 Supplemental Plan (collectively, the "eligible option plans") that have an exercise price of $5.00 per share or more (after giving effect to InterTrust's two-for-one stock split on February 24, 2000) for new options we will grant under an eligible option plan. We are making this offer upon the terms and subject to the conditions set forth in this offer to exchange and in the related letter of transmittal (which together, as they may be amended from time to time, constitute the "offer"). The number of shares of common stock subject to new options to be granted to each option holder will be equal to one hundred percent (100%) of the number of shares subject to the options tendered by such option holder and accepted for exchange. We will grant the new options on the date of the first meeting of the compensation committee of the InterTrust Board of Directors held more than six months and one day following the date we cancel the options accepted for exchange. If you choose to participate, you will be required to exchange all options granted on or after November 22, 2000, regardless of their exercise price, even if you are only electing to exchange options granted prior to November 22, 2000. This offer is not conditioned upon a minimum number of options being tendered. This offer is subject to conditions which we describe in section 6 of this offer to exchange. If you tender options for exchange, we will grant you new options under an eligible option plan and a new option agreement between us and you. The exercise price of the new options will be equal to the last reported sale price of our common stock on the Nasdaq Market on the date of grant as reported in the print edition of The Wall Street Journal. The vesting schedule for the new options granted will be exactly the same as the vesting schedule for the cancelled options, and the other terms and conditions of the new options will be substantially the same as the cancelled options. On the replacement grant date, you will have vested in the same number of options as if you had not exchanged your options under this offer. Therefore, no employees will lose nor gain vesting in the new options, but rather the new options will vest on the same schedule as the prior options. The new options will be "blacked out", and you will not be able to exercise them, for three weeks following the replacement grant date, to let us handle administrative matters relating to the new grant. If you are not an employee of InterTrust or one of our subsidiaries from the date you tender your options through the date we grant the new options, you will not receive any new options in exchange for your tendered options that have been accepted for exchange. You also will not receive any other consideration for your tendered options if you are not any employee from the date you tender options through the date we grant the new options. The same is true if InterTrust is involved in an acquisition or merger before the date we grant new options, and you are not an employee of the surviving corporation after the transaction. Therefore, if you leave InterTrust or one of its subsidiaries (or in the case of an acquisition or merger, the surviving corporation) voluntarily, involuntarily, or for any other reason, before your new option is re-granted, you will not have a right to any stock options that were previously cancelled, and you will not have a right to the re-grant that would have been issued on the replacement grant date. As of May 24, 2001, options to purchase 16,300,000 shares of our common stock were issued and outstanding under the eligible option plans. Of these options, options to purchase 7,300,000 shares of our common stock had an exercise price of $5.00 or more. The shares of common stock issuable upon exercise of options we are offering to exchange represent approximately 45% of the total shares of common stock issuable upon exercise of all options outstanding under the eligible option plans as of May 24, 2001. All options accepted by us pursuant to this offer will be canceled. 6 THE OFFER 1. NUMBER OF OPTIONS; EXPIRATION DATE. Upon the terms and subject to the conditions of the offer, we will exchange for new options to purchase common stock under the eligible option plans all eligible outstanding options under the eligible option plans that are properly tendered and not validly withdrawn in accordance with section 4 before the "expiration date," as defined below. Eligible outstanding options are all options that have an exercise price of $5.00 per share (after giving effect to InterTrust's two-for-one stock split on February 24, 2000). In addition, if you choose to participate, you will be required to exchange all options granted on or after November 24, 2000, regardless of their exercise price, even if you are only electing to exchange options granted prior to November 24, 2000. If your options are properly tendered and accepted for exchange, you will be entitled to receive new options to purchase the number of shares of our common stock which is equal to one hundred percent (100%) of the number of shares subject to the options that you tendered, subject to adjustments for any stock splits, stock dividends and similar events, including change of control events. All new options will be subject to the terms of an eligible option plan and to a new option agreement between us and you. IF YOU ARE NOT AN EMPLOYEE OF INTERTRUST OR ONE OF OUR SUBSIDIARIES FROM THE DATE YOU TENDER OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS, YOU WILL NOT RECEIVE ANY NEW OPTIONS IN EXCHANGE FOR YOUR TENDERED OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE. YOU ALSO WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR YOUR TENDERED OPTIONS IF YOU ARE NOT AN EMPLOYEE FROM THE DATE YOU TENDER OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS. THEREFORE, IF YOU LEAVE INTERTRUST OR ONE OF ITS SUBSIDIARIES VOLUNTARILY, INVOLUNTARILY, OR FOR ANY OTHER REASON, BEFORE YOUR NEW OPTION IS RE-GRANTED, YOU WILL NOT HAVE A RIGHT TO ANY STOCK OPTIONS THAT WERE PREVIOUSLY CANCELLED, AND YOU WILL NOT HAVE A RIGHT TO THE RE-GRANT THAT WOULD HAVE BEEN ISSUED ON THE REPLACEMENT GRANT DATE. Special considerations apply to employees located in Australia, Hong Kong, Japan and the United Kingdom. In some of these countries, the application of local taxation rules may have an impact upon the re-grant. We are planning a series of communication forums to those countries so affected. The term "expiration date" means 9:00 p.m., Pacific time, on June 22, 2001, unless and until we, in our discretion, have extended the period of time during which the offer will remain open, in which event the term "expiration date" refers to the latest time and date at which the offer, as so extended, expires. See section 14 for a description of our rights to extend, delay, terminate and amend the offer. If we decide to take any of the following actions, we will publish notice of such action and extend the offer for a period of ten business days after the date of such publication: (a) (1) we increase or decrease the amount of consideration offered for the options; (2) we decrease the number of options eligible to be tendered in the offer; or (3) we increase the number of options eligible to be tendered in the offer by an amount that exceeds 2% of the shares of common stock issuable upon exercise of the options that are subject to the offer immediately prior to the increase; and (b) the offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified in section 14. For purposes of the offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Eastern time. 2. PURPOSE OF THE OFFER. We issued the options outstanding under the eligible option plans for the following purposes: . to provide our employees an opportunity to acquire or increase a proprietary interest in InterTrust, thereby creating a stronger incentive to expend maximum effort for our growth and success; and 7 . to encourage our employees to continue their employment with us. Many of our outstanding options, whether or not they are currently exercisable, have exercise prices that are significantly higher than the current market price of our common stock. We believe these options are unlikely to be exercised in the foreseeable future. By making this offer to exchange outstanding options for new options that will have an exercise price equal to the market value of our common stock on the grant date, we intend to provide our employees with the benefit of owning options that over time may have a greater potential to increase in value, create better performance incentives for employees and thereby maximize stockholder value. IT IS HOPED THAT THIS PROGRAM WILL AMELIORATE THE CURRENT UNDERWATER OPTIONS ISSUE, BUT IT IS NOT GUARANTEED THAT IT WILL DO SO GIVEN THE EVER-PRESENT RISKS ASSOCIATED WITH A VOLATILE AND UNPREDICTABLE STOCK MARKET. Subject to the foregoing, and except as otherwise disclosed in this offer to exchange or in our filings with the Securities and Exchange Commission (the "SEC"), we presently have no plans, proposals or negotiations that relate to or would result in: (a) a material and extraordinary corporate transaction, such as a merger, reorganization or liquidation. Since our inception, we have acquired four companies (either by purchasing substantially all of the assets or all of the outstanding shares)-- MpegTV, LLC, Infinite Ink Corporation, PassEdge Corporation and PublishOne Inc. We expect to consider additional acquisitions from time to time; (b) any purchase, sale or transfer of a material amount of our assets; (c) any material change in our present dividend rate or policy, or our indebtedness or capitalization; (d) any change in our present Board of Directors or management, including a change in the number or term of directors or to fill any existing board vacancies or to change any executive officer's material terms of employment; (e) any other material change in our corporate structure or business; (f) our common stock being delisted from a national securities exchange or not being authorized for quotation in an automated quotation system operated by a national securities association; (g) our common stock becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act; (h) the suspension of our obligation to file reports pursuant to Section 15(d) of the Securities Exchange Act; or (i) any change in our certificate of incorporation or bylaws, or any actions which may impede the acquisition of control of us by any person. Neither we nor our Board of Directors makes any recommendation as to whether you should tender your options, nor have we authorized any person to make any such recommendation. You are urged to evaluate carefully all of the information in this offer to exchange and to consult your own investment and tax advisors. You must make your own decision whether to tender your options for exchange. 3. PROCEDURES FOR TENDERING OPTIONS. Proper Tender of Options. To validly tender your options pursuant to the offer, - ------------------------ you must, in accordance with the terms of the letter of transmittal, properly complete, duly execute and deliver to us the letter of transmittal, or a facsimile thereof, along with any other required documents. We must receive all of the required documents by fax at (408) 855-0144 or by email at jamster@intertrust.com or by post at 4750 Patrick Henry Drive, Santa Clara, - ---------------------- California 95054, Attn: John Amster, Vice President, Corporate Development, before the expiration date. If you do not turn in your letter of transmittal by the deadline, then you will not participate in the option exchange, and all stock options currently held by you will remain intact at their original price and original terms. THE METHOD OF DELIVERY OF ALL DOCUMENTS, INCLUDING LETTERS OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, IS AT THE ELECTION AND RISK OF THE TENDERING OPTION HOLDER. IF 8 DELIVERY IS BY MAIL, WE RECOMMEND THAT YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED AND PROPERLY INSURE YOUR PACKAGE. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. Determination of Validity; Rejection of Options; Waiver of Defects; No - ---------------------------------------------------------------------- Obligation to Give Notice of Defects. We will determine, in our discretion, all - ------------------------------------ questions as to form of documents and the validity, form, eligibility, including time of receipt, and acceptance of any tender of options. Our determination of these matters will be final and binding on all parties. We reserve the right to reject any or all tenders of options that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we will accept properly and timely tendered options which are not validly withdrawn. We also reserve the right to waive any of the conditions of the offer or any defect or irregularity in any tender with respect to any particular options or any particular option holder. No tender of options will be deemed to have been properly made until all defects or irregularities have been cured by the tendering option holder or waived by us. Neither we nor any other person is obligated to give notice of any defects or irregularities in tenders, nor will anyone incur any liability for failure to give any such notice. Our Acceptance Constitutes an Agreement. Your tender of options pursuant to the - --------------------------------------- procedures described above constitutes your acceptance of the terms and conditions of the offer. OUR ACCEPTANCE FOR EXCHANGE OF YOUR OPTIONS TENDERED BY YOU PURSUANT TO THE OFFER WILL CONSTITUTE A BINDING AGREEMENT BETWEEN US AND YOU UPON THE TERMS AND SUBJECT TO THE CONDITIONS OF THE OFFER. Subject to our rights to extend, terminate and amend the offer, we currently expect that we will accept promptly after the expiration of the offer all properly tendered options that have not been validly withdrawn. 4. WITHDRAWAL RIGHTS. You may only withdraw your tendered options in accordance with the provisions of this section 4. You may withdraw your tendered options at any time before 9:00 p.m., Pacific time, on June 22, 2001. If the offer is extended by us beyond that time, you may withdraw your tendered options at any time until the extended expiration of the offer. In addition, unless we accept your tendered options for exchange before 9:00 p.m., Pacific time, on July 23, 2001, you may withdraw your tendered options at any time after 9:00 p.m. Pacific time, on July 23, 2001. To withdraw validly tendered options, an option holder must deliver to us at the address set forth on the back cover of this offer to exchange a written notice of withdrawal, or a facsimile thereof, with the required information, while the option holder still has the right to withdraw the tendered options. The notice of withdrawal must specify the name of the option holder who tendered the options to be withdrawn, the grant date, exercise price and total number of option shares subject to each option to be withdrawn, and the number of option shares to be withdrawn. Except as described in the following sentence, the notice of withdrawal must be executed by the option holder who tendered the options to be withdrawn exactly as such option holder's name appears on the option agreement or agreements evidencing such options. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or another person acting in a fiduciary or representative capacity, the signer's full title and proper evidence of the authority of such person to act in such capacity must be indicated on the notice of withdrawal. You may not rescind any withdrawal, and any options you withdraw will thereafter be deemed not properly tendered for purposes of the offer, unless you properly re-tender those options before the expiration date by following the procedures described in section 3. Neither InterTrust nor any other person is obligated to give notice of any defects or irregularities in any notice of withdrawal, nor will anyone incur any liability for failure to give any such notice. We will determine, in our discretion, all questions as to the form and validity, including time of receipt, of notices of withdrawal. Our determination of these matters will be final and binding. 5. ACCEPTANCE OF OPTIONS FOR EXCHANGE AND ISSUANCE OF NEW OPTIONS. Upon the terms and subject to the conditions of this offer and as promptly as practicable following the expiration date, we will accept for exchange and cancel options properly tendered and not validly withdrawn before the expiration date. If your options are properly tendered and accepted for exchange on June 22, 2001, the scheduled expiration date of the offer, you will be granted new options on or after December 26, 2001, which is the first business day that is at least six months and one day following the date we cancel the options accepted for exchange. If we extend the date by which we must accept and cancel options properly tendered for exchange, you will be granted new options on a subsequent business day which is on or about the first business day at least six months and one day following the extended expiration date. 9 If we accept options you tender in the offer, you will not receive any additional stock option grants until after the replacement grant date, even if you may have otherwise been eligible for additional stock option grants before the replacement grant date, in order for us to avoid incurring compensation expense against our earnings because of accounting rules that could apply to these interim option grants as a result of the offer. Your new options will entitle you to purchase a number of shares of our common stock which is equal to one hundred percent (100%) of the number of shares subject to the options you tender, subject to adjustments for any stock splits, stock dividends and similar events, including change of control events. IF YOU ARE NOT AN EMPLOYEE OF INTERTRUST OR ONE OF OUR SUBSIDIARIES FROM THE DATE YOU TENDER OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS, YOU WILL NOT RECEIVE ANY NEW OPTIONS IN EXCHANGE FOR YOUR TENDERED OPTIONS THAT HAVE BEEN ACCEPTED FOR EXCHANGE. YOU ALSO WILL NOT RECEIVE ANY OTHER CONSIDERATION FOR YOUR TENDERED OPTIONS IF YOU ARE NOT AN EMPLOYEE FROM THE DATE YOU TENDER OPTIONS THROUGH THE DATE WE GRANT THE NEW OPTIONS. THEREFORE, IF YOU LEAVE INTERTRUST OR ONE OF ITS SUBSIDIARIES VOLUNTARILY, INVOLUNTARILY, OR FOR ANY OTHER REASON, BEFORE YOUR NEW OPTION IS RE-GRANTED, YOU WILL NOT HAVE A RIGHT TO ANY STOCK OPTIONS THAT WERE PREVIOUSLY CANCELLED, AND YOU WILL NOT HAVE A RIGHT TO THE RE- GRANT THAT WOULD HAVE BEEN ISSUED ON THE REPLACEMENT GRANT DATE. If we are a party to a change of control transaction (i.e. a merger or consolidation of InterTrust with or into another entity or any other corporate reorganization or a sale, transfer or other disposition of all or substantially all of InterTrust's assets) before the new options are granted, we would require the surviving corporation to inherit our obligation to grant new options at the replacement date. The new options would still be granted on the replacement grant date, but they would be options to purchase the shares of the surviving corporation. The exercise price would be equal to the market price of the surviving company's stock on the date of grant. For example, if we were acquired by means of a merger, the number of shares would be equal to the number of our shares that you would have received, multiplied by the exchange ratio that was used in the merger. The vesting schedule of the new options would give you the benefit of the acceleration provisions of your existing InterTrust options. HOWEVER, IN THE EVENT OF A CHANGE OF CONTROL TRANSACTION, THERE CAN BE NO ASSURANCE THAT YOU WILL NOT BE INVOLUNTARILY TERMINATED BY THE SUCCESSOR ENTITY BEFORE THE NEW OPTIONS ARE GRANTED, IN WHICH CASE YOU WOULD NOT RECEIVE ANY NEW OPTIONS. For purposes of the offer, we will be deemed to have accepted for exchange options that are validly tendered and not properly withdrawn, if and when we give written notice to the option holders of our acceptance for exchange of such options, which may be by press release. Subject to our rights to extend, terminate and amend the offer, we currently expect that we will accept promptly after the expiration of the offer all properly tendered options that are not validly withdrawn. Promptly after we accept tendered options for exchange, we will send each tendering option holder a letter indicating the number of shares subject to the options that we have accepted for exchange, the corresponding number of shares that will be subject to the new options and the expected grant date of the new options. 6. CONDITIONS OF THE OFFER. Notwithstanding any other provision of the offer, we will not be required to accept any options tendered for exchange, and we may terminate or amend the offer, or postpone our acceptance and cancellation of any options tendered for exchange, in each case, subject to Rule 13e-4(f)(5) under the Securities Exchange Act, if at any time on or after May 24, 2001 and prior to the expiration date any of the following events has occurred, or has been determined by us to have occurred, and, in our reasonable judgment in any such case and regardless of the circumstances giving rise thereto, including any action or omission to act by us, the occurrence of such event or events makes it inadvisable for us to proceed with the offer or with such acceptance and cancellation of options tendered for exchange: (a) there shall have been threatened or instituted or be pending any action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or any other person, domestic or foreign, before any court, authority, agency or tribunal that directly or indirectly challenges the making of the offer, the acquisition of some or all of the tendered options pursuant to the offer, the issuance of new options, or otherwise relates in any manner to the offer or that, in our reasonable judgment, could materially and adversely affect the business, condition (financial or other), income, operations or prospects of InterTrust or our subsidiaries, or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our subsidiaries or materially impair the contemplated benefits of the offer to us; 10 (b) there shall have been any action threatened, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the offer or us or any of our subsidiaries, by any court or any authority, agency or tribunal that, in our reasonable judgment, would or might directly or indirectly: (1) make the acceptance for exchange of, or issuance of new options for, some or all of the tendered options illegal or otherwise restrict or prohibit consummation of the offer or otherwise relates in any manner to the offer; (2) delay or restrict our ability, or render us unable, to accept for exchange, or issue new options for, some or all of the tendered options; (3) materially impair the contemplated benefits of the offer to us; or (4) materially and adversely affect the business, condition (financial or other), income, operations or prospects of InterTrust, or otherwise materially impair in any way the contemplated future conduct of our business or materially impair the contemplated benefits of the offer to us; (c) there shall have occurred: (1) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market; (2) the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, whether or not mandatory; (3) the commencement of a war, armed hostilities or other international or national crisis directly or indirectly involving the United States; (4) any limitation, whether or not mandatory, by any governmental, regulatory or administrative agency or authority on, or any event that in our reasonable judgment might affect, the extension of credit by banks or other lending institutions in the United States; (5) any significant decrease in the market price of the shares of our common stock or any change in the general political, market, economic or financial conditions in the United States or abroad that could, in our reasonable judgment, have a material adverse effect on the business, condition (financial or other), operations or prospects of InterTrust or on the trading in our common stock; (6) any change in the general political, market, economic or financial conditions in the United States or abroad that could have a material adverse effect on the business, condition (financial or other), operations or prospects of InterTrust or that, in our reasonable judgment, makes it inadvisable to proceed with the offer; (7) in the case of any of the foregoing existing at the time of the commencement of the offer, a material acceleration or worsening thereof; or (8) any decline in either the Dow Jones Industrial Average or the Standard and Poor's Index of 500 Companies by an amount in excess of 10% measured during any time period after the close of business on May 23, 2001; (d) there shall have occurred any change in generally accepted accounting standards which could or would require us for financial reporting purposes to record compensation expense against our earnings in connection with the offer; (e) a tender or exchange offer with respect to some or all of our common stock, or a merger or acquisition proposal for us, shall have been proposed, announced or made by another person or entity or shall have been publicly disclosed, or we shall have learned that: (1) any person, entity or "group," within the meaning of Section 13(d)(3) of the Securities Exchange Act, shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding shares of our common stock, or any new group shall have been formed that beneficially owns more than 5% of the outstanding shares of our 11 common stock, other than any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the SEC on or before June 22, 2001; (2) any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the SEC on or before June 22, 2001 shall have acquired or proposed to acquire beneficial ownership of an additional 2% or more of the outstanding shares of our common stock; or (3) any person, entity or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, or made a public announcement reflecting an intent to acquire us or any of our subsidiaries or any of the assets or securities of us or any of our subsidiaries; or (f) any change or changes shall have occurred in the business, condition (financial or other), assets, income, operations, prospects or stock ownership of InterTrust that, in our reasonable judgment, is or may be material to InterTrust. The conditions to the offer are for our benefit. We may assert them in our discretion regardless of the circumstances giving rise to them prior to the expiration date. We may waive them, in whole or in part, at any time and from time to time prior to the expiration date, in our discretion, whether or not we waive any other condition to the offer. Our failure at any time to exercise any of these rights will not be deemed a waiver of any such rights. The waiver of any of these rights with respect to particular facts and circumstances will not be deemed a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this section 6 will be final and binding upon all persons. 7. PRICE RANGE OF COMMON STOCK UNDERLYING THE OPTIONS. Our common stock is quoted on the Nasdaq Market under the symbol "ITRU." The following table shows, for the periods indicated, the high and low sales prices per share of our common stock as reported by the Nasdaq Market.
Low High --- ---- Fiscal 1999 Fourth Fiscal Quarter (beginning October 27, 1999)................................. $ 9.00 $93.63 Fiscal 2000 First Fiscal Quarter............................................................... $44.63 $97.47 Second Fiscal Quarter.............................................................. $15.63 $49.88 Third Fiscal Quarter............................................................... $11.81 $22.94 Fourth Fiscal Quarter.............................................................. $ 3.38 $11.00 Fiscal 2001 First Fiscal Quarter............................................................... $2.844 $6.781 Second Fiscal Quarter (through May 23, 2001)....................................... $1.720 $3.875
As of May 23, 2001, the last reported sale price of our common stock, as reported by the Nasdaq Market, was $2.19 per share. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK BEFORE DECIDING WHETHER TO TENDER YOUR OPTIONS. 8. SOURCE AND AMOUNT OF CONSIDERATION; TERMS OF NEW OPTIONS. Consideration. We will issue new options to purchase common stock under an - ------------- eligible option plan in exchange for outstanding eligible options properly tendered and accepted for exchange by us. The number of shares of common stock subject to new options to be granted to each option holder will be equal to one hundred percent (100%) of the number of shares subject to the options tendered by such option holder and accepted for exchange, subject to adjustments for any stock splits, stock dividends and similar events. If we 12 receive and accept tenders of all outstanding eligible options, we will grant new options to purchase a total of 7,300,000 shares of our common stock. The common stock issuable upon exercise of the new options will equal approximately 45% of the total shares of our common stock outstanding as of May 24, 2001. Terms of New Options. The new options will be nonstatutory options issued under - -------------------- an eligible option plan. We will issue a new option agreement to each option holder who has elected to exchange options in the offer. Except for the exercise price and the black out period, the terms and conditions of the new options will be substantially the same as the terms and conditions of the options elected for exchange. This includes the vesting schedule and the vesting commencement date, which will both remain unchanged. The vesting acceleration provisions that apply in the event of a change of control will also remain unchanged. The terms and conditions of your current option are set forth in the eligible option plan under which it was granted and the stock option agreement you entered into in connection with the grant. The terms and conditions of the eligible option plans are summarized in the prospectuses prepared by us and previously distributed to you. YOU MAY OBTAIN COPIES OF THESE PROSPECTUSES AND THE ELIGIBLE OPTION PLANS AS INDICATED BELOW. U.S. Federal Income Tax Consequences of Options. New options granted under the - ----------------------------------------------- eligible option plans are nonstatutory stock options that are not intended to satisfy the requirements of Section 422 of the Internal Revenue Code. Under U.S. law, an optionee recognizes no taxable income upon the grant of a nonstatutory option. The optionee will, in general, recognize ordinary income in the year in which the option is exercised. The amount of ordinary income is equal to the excess of the fair market value of the purchased shares on the exercise date over the exercise price paid for the shares. The optionee will be required to satisfy the tax withholding requirements applicable to such income. We will be entitled to a business expense deduction equal to the amount of ordinary income recognized by the optionee with respect to the exercised nonstatutory option. The deduction will in general be allowed for the taxable year of InterTrust in which the ordinary income is recognized by the optionee. WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN THE OFFER. Our statements in this offer to exchange concerning the eligible option plans and the new options are merely summaries and do not purport to be complete. The statements are subject to, and are qualified in their entirety by reference to, all provisions of the eligible option plans and the form of option agreement under the eligible option plans. Please contact us at InterTrust Technologies Corporation, 4750 Patrick Henry Drive, Santa Clara, California 95054, Attn: John Amster, Vice President, Corporate Development, or by telephone at (408) 855- 0100, to receive a copy of an eligible option plan and the form of option agreement thereunder. We will promptly furnish you copies of these documents at our expense. See "Additional Information" beginning on page 16 for instructions on how you can obtain copies of our SEC reports that contain the audited financial statements and unaudited financial data we have summarized above. 9. INFORMATION CONCERNING INTERTRUST We have developed a general purpose digital rights management, or DRM, platform to serve as a foundation for providers of digital information, technology, and commerce services to participate in a global e-commerce system. We provide our DRM platform as software, tools, and hardware to licensees, which we call partners. These partners intend to offer digital commerce services and applications that collectively will form a global commerce system, which we have branded as the MetaTrust Utility. DRM technologies protect and manage the rights and interests in digital information of artists, authors, producers, publishers, distributors, traders and brokers, enterprises, governments and other institutions, and consumers. The Internet and the music industry have dramatized the need for protection and management of digital information. The very characteristics that make the Internet ideal for distributing digital information also make it ideal for pirating. DRM is needed by any industry that distributes information that can be put into digital form. 13 Our DRM platform provides a foundation for people and organizations to define rules for using digital information and building commercial models. Our technology is designed to protect digital information, apply rules persistently after information is distributed, and automate many of the commercial consequences of using the information. Our general purpose DRM platform is designed to manage a broad range of rights across digital information and media types. As of December 31, 2000, we had 61 partners including: ARM, Adobe, America Online, Blockbuster, BMG Entertainment, Cirrus Logic, Compaq, Creative Technology, Diamond Multimedia Systems, Enron, Mitsubishi Corporation, MusicMatch, Magex, PricewaterhouseCoopers, RioPort, Texas Instruments, Universal Music Group, and Wave Systems. These partners endorse or promote our products and services through various sales and marketing activities, including press releases and trade shows. Some of our partners, including BMG Entertainment and Universal Music Group, began offering commercial applications and services in the MetaTrust Utility in the second half of 2000. See "Additional Information" beginning on page 16 for instructions on how you can obtain copies of our SEC reports that contain the audited financial statements and unaudited financial data about InterTrust. 10. INTERESTS OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING THE OPTIONS. A list of our directors and executive officers is attached to this offer to exchange as Schedule A. Please see our Annual Report on Form 10-K/A, filed with the SEC on April 30, 2001, for information regarding the amount of our securities beneficially owned by our executive officers and directors as of March 31, 2001. As of May 24, 2001, our 14 executive officers and directors as a group beneficially owned options outstanding under eligible option plans to purchase a total of 4,700,000 shares of our common stock, which represented approximately 6% of the shares subject to all options outstanding under the eligible plans as of that date. Bruce Fredrickson and Satish Gupta, two of our directors, each received an option to purchase 40,000 shares of our common stock on May 2, 2001. Except as otherwise described above, and other than ordinary course purchases under the InterTrust Technologies Corporation 1999 Employee Stock Purchase Plan and ordinary course grants of stock options to employees who are not executive officers, there have been no transactions in options to purchase our common stock or in our common stock which were effected during the past 60 days by InterTrust or, to our knowledge, by any executive officer, director, affiliate or subsidiary of InterTrust. 11. STATUS OF OPTIONS ACQUIRED BY US IN THE OFFER; ACCOUNTING CONSEQUENCES OF THE OFFER Options we acquire pursuant to the offer will be canceled and the shares of common stock subject to those options will be returned to the pool of shares available for grants of new options under the eligible option plans and for issuance upon the exercise of such new options. To the extent such shares are not fully reserved for issuance upon exercise of the new options to be granted in connection with the offer, the shares will be available for future awards to employees and other eligible plan participants without further stockholder action, except as required by applicable law or the rules of the Nasdaq Market or any other securities quotation system or any stock exchange on which our common stock is then quoted or listed. We believe that InterTrust will not incur any compensation expense solely as a result of the transactions contemplated by the offer because: . we will not grant any new options until a business day that is at least six months and one day after the date that we accept and cancel options tendered for exchange; and . the exercise price of all new options will equal the market value of the common stock on the date we grant the new options. 12. LEGAL MATTERS; REGULATORY APPROVALS. We are not aware of any license or regulatory permit that appears to be material to our business that might be adversely affected by our exchange of options and issuance of new options as contemplated by the offer, or of any approval or other action by any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of our options as contemplated herein. Should any such approval or other action be required, we presently contemplate that we will seek such approval or take such other action. We are unable to predict whether we may determine that we are required to delay the acceptance of options for exchange pending the outcome of any such matter. We cannot assure you that any such 14 approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any such approval or other action might not result in adverse consequences to our business. Our obligation under the offer to accept tendered options for exchange and to issue new options for tendered options is subject to conditions, including the conditions described in section 6. 13. MATERIAL FEDERAL INCOME TAX CONSEQUENCES. The following is a general summary of the material federal income tax consequences of the exchange of options pursuant to the offer. This discussion is based on the Internal Revenue Code, its legislative history, Treasury Regulations thereunder and administrative and judicial interpretations thereof as of the date of the offer, all of which are subject to change, possibly on a retroactive basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, nor is it intended to be applicable in all respects to all categories of option holders. The option holders who exchange outstanding options for new options will not be required to recognize income for federal income tax purposes at the time of the exchange. We believe that the exchange will be treated as a non-taxable exchange. At the date of grant of the new options, the option holders will not be required to recognize additional income for federal income tax purposes. The grant of options is not recognized as taxable income. Special tax considerations may apply to employees located in Australia, Hong Kong, Japan and the United Kingdom. In some of these countries, the application of local taxation rules may have an impact upon the re-grant. We are planning a series of communication forums for those countries so affected. In particular, for employees in the United Kingdom, which has adopted new laws governing the exercise of stock options awarded after April 5, 1999, the grant of the new option will be subject to the execution of a joint election between you and InterTrust or any subsidiary of InterTrust to provide for the shifting of any Secondary Class 1 National Insurance Contribution liability in connection with the exercise, assignment, release or cancellation of the option from --------------------------------------------- InterTrust and/or any subsidiary to you. This tax is currently set at 11.9% of the difference between the exercise price and the fair market value of the stock at the time of exercise. By accepting the new option, to the extent allowable by applicable law, you will be consenting to and agreeing to satisfy any liability that InterTrust and/or any subsidiary realizes with respect to Secondary Class 1 National Insurance Contribution payments required to be paid by InterTrust and/or any subsidiary in connection with the exercise, assignment, release or -------------------------------- cancellation of the option. In addition, if you accept the new option, you will - ------------ be authorizing InterTrust or the subsidiary to withhold any such Secondary Class 1 National Insurance Contributions from the payroll at any time or from the sale ----------- of a sufficient number of Shares upon exercise, assignment, release or -------------------------------- cancellation of the option. In the alternative, you agree to make payment on - ------------ demand for such contributions to InterTrust or any subsidiary that will remit such contributions to the Inland Revenue. If additional consents and/or any elections are required to accomplish the foregoing shifting of liability, you agree to provide them promptly upon request. If you do not enter into the joint election described above at the same time that you accept the new option, or if the joint election is revoked at any time by the Inland Revenue, InterTrust will have the right to cancel the new option without further liability. WE RECOMMEND THAT YOU CONSULT YOUR OWN TAX ADVISOR WITH RESPECT TO THE FEDERAL, STATE AND LOCAL TAX CONSEQUENCES OF PARTICIPATING IN THE OFFER. 14. EXTENSION OF OFFER; TERMINATION; AMENDMENT. We expressly reserve the right, in our discretion, at any time and from time to time, and regardless of whether or not any event set forth in section 6 has occurred or is deemed by us to have occurred, to extend the period of time during which the offer is open and thereby delay the acceptance for exchange of any options by giving oral or written notice of such extension to the option holders and making a public announcement thereof. We also expressly reserve the right, in our reasonable judgment, prior to the expiration date to terminate or amend the offer and to postpone our acceptance and cancellation of any options tendered for exchange upon the occurrence of any of the conditions specified in section 6, by giving oral or written notice of such termination or postponement to the option holders and making a public announcement thereof. Notwithstanding the foregoing, we will pay the consideration offered or return the options elected for exchange promptly after termination or withdrawal of an offer to exchange. Subject to compliance with applicable law, we further reserve the right, in our discretion, and regardless of whether any event set forth 15 in section 6 has occurred or is deemed by us to have occurred, to amend the offer in any respect, including, without limitation, by decreasing or increasing the consideration offered in the offer to option holders or by decreasing or increasing the number of options being sought in the offer. Amendments to the offer may be made at any time and from time to time by public announcement of the amendment. In the case of an extension, the amendment must be issued no later than 9:00 a.m., Eastern Time, on the next business day after the last previously scheduled or announced expiration date. Any public announcement made pursuant to the offer will be disseminated promptly to option holders in a manner reasonably designated to inform option holders of such change. Without limiting the manner in which we may choose to make a public announcement, except as required by applicable law, we have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a press release to the Dow Jones News Service. If we materially change the terms of the offer or the information concerning the offer, or if we waive a material condition of the offer, we will extend the offer. Except for a change in price or a change in percentage of securities sought, the amount of time by which we will extend the offer following a material change in the term of the offer or information concerning the offer will depend on the facts and circumstances, including the relative materiality of such terms or information. If we decide to take any of the following actions, we will notify you of such action and extend the offer for a period of ten business days after the date of such notice: (a) (1) we increase or decrease the amount of consideration offered for the options; (2) we decrease the number of options eligible to be tendered in the offer; or (3) we increase the number of options eligible to be tendered in the offer by an amount that exceeds 2% of the shares of common stock issuable upon exercise of the options that are subject to the offer immediately prior to the increase; and (b) the offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that notice of such increase or decrease is first published, sent or given in the manner specified in this section 14. 15. FEES AND EXPENSES. We will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of options pursuant to this offer to exchange. 16. ADDITIONAL INFORMATION. We have filed with the SEC a Tender Offer Statement on Schedule TO, of which this offer to exchange is a part, with respect to the offer. This offer to exchange does not contain all of the information contained in the Schedule TO and the exhibits to the Schedule TO. We recommend that you review the Schedule TO, including its exhibits, and the following materials which we have filed with the SEC before making a decision on whether to tender your options: 1. our annual report on Form 10-K for our fiscal year ended December 31, 2000, filed with the SEC on April 2, 2001; 2. our amendment to our annual report on Form 10-K/A for our fiscal year ended December 31, 2000, filed with the SEC on April 30, 2001; 3. our quarterly report on Form 10-Q for our fiscal quarter ended March 31, 2001, filed with the SEC on May 15, 2001; 4. our Form S-8 (registering shares to be issued under the InterTrust Technologies Corporation 1995 Stock Plan and 1999 Equity Incentive Plan) filed with the SEC on November 2, 1999; 5. our Form S-8 (registering shares to be issued under the InterTrust Technologies Corporation 1995 Stock Plan) filed with the SEC on January 19, 2000; 6. our Form S-8 (registering shares to be issued under the InterTrust Technologies Corporation 1999 Equity Incentive Plan) filed with the SEC on April 3, 2000; 7. Our Form S-8 (registering shares to be issued under the InterTrust Technologies Corporation 1999 Equity Incentive Plan 16 and the 2000 Supplemental Plan) filed with the SEC on February 23, 2001; and 8. the description of our common stock included in our registration statement on Form 8-A, which was filed with the SEC on September 9, 1999, including any amendments or reports we file for the purpose of updating that description. The SEC file number for these filings is 000-27287. These filings, our other annual, quarterly and current reports, our proxy statements and our other SEC filings may be examined, and copies may be obtained, at the following SEC public reference rooms: 450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street Room 1024 Suite 1300 Suite 1400 Washington, D.C. 20549 New York, New York 10048 Chicago, Illinois 60661
You may obtain information on the operation of the public reference rooms by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the public on the SEC's Internet site at http://www.sec.gov. Our common stock is quoted on the Nasdaq Market under the symbol "ITRU", and our SEC filings can be read at the following Nasdaq address: Nasdaq Operations 1735 K Street, N.W. Washington, D.C. 20006 We will also provide without charge to each person to whom a copy of this offer to exchange is delivered, upon the written or oral request of any such person, a copy of any or all of the documents to which we have referred you, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to: InterTrust Technologies Corporation Attention: Investor Relations 4750 Patrick Henry Drive Santa Clara, California 95054 or by telephoning us at (408) 855-0100 between the hours of 9:00 a.m. and 5:00 p.m., Santa Clara, California local time. As you read the foregoing documents, you may find some inconsistencies in information from one document to another. If you find inconsistencies between the documents, or between a document and this offer to exchange, you should rely on the statements made in the most recent document. The information contained in this offer to exchange about InterTrust should be read together with the information contained in the documents to which we have referred you. 17. MISCELLANEOUS. When used in this offer to exchange, the words "anticipate," "believe," "estimate," expect," "intend" and "plan" as they relate to InterTrust Technologies Corporation or our management are intended to identify these forward-looking statements. All statements by us regarding our expected future financial position and operating results, our business strategy, our financing plans and expected capital requirements, forecasted trends relating to our services or the markets in which we operate and similar matters are forward- looking statements. The documents filed by InterTrust with the SEC, including our annual report on Form 10-K filed on April 2, 2001, discuss some of the risks that could cause our actual results to differ from those contained or implied in the forward-looking statements. These risks include that our business model is new and unproven and we may not succeed in generating sufficient revenue to sustain or grow our business; that our quarterly operating results are volatile and difficult to predict; that we are dependent on international sales which subject us to a variety of risks; that if we or third parties do not deploy our technology and create a market for digital commerce, our business will be harmed; that we have a history of losses, and we expect our operating expenses and losses to increase significantly; that we need to significantly increase the number of companies that license our technology to sustain and grow our business; that the long and complex process of licensing our Commerce and other software and hardware products could delay the deployment of our technology and harm our business; that our Commerce and other software and hardware products have 17 only recently been used by our licensees in pilot programs, making evaluation of our business and prospects difficult; that security breaches of our software and our licensees' software could result in decreased demand for our technology by our licensees or their customers or in litigation; that defects in our software and the software of our licensees could delay deployment of our technology and reduce our revenues; that if we are unable to continue obtaining third-party software and applications, we could be forced to change our product offering or find alternative suppliers, which could delay shipment of our product; that the market for digital rights management will be subject to rapid technological change and new product introductions and enhancements that we may not be able to address; that our markets are highly competitive and we may not be able to compete successfully against current or potential competitors, reducing our market share and revenue growth; that any acquisitions that we make could disrupt our business and harm our operating results; that we and our licensees may be found to infringe proprietary rights of others, resulting in litigation, redesign expenses, or costly licenses; that our or our licensees' products and services may be subject to a claim of patent infringement independent of any infringement by our software; that protection of our intellectual property is limited and efforts to protect our intellectual property may be inadequate, time consuming, and expensive; that to successfully license our product and grow our business, we must retain and attract key personnel; competition for these personnel is intense; that failure to appropriately manage our growth and expansion could seriously harm our business and operating results; that we have implemented anti-takeover provisions that could make it more difficult to acquire us; that stockholders may incur dilution as a result of future equity issuances; that our revenues may not grow and our stock price may decline if digital music commerce over the Internet does not develop; that we may not receive sufficient revenues to be successful and our stock price will decline if use of the Internet for commercial distribution of digital content is not widely accepted; that if standards for digital rights management are not adopted, confusion among content providers, distributors, and consumers may depress the level of digital commerce, which would reduce our revenues; and that we may face increased governmental regulation and legal uncertainties that could increase our costs and provide a barrier to doing business. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. We are not aware of any jurisdiction where the making of the offer is not in compliance with applicable law. If we become aware of any jurisdiction where the making of the offer is not in compliance with any valid applicable law, we will make a good faith effort to comply with such law. If, after such good faith effort, we cannot comply with such law, the offer will not be made to, nor will tenders be accepted from or on behalf of, the option holders residing in such jurisdiction. WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR OPTIONS PURSUANT TO THE OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT OR IN THE RELATED LETTER OF TRANSMITTAL. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US. InterTrust Technologies Corporation May 24, 2001 18 SCHEDULE A INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE OFFICERS OF INTERTRUST TECHNOLOGIES CORPORATION The directors and executive officers of InterTrust Technologies Corporation and their positions and offices as of May 24, 2001, are set forth in the following table:
NAME POSITION AND OFFICES HELD ---- ------------------------- Victor Shear Chairman of the Board and Chief Executive Officer David Ludvigson President David C. Chance Executive Vice Chairman of the Board Edmund J. Fish Director and President, MetaTrust Utility Greg Wood Chief Financial Officer David P. Maher Chief Technology Officer Mark Ashida Chief Operating Officer Patrick P. Nguyen Senior Vice President, Corporate Development Talal Shamoon Senior Vice President, Media Mark Scadina General Counsel Bruce Fredrickson Director Satish K. Gupta Director David Lockwood Director Timo Ruikka Director
The address of each director and executive officer is: c/o InterTrust Technologies Corporation, 4750 Patrick Henry Drive, Santa Clara, CA 95054. 19 OFFER TO EXCHANGE ALL OUTSTANDING OPTIONS UNDER THE INTERTRUST TECHNOLOGIES CORPORATION STOCK OPTION PLANS WITH AN EXERCISE PRICE OF $5.00 OR MORE (AFTER GIVING EFFECT TO A TWO-FOR-ONE STOCK SPLIT ON FEBRUARY 24, 2000) OF INTERTRUST TECHNOLOGIES CORPORATION Any questions or requests for assistance or additional copies of any documents referred to in the offer to exchange may be directed to John Amster, Vice President, Corporate Development, at InterTrust Technologies Corporation, 4750 Patrick Henry Drive, Santa Clara, California 95054 (telephone: (408) 855-0100) (facsimile: (408) 855-0144). May 24, 2001 EX-99.(A)(2) 3 dex99a2.txt FORM OF LETTER OF TRANSMITTAL Exhibit (a)(2) LETTER OF TRANSMITTAL TO TENDER OPTIONS TO PURCHASE SHARES OF COMMON STOCK HAVING AN EXERCISE PRICE OF $5.00 OR MORE (AFTER GIVING EFFECT TO A TWO-FOR-ONE STOCK SPLIT ON FEBRUARY 24, 2000) FOR NEW OPTIONS UNDER THE INTERTRUST TECHNOLOGIES CORPORATION ELIGIBLE OPTION PLANS PURSUANT TO THE OFFER TO EXCHANGE DATED MAY 24, 2001 ---------------------------------------------------- THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 9:00 P.M., PACIFIC TIME, ON FRIDAY, JUNE 22, 2001, UNLESS THE OFFER IS EXTENDED. ----------------------------- To: John Amster Vice President, Corporate Development InterTrust Technologies Corporation 4750 Patrick Henry Drive Santa Clara, California 95054 Santa Clara, California 95054 Telephone: (408) 855-0100 Facsimile: (408) 855-0309 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. Pursuant to the terms and subject to the conditions of the Offer to Exchange dated May 24, 2001 and this Letter of Transmittal, I hereby tender the following options to purchase shares of common stock, par value $.001 per share ("Option Shares"), outstanding under the InterTrust Technologies Corporation 1995 Stock Plan and/or the InterTrust Technologies Corporation 1999 Equity Incentive Plan and/or the InterTrust Technologies Corporation 2000 Supplemental Plan, having an exercise price of $5.00 or more (after giving effect to InterTrust's two-for-one stock split on February 24, 2000) and the following options granted after November 24, 2000 (to validly tender such options you must complete the following table according to instructions 2 and 3 on page 4 of this Letter of Transmittal): Total Number of Option Shares Grant Date of Exercise Price of Subject to Number of Option Shares to be Tendered Option/1/ Option Option (must be in whole Option Shares)
/1/ List each option on a separate line even if more than one option was issued on the same grant date. 1 To InterTrust Technologies Corporation: Upon the terms and subject to the conditions set forth in the Offer to Exchange dated May 24, 2001 (the "Offer to Exchange"), my receipt of which I hereby acknowledge, and in this Letter of Transmittal (this "Letter" which, together with the Offer to Exchange, as they may be amended from time to time, constitutes the "Offer"), I, the undersigned, hereby tender to InterTrust Technologies Corporation, a Delaware corporation (the "Company"), the options to purchase shares ("Option Shares") of common stock, par value $.001 per share, of the Company (the "Common Stock") specified in the table on page 1 of this Letter (the "Options") in exchange for "New Options," which are new options to purchase shares of Common Stock equal to one hundred percent (100%) of the number of Option Shares subject to the Options that I tender hereby. All New Options will be subject to the terms of an eligible option plan and to a new option agreement between the Company and me. Subject to, and effective upon, the Company's acceptance for exchange of the Options tendered herewith in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), I hereby sell, assign and transfer to, or upon the order of, the Company all right, title and interest in and to all of the Options that I am tendering hereby. I acknowledge that the Company has advised me to consult with my own advisors as to the consequences of participating or not participating in the Offer. I agree that this Letter is an amendment to the option agreement or agreements to which the Options I am tendering hereby are subject. I hereby represent and warrant that I have full power and authority to tender the Options tendered hereby and that, when and to the extent such Options are accepted for exchange by the Company, such Options will be free and clear of all security interests, liens, restrictions, charges, encumbrances, conditional sales agreements or other obligations relating to the sale or transfer thereof, other than pursuant to the applicable option agreement, and such Options will not be subject to any adverse claims. Upon request, I will execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the exchange of the Options I am tendering hereby. All authority herein conferred or agreed to be conferred shall not be affected by, and shall survive, my death or incapacity, and all of my obligations hereunder shall be binding upon my heirs, personal representatives, successors and assigns. Except as stated in the Offer, this tender is irrevocable. By execution hereof, I understand that tenders of Options pursuant to the procedure described in Section 3 of the Offer to Exchange and in the instructions to this Letter will constitute my acceptance of the terms and conditions of the Offer. The Company's acceptance for exchange of Options tendered pursuant to the Offer will constitute a binding agreement between the Company and me upon the terms and subject to the conditions of the Offer. I acknowledge that the New Options that I will receive (1) will not be granted until on or about the first business day that is at least six months and one day after the date the Options tendered hereby are accepted for exchange and canceled, (2) will be subject to the terms and conditions set forth in a new option agreement between the Company and me that will be forwarded to me after the grant of the New Option and (3) will be blacked out for two weeks following the replacement grant date. I also acknowledge that I must be an employee of the Company or one of its subsidiaries from the date I tender Options through the date the New Options are granted and otherwise be eligible under an eligible option plan on the date the New Options are granted in order to receive New Options. I further acknowledge that, if I do not remain such an employee, whether by result of a voluntary termination or an involuntary termination by InterTrust or a successor, I will not receive any New Options or any other consideration for the Options that I tender and that are accepted for exchange pursuant to the Offer. The name of the registered holder of the Options tendered hereby appears below exactly as it appears on the option agreement or agreements representing such Options. In the appropriate boxes of the table, I have listed for each Option the grant date, the exercise price, the total number of Option Shares subject to the Option, and the number of Option Shares I am tendering. I understand that I may tender all of my options outstanding under and eligible plan having an exercise price of $5.00 or more (after giving effect to InterTrust's two-for-one stock split on February 24, 2000) and that I am not required to tender any of such options in the Offer. I also understand that if I wish to participate in this program, I am required to cancel all options granted to me on or after November 24, 2000. I also understand that all of such Options properly tendered prior to the "Expiration Date" (as defined in the following sentence) and not properly withdrawn will be exchanged for New Options, upon the terms and subject to the conditions of the Offer, including the conditions described in Sections 1 and 6 of the Offer to Exchange. The term "Expiration Date" means 9:00 p.m., Pacific time, on June 22, 2001, unless and until the Company, in its discretion, has extended the period of time during which the Offer will remain open, in which event the term "Expiration Date" refers to the latest time and date at which the Offer, as so extended, expires. 2 I recognize that, under certain circumstances set forth in the Offer to Exchange, the Company may terminate or amend the Offer and postpone its acceptance and cancellation of any Options tendered for exchange. In any such event, I understand that the Options delivered herewith but not accepted for exchange will be returned to me at the address indicated below. THE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS OF OPTIONS BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OR ACCEPTANCE OF THE OFFER WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH JURISDICTION. All capitalized terms used in this Letter but not defined shall have the meaning ascribed to them in the Offer to Exchange. I have read, understand and agree to all of the terms and conditions of the Offer. HOLDER PLEASE SIGN HERE (See Instructions 1 and 4) You must complete and sign the following exactly as your name appears on the option agreement or agreements evidencing the Options you are tendering. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or another person acting in a fiduciary or representative capacity, please set forth the signer's full title and include with this Letter proper evidence of the authority of such person to act in such capacity. SIGNATURE OF OWNER X______________________________________________________ (Signature of Holder or Authorized Signatory) (if completing via email, type name) Date:__________ __, 2001 Name:__________________________________________________ (Please Print) Capacity:______________________________________________ Address:_______________________________________________ (Please include ZIP code) Telephone No. (with area code):________________________ Tax ID/ Social Security No.:___________________________ 3 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Delivery of Letter of Transmittal. A properly completed and duly executed --------------------------------- original of this Letter (or a facsimile thereof), and any other documents required by this Letter, must be received by the Company at its address set forth on the front cover of this Letter on or before the Expiration Date. THE METHOD BY WHICH YOU DELIVER ANY REQUIRED DOCUMENTS IS AT YOUR OPTION AND RISK, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE COMPANY. IF YOU ELECT TO DELIVER YOUR DOCUMENTS BY MAIL, THE COMPANY RECOMMENDS THAT YOU USE REGISTERED MAIL WITH RETURN RECEIPT REQUESTED AND THAT YOU PROPERLY INSURE THE DOCUMENTS. IN ALL CASES, YOU SHOULD ALLOW SUFFICIENT TIME TO ENSURE TIMELY DELIVERY. Tenders of Options made pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. If the Offer is extended by the Company beyond that time, you may withdraw your tendered options at any time until the extended expiration of the Offer. In addition, unless the Company accepts your tendered Options before 9:00 p.m., Pacific time, on Monday, July 23, 2001, you may withdraw your tendered Options at any time after July 23, 2001. To withdraw tendered Options you must deliver a written notice of withdrawal, or a facsimile thereof, with the required information to the Company while you still have the right to withdraw the tendered Options. Withdrawals may not be rescinded and any Options withdrawn will thereafter be deemed not properly tendered for purposes of the Offer unless such withdrawn Options are properly re-tendered prior to the Expiration Date by following the procedures described above. The Company will not accept any alternative, conditional or contingent tenders. All tendering Option Holders, by execution of this Letter (or a facsimile of it), waive any right to receive any notice of the acceptance of their tender, except as provided for in the Offer to Exchange. 2. Inadequate Space. If the space provided herein is inadequate, the ---------------- information requested by the first table in this Letter regarding the Options to be tendered should be provided on a separate schedule attached hereto. 3. Tenders. If you intend to tender options pursuant the Offer, you must ------- complete the table on page 1 of this Letter by providing the following information for each Option that you intend to tender: grant date, exercise price, total number of Option Shares subject to the Option, and number of Option Shares you are tendering. You must tender all of the shares subject to each of your options. 4. Signatures on This Letter of Transmittal. If this Letter is signed by the ---------------------------------------- holder of the Options, the signature must correspond with the name as written on the face of the option agreement or agreements to which the Options are subject without alteration, enlargement or any change whatsoever. If this Letter is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Company of the authority of such person so to act must be submitted with this Letter. 5. Requests for Assistance or Additional Copies. Any questions or requests for -------------------------------------------- assistance, as well as requests for additional copies of the Offer to Exchange or this Letter may be directed to John Amster, at the address and telephone number given on the front cover of this Letter. Copies will be furnished promptly at the Company's expense. 6. Irregularities. All questions as to the number of Option Shares subject to -------------- Options to be accepted for exchange, and the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tender of Options will be determined by the Company in its discretion, which determinations shall be final and binding on all parties. The Company reserves the right to reject any or all tenders of Options the Company determines not to be in proper form or the acceptance of which may, in the opinion of the Company's counsel, be unlawful. The Company also reserves the right to waive any of the conditions of the Offer and any defect or irregularity in the tender of any particular Options, and the Company's interpretation of the terms of the Offer (including these instructions) will be 4 final and binding on all parties. No tender of Options will be deemed to be properly made until all defects and irregularities have been cured or waived. Unless waived, any defects or irregularities in connection with tenders must be cured within such time as the Company shall determine. Neither the Company nor any other person is or will be obligated to give notice of any defects or irregularities in tenders, and no person will incur any liability for failure to give any such notice. IMPORTANT: THIS LETTER (OR A FACSIMILE COPY THEREOF) TOGETHER WITH ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE COMPANY, ON OR PRIOR TO THE EXPIRATION DATE. 7. Important Tax Information. You should refer to Section 13 of the Offer to ------------------------- Exchange, which contains important tax information. 5 EX-99.(A)(3) 4 dex99a3.txt FORM OF LETTER TO ELIGIBLE OPTION HOLDERS Exhibit (a)(3) [LOGO OF INTERTRUST] 4750 Patrick Henry Drive Santa Clara, CA 95054 May 24, 2001 Dear Employee Option Holder: Due to today's difficult market conditions, many employee option holders hold stock options with an exercise price that exceeds the market price of our common stock. Because our Board of Directors (the "Board") recognizes that the Company's options are an important incentive for its valued employees, the Board has considered various ways to provide you with the benefit of options that over time may have a greater potential to increase in value. As a result, I am happy to announce that InterTrust will offer to exchange your outstanding options under InterTrust's eligible option plans with an exercise price of $5.00 or more (after giving effect to InterTrust's two-for-one stock split on February 24, 2000) for new options we will grant under an eligible option plan. You may tender (surrender) all of these options to the Company for an opportunity to receive new options. If you choose to tender any of your options, you will automatically be required to tender all options grants to you within the 6 months preceeding the commencement of the offering and you will not be eligible for any new option grants for 6 months and one day following the cancellation of your options. You also have the right to choose not to tender any of your options. The number of shares of common stock under the new options will be equal to one hundred percent (100%) of the number of shares under the options that you tender and we accept for exchange, as adjusted for any stock splits, stock dividends and similar events. We will grant the new options on the date of the first meeting of the compensation committee of the Board which occurs on or after six months and one day following the date we accept and cancel the tendered options. For example, if we accept and cancel the tendered options on June 25, 2001 as currently scheduled, we will grant the new options on or after December 26, 2001. The vesting schedule for all new options granted in this program will be exactly the same as the vesting schedule for the cancelled options in order to effectively provide you with the same number of vested options as if you had not exchanged your options under this offer. You must be an employee of the Company, one of its subsidiaries or a successor entity from the date you tender options through the date we grant the new options in order to receive new options. If you do not remain an employee, you will not receive any new options or any other consideration for the options tendered by you and canceled by the Company. The terms and conditions of the new options will be substantially the same as the terms and conditions of your current options, except the per share exercise price of all new options will equal the last reported sale price of our common stock on the Nasdaq Market on the date we grant the new options and the new options will be subject to a black-out period. The Board makes no recommendation as to whether you should tender or refrain from tendering your options in the offer. You must make your own decision whether to tender your options. The Company's offer is being made under the terms and subject to the conditions of an offer to exchange and a related letter of transmittal which are attached to this letter. You should carefully read the entire offer to exchange and letter of transmittal before you decide whether to tender all or any of your options. A tender of options involves risks which are discussed in the offer to exchange. To tender options, you will be required to properly complete and return to us the letter of transmittal and any other documents specified in that letter by the expiration date of the Company's offer. If you have any questions about the offer, please call John Amster, Vice President, Corporate Development, at (408) 855-0100. We thank you for your continued efforts on behalf of InterTrust. Sincerely, David Ludvigson President Attachments 1 EX-99.(A)(4) 5 dex99a4.txt FORM OF LETTER TO TENDERING OPTION HOLDERS Exhibit (a)(4) [LOGO OF INTERTRUST] 4750 Patrick Henry Drive Santa Clara, CA 95054 [Date] Dear Option Holder: On behalf of InterTrust Technologies Corporation (the "Company"), I am writing to provide you with the results of the Company's recent offer to exchange (the "Offer") outstanding options granted under the InterTrust Technologies Corporation 1995 Stock Plan, 1999 Equity Incentive Plan and 2000 Supplemental Plan (the "Plans") with an exercise price of $5.00 or more (after giving effect to InterTrust's two-for-one stock split on February 24, 2000) (the "Options") for new options the Company will grant under the Plans (the "New Options"). All capitalized terms used in this letter which are not defined herein have the meanings given to those terms in the letter of transmittal (the "Letter of Transmittal") accompanying the Company's offer to exchange dated May 24, 2001 (the "Offer of Exchange"). The Offer expired at 9:00 p.m., Pacific time, on June 22, 2001. Promptly following the expiration of the Offer and pursuant to the terms and conditions of the Offer, the Company accepted for exchange Options tendered to it for a total of ____________ shares of Common Stock and canceled all such Options. The Company has accepted for exchange and canceled the number of Options tendered by you equal to the number of Option Shares set forth on Attachment A to this letter. In accordance with the terms and subject to the conditions of the Offer, you will have the right to receive a New Option under a Plan for the number of shares of Common Stock which is equal to the number of Option Shares set forth on Attachment A, as adjusted for any stock splits, stock dividends and similar events. Also in accordance with the terms of the Offer, the terms and conditions of the New Option will be substantially the same as the terms and conditions of the Options you tendered for exchange, except that the per share exercise price under the New Option will equal the last reported sale price of the Common Stock on the Nasdaq Market on the date the Company grants the New Option. In accordance with the terms of the Offer, the Company will grant you the New Option on or after December 26, 2001. At that time, as described in the Offer to Exchange, you will receive a New Option Agreement executed by the Company. In accordance with the terms of the Offer, and as provided in the Plans, you must be an employee of the Company or one of its subsidiaries from the date you tendered options through the New Option grant date in order to receive your New Option. If you do not remain an employee, you will not receive a New Option or any other consideration for the Options tendered by you and canceled by the Company. If you have any questions about your rights in connection with the grant of a New Option, please call John Amster, Vice President, Corporate Development, at (408) 855-0100. Sincerely, Victor Shear Chief Executive Officer Attachment 1 Attachment A Option Grant Date No. of Option Shares -------------------- 2 EX-99.(A)(5) 6 dex99a5.txt FORM OF NOTICE OF ACCEPTANCE EXHIBIT (a)(5) To: Participants in the Voluntary Option Exchange Program Re: Notice of Acceptance of Outstanding Options for Exchange The purpose of this e-mail is to notify you that your outstanding option(s) ("old option(s)") have been accepted for exchange and cancellation under, and in accordance with, the terms of the offer to exchange as described in the disclosure information and participation form for the exchange program posted on the HR intranet site under "option exchange". The cancellation date of the old options is June 25, 2001, the business day following the expiration date of the offer to exchange. The new option(s) to be granted to you in exchange for the canceled old option(s) will be granted at the first compensation committee meeting that is at least six months and one day after the old option cancellation date of June 25, 2001, and will have the same vesting schedules as the corresponding old options. The number of shares of common stock subject to the new option(s) will be equal to 100% of the number of shares of common stock subject to the options that you tendered. Please contact me with any questions. Regards, Stock Administrator InterTrust Technologies Corporation EX-99.(D)(2) 7 dex99d2.txt FORM OF OPTION AGMT - 2000 SUPPLEMENTAL PLAN EXHIBIT (d)(2) InterTrust Technologies Corporation 2000 Supplemental Plan Notice of Stock Option Grant You have been granted the following option to purchase Common Stock of InterTrust Technologies Corporation (the "Company"): Name of Optionee: ((Name)) Total Number of Shares Granted: ((TotalShares)) Type of Option: Nonstatutory Stock Option Exercise Price Per Share: $((PricePerShare)) Date of Grant: ((DateGrant)) Vesting Commencement Date: ((VestDay)) Vesting Schedule: This option becomes exercisable with respect to the first 25% of the Shares subject to this option when you complete 12 months of continuous service from the Vesting Commencement Date and with respect to an additional 1/48th of the Shares subject to this option when you complete each month of continuous service thereafter. Expiration Date: ((ExpDate)) Optionee: Intertrust Technologies Corporation _________________________________________ By:______________________________ _________________________________________ Title:___________________________ Print Name InterTrust Technologies Corporation 2000 Supplemental Plan Stock Option Agreement Tax Treatment This option is intended to be a nonstatutory option, as provided in the Notice of Stock Option Grant. Vesting This option becomes exercisable in installments, as shown in the Notice of Stock Option Grant. In addition, this option becomes exercisable and vested in full if the Company is subject to a "Change in Control" (as defined in the Plan) while you are an employee or consultant of the Company or a parent or subsidiary of the Company, unless this option ------ remains outstanding following the "Change in Control," or is assumed by the surviving corporation (or parent thereof) or substituted with an option with substantially the same terms by the surviving corporation (or parent thereof). The determination of whether a substituted option has substantially the same terms as this option shall be made by the Compensation Committee, and its determination shall be final, binding and conclusive. If the Company and the other party to the transaction constituting a Change in Control agree that such transaction is to be treated as a "pooling of interests" for financial reporting purposes, and if such transaction in fact is so treated, then the acceleration of vesting and exercisability shall not occur to the extent that the Company's independent accountants and such other party's independent accountants separately determine in good faith that such acceleration would preclude the use of "pooling of interests" accounting. No additional shares become exercisable after your service as an employee or consultant of the Company or a parent or subsidiary of the Company has terminated for any reason. Term This option expires in any event at the close of business at Company headquarters on the day before the 10th anniversary of the Date of Grant, as shown in the Notice of Stock Option Grant. (It will expire earlier if your service terminates, as described below.) Regular If your service as an employee or consultant of the Company Termination or a parent or subsidiary of the Company terminates for any reason except death or disability, then this option will expire at the close of business at Company 2 headquarters on the date three months after your termination date. The Company determines when your service terminates for this purpose. Death If you die as an employee, consultant or director of the Company or a parent or subsidiary of the Company, then this option will expire at the close of business at Company headquarters on the date 12 months after the date of death. Disability If your service as an employee, consultant or director of the Company or a parent or subsidiary of the Company terminates because of your disability, then this option will expire at the close of business at Company headquarters on the date six months after your termination date. For all purposes under this Agreement, "disability" means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment. Leaves of Absence For purposes of this option, your service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing and if continued crediting of service is required by the terms of the leave or by applicable law. But your service terminates when the approved leave ends, unless you immediately return to active work. In addition, at the discretion of the Company, the vesting and exercisability of your option may be suspended during a leave of absence, in accordance with the Company's general policies, which may be amended from time to time. Restrictions on The Company will not permit you to exercise this option if Exercise the issuance of shares at that time would violate any law or regulation. Notice of Exercise When you wish to exercise this option, you must notify the Company by filing the proper "Notice of Exercise" form at the address given on the form. Your notice must specify how many shares you wish to purchase. Your notice must also specify how your shares should be registered (in your name only or in your and your spouse's names as community property or as joint tenants with right of survivorship). The notice will be effective when it is received by the Company. If someone else wants to exercise this option after your death, that person must prove to the Company's satisfaction that he or she is entitled to do so. Form of Payment When you submit your notice of exercise, you must include payment of the option exercise price for the shares you are purchasing. Payment may be made in one (or a combination of two or more) of the following forms: 3 . Your personal check, a cashier's check or a money order. . Certificates for shares of Company stock that you own, along with any forms needed to effect a transfer of those shares to the Company. The value of the shares, determined as of the effective date of the option exercise, will be applied to the option exercise price. Instead of surrendering shares of Company stock, you may attest to the ownership of those shares on a form provided by the Company and have the same number of shares subtracted from the option shares issued to you. However, you may not surrender, or attest to the ownership of, shares of Company stock in payment of the exercise price if your action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to this option for financial reporting purposes. . Irrevocable directions to a securities broker approved by the Company to sell all or part of your option shares and to deliver to the Company from the sale proceeds an amount sufficient to pay the option exercise price and any withholding taxes. (The balance of the sale proceeds, if any, will be delivered to you.) The directions must be given by signing a special "Notice of Exercise" form provided by the Company. . Irrevocable directions to a securities broker or lender approved by the Company to pledge option shares as security for a loan and to deliver to the Company from the loan proceeds an amount sufficient to pay the option exercise price and any withholding taxes. The directions must be given by signing a special "Notice of Exercise" form provided by the Company. Withholding Taxes You will not be allowed to exercise this option unless you and Stock make arrangements acceptable to the Company to pay any Withholding withholding taxes that may be due as a result of the option exercise. These arrangements may include withholding shares of Company stock that otherwise would be issued to you when you exercise this option. The value of these shares, determined as of the effective date of the option exercise, will be applied to the withholding taxes. Restrictions on Resale By signing this Agreement, you agree not to sell any option shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your option has not expired. Transfer Prior to your death, only you may exercise this option. You of Option cannot transfer or assign this option. For instance, you may not sell this option or 4 use it as security for a loan. If you attempt to do any of these things, this option will immediately become invalid. You may, however, dispose of this option in your will or a beneficiary designation. Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of exercise from your former spouse, nor is the Company obligated to recognize your former spouse's interest in your option in any other way. Employment or Your option or this Agreement do not give you the right to Retention Rights be retained by the Company or a parent or subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your service at any time, with or without cause. Stockholder You, or your estate or heirs, have no rights as a Rights stockholder of the Company until you have exercised this option by giving the required notice to the Company and paying the exercise price. No adjustments are made for dividends or other rights if the applicable record date occurs before you exercise this option, except as described in the Plan. Adjustments In the event of a stock split, a stock dividend or a similar change in Company stock, the number of shares covered by this option and the exercise price per share may be adjusted pursuant to the Plan. Applicable Law This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-law provisions). The Plan and The text of the Plan is incorporated in this Agreement by Other Agreements reference. This Agreement and the Plan constitute the entire understanding between you and the Company regarding this option. Any prior agreements, commitments or negotiations concerning this option are superseded. This Agreement may be amended only by another written agreement, signed by both parties. By signing the cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan. 5 EX-99.(D)(4) 8 dex99d4.txt FORM OF OPTION AGMT - 1999 EQUITY PLAN Exhibit (d)(4) InterTrust Technologies Corporation 1999 Equity Incentive Plan Notice of Stock Option Grant You have been granted the following option to purchase Common Stock of InterTrust Technologies Corporation (the "Company"): Name of Optionee: ((Name)) Total Number of Shares Granted: ((TotalShares)) Type of Option: ((ISO)) Incentive Stock Option ((NSO)) Nonstatutory Stock Option Exercise Price Per Share: $((PricePerShare)) Date of Grant: ((DateGrant)) Vesting Commencement Date: ((VestDay)) Vesting Schedule: This option becomes exercisable with respect to the first 25% of the Shares subject to this option when you complete 12 months of continuous service from the Vesting Commencement Date and with respect to an additional 1/48th of the Shares subject to this option when you complete each month of continuous service thereafter. Expiration Date: ((ExpDate)) By your signature and the signature of the Company"s representative below, you and the Company agree that this option is granted under and governed by the terms and conditions of the 1999 Equity Incentive Plan (the "Plan") and the Stock Option Agreement, both of which are attached to and made a part of this document. Optionee: InterTrust Technologies Corporation ________________________________________ By:_____________________________ ________________________________________ Title:__________________________ Print Name InterTrust Technologies Corporation 1999 Equity Incentive Plan Stock Option Agreement Tax Treatment This option is intended to be an incentive stock option under section 422 of the Internal Revenue Code or a nonstatutory option, as provided in the Notice of Stock Option Grant. Vesting This option becomes exercisable in installments, as shown in the Notice of Stock Option Grant. In addition, this option becomes exercisable and vested in full if the Company is subject to a "Change in Control" (as defined in the Plan) while you are an employee, consultant or director of the Company or a parent or subsidiary of the Company, unless this option remains outstanding following ------ the "Change in Control," or is assumed by the surviving corporation (or parent thereof) or substituted with an option with substantially the same terms by the surviving corporation (or parent thereof). The determination of whether a substituted option has substantially the same terms as this option shall be made by the Compensation Committee, and its determination shall be final, binding and conclusive. If the Company and the other party to the transaction constituting a Change in Control agree that such transaction is to be treated as a "pooling of interests" for financial reporting purposes, and if such transaction in fact is so treated, then the acceleration of vesting and exercisability shall not occur to the extent that the Company"s independent accountants and such other party"s independent accountants separately determine in good faith that such acceleration would preclude the use of "pooling of interests" accounting. No additional shares become exercisable after your service as an employee, consultant or director of the Company or a parent or subsidiary of the Company has terminated for any reason. Term This option expires in any event at the close of business at Company headquarters on the day before the 10th anniversary of the Date of Grant, as shown in the Notice of Stock Option Grant. (It will expire earlier if your service terminates, as described below.) Regular If your service as an employee, consultant or director of Termination the Company or a parent or subsidiary of the Company terminates for any reason except 2 death or disability, then this option will expire at the close of business at Company headquarters on the date three months after your termination date. The Company determines when your service terminates for this purpose. Death If you die as an employee, consultant or director of the Company or a parent or subsidiary of the Company, then this option will expire at the close of business at Company headquarters on the date 12 months after the date of death. Disability If your service as an employee, consultant or director of the Company or a parent or subsidiary of the Company terminates because of your disability, then this option will expire at the close of business at Company headquarters on the date six months after your termination date. For all purposes under this Agreement, "disability" means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment. Leaves of Absence For purposes of this option, your service does not terminate when you go on a military leave, a sick leave or another bona fide leave of absence, if the leave was approved by the Company in writing and if continued crediting of service is required by the terms of the leave or by applicable law. But your service terminates when the approved leave ends, unless you immediately return to active work. In addition, at the discretion of the Company, the vesting and exercisability of your option may be suspended during a leave of absence, in accordance with the Company"s general policies, which may be amended from time to time. Restrictions on The Company will not permit you to exercise this option Exercise if the issuance of shares at that time would violate any law or regulation. Notice of Exercise When you wish to exercise this option, you must notify the Company by filing the proper "Notice of Exercise" form at the address given on the form. Your notice must specify how many shares you wish to purchase. Your notice must also specify how your shares should be registered (in your name only or in your and your spouse's names as community property or as joint tenants with right of survivorship). The notice will be effective when it is received by the Company. If someone else wants to exercise this option after your death, that person must prove to the Company's satisfaction that he or she is entitled to do so. Form of Payment When you submit your notice of exercise, you must include payment of the option exercise price for the shares you are purchasing. Payment may 3 be made in one (or a combination of two or more) of the following forms: . Your personal check, a cashier's check or a money order. . Certificates for shares of Company stock that you own, along with any forms needed to effect a transfer of those shares to the Company. The value of the shares, determined as of the effective date of the option exercise, will be applied to the option exercise price. Instead of surrendering shares of Company stock, you may attest to the ownership of those shares on a form provided by the Company and have the same number of shares subtracted from the option shares issued to you. However, you may not surrender, or attest to the ownership of, shares of Company stock in payment of the exercise price if your action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to this option for financial reporting purposes. . Irrevocable directions to a securities broker approved by the Company to sell all or part of your option shares and to deliver to the Company from the sale proceeds an amount sufficient to pay the option exercise price and any withholding taxes. (The balance of the sale proceeds, if any, will be delivered to you.) The directions must be given by signing a special "Notice of Exercise" form provided by the Company. . Irrevocable directions to a securities broker or lender approved by the Company to pledge option shares as security for a loan and to deliver to the Company from the loan proceeds an amount sufficient to pay the option exercise price and any withholding taxes. The directions must be given by signing a special "Notice of Exercise" form provided by the Company. Withholding You will not be allowed to exercise this option Taxes and Stock unless you make arrangements acceptable to the Withholding Company to pay any withholding taxes that may be due as a result of the option exercise. These arrangements may include withholding shares of Company stock that otherwise would be issued to you when you exercise this option. The value of these shares, determined as of the effective date of the option exercise, will be applied to the withholding taxes. Restrictions on By signing this Agreement, you agree not to sell any Resale option shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as long as your option has not expired. Transfer of Prior to your death, only you may exercise this option. You cannot 4 Option transfer or assign this option. For instance, you may not sell this option or use it as security for a loan. If you attempt to do any of these things, this option will immediately become invalid. You may, however, dispose of this option in your will or a beneficiary designation. Regardless of any marital property settlement agreement, the Company is not obligated to honor a notice of exercise from your former spouse, nor is the Company obligated to recognize your former spouse's interest in your option in any other way. Retention Rights Your option or this Agreement do not give you the right to be retained by the Company or a parent or subsidiary of the Company in any capacity. The Company and its subsidiaries reserve the right to terminate your service at any time, with or without cause. Stockholder You, or your estate or heirs, have no rights as a Rights stockholder of the Company until you have exercised this option by giving the required notice to the Company and paying the exercise price. No adjustments are made for dividends or other rights if the applicable record date occurs before you exercise this option, except as described in the Plan. Adjustments In the event of a stock split, a stock dividend or a similar change in Company stock, the number of shares covered by this option and the exercise price per share may be adjusted pursuant to the Plan. Applicable Law This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-law provisions). The Plan and The text of the Plan is incorporated in this Other Agreements Agreement by reference. This Agreement and the Plan constitute the entire understanding between you and the Company regarding this option. Any prior agreements, commitments or negotiations concerning this option are superseded. This Agreement may be amended only by another written agreement, signed by both parties. By signing the cover sheet of this Agreement, you agree to all of the terms and conditions described above and in the Plan. 5 EX-99.(D)(5) 9 dex99d5.txt INTERTRUST TECHNOLOGIES 1995 STOCK PLAN Exhibit (d)(5) InterTrust Technologies Corporation 1995 STOCK PLAN (as amended and restated December 21, 1998) (as amended on May 1, 1999) (as amended June 17, 1999) 1. Purposes of the Plan. The purposes of this 1995 Stock Plan are to -------------------- attract and retain the best available personnel for positions of substantial responsibility, to provide additional incentive to Employees and Consultants of the Company and its Subsidiaries and to promote the success of the Company's business. Options granted under the Plan may be incentive stock options (as defined under Section 422 of the Code) or non-statutory stock options, as determined by the Administrator at the time of grant of an option and subject to the applicable provisions of Section 422 of the Code, as amended, and the regulations promulgated thereunder. Stock purchase rights may also be granted under the Plan. 2. Definitions. As used herein, the following definitions shall ----------- apply: (a) "Administrator" means the Board or any of its Committees ------------- appointed pursuant to Section 4 of the Plan. (b) "Board" means the Board of Directors of the Company. ----- (c) "Code" means the Internal Revenue Code of 1986, as amended. ---- (d) "Committee" means the Committee appointed by the Board of --------- Directors in accordance with Section 4(a) of the Plan. (e) "Class A Stock" means the Class A Common Stock of the ------------- Company or any class of stock of the Company into which Class A Common Stock is converted. (f) "Company" means InterTrust Technologies Corporation, a ------- Delaware corporation. (g) "Consultant" means any person, including an advisor, who is ---------- engaged by the Company or any Parent or Subsidiary to render services and is compensated for such services, and any director of the Company whether compensated for such services or not, provided that if and in the event the Company registers any class of any equity security pursuant to the Exchange Act, the term Consultant shall thereafter not include directors who are not compensated for their services or are paid only a director's fee by the Company. (h) "Continuous Status as an Employee or Consultant" means the ---------------------------------------------- absence of any interruption or termination of service as an Employee or Consultant. Continuous Status as an Employee or Consultant shall not be considered interrupted in the case of: (i) sick leave; (ii) military leave; (iii) any other leave of absence approved by the Administrator, provided that such leave is for a period of not more than ninety (90) days, unless reemployment upon the expiration of such leave is guaranteed by contract or statute, or unless provided otherwise pursuant to Company policy adopted from time to time; or (iv) in the case of transfers between locations of the Company or between the Company, its Subsidiaries or their respective successors. For purposes of this Plan, a change in status from an Employee to a Consultant or from a Consultant to an Employee will not constitute an interruption of Continuous Status as an Employee or Consultant. (i) "Employee" means any person, including officers and directors, -------- employed by the Company or any Parent or Subsidiary of the Company, with the status of employment determined based upon such minimum number of hours or periods worked as shall be determined by the Administrator in its discretion, subject to any requirements of the Code. The payment of a director's fee by the Company shall not be sufficient to constitute "employment" by the Company. (j) "Exchange Act" means the Securities Exchange Act of 1934, as ------------ amended. (k) "Fair Market Value" means, as of any date, the fair market value ----------------- of Class A Stock determined as follows: (i) If the Class A Stock is listed on any established stock exchange or a national market system including without limitation The National Market of the National Association of Securities Dealers, Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported), as quoted on such system or exchange, or the exchange with the greatest volume of trading in Class A Stock for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; (ii) If the Class A Stock is quoted on the NASDAQ System (but not on The National Market thereof) or regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high bid and low asked prices for the Class A Stock for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or (iii) In the absence of an established market for the Class A Stock, the Fair Market Value thereof shall be determined in good faith by the Administrator. (l) "Incentive Stock Option" means an Option intended to qualify as ---------------------- an incentive stock option within the meaning of Section 422 of the Code, as designated in the applicable option agreement. (m) "Nonstatutory Stock Option" means an Option not intended to ------------------------- qualify as an Incentive Stock Option, as designated in the applicable option agreement. 2 (n) "Option" means a stock option granted pursuant to the Plan. ------ (o) "Optioned Stock" means the Class A Stock subject to an Option or -------------- a Stock Purchase Right. (p) "Optionee" means an Employee or Consultant who receives an -------- Option or a Stock Purchase Right. (q) "Parent" means a "parent corporation", whether now or hereafter ------ existing, as defined in Section 424(e) of the Code, or any successor provision. (r) "Plan" means this 1995 Stock Plan. ---- (s) "Reporting Person" means an officer, director, or greater than ---------------- ten percent stockholder of the Company within the meaning of Rule 16a-2 under the Exchange Act, who is required to file reports pursuant to Rule 16a-3 under the Exchange Act. (t) "Restricted Stock" means shares of Class A Stock acquired ---------------- pursuant to a grant of a Stock Purchase Right under Section 10 below. (u) "Rule 16b-3" means Rule 16b-3 promulgated under the Exchange ---------- Act, as the same may be amended from time to time, or any successor provision. (v) "Share" means a share of the Class A Stock, as adjusted in ----- accordance with Section 12 of the Plan. (w) "Stock Exchange" means any stock exchange or consolidated stock -------------- price reporting system on which prices for the Class A Stock are quoted at any given time. (x) "Stock Purchase Right" means the right to purchase Class A Stock -------------------- pursuant to Section 10 below. (y) "Subsidiary" means a "subsidiary corporation," whether now or ---------- hereafter existing, as defined in Section 424(f) of the Code, or any successor provision. 3. Stock Subject to the Plan. Subject to the provisions of Section 12 of ------------------------- the Plan, the maximum aggregate number of shares that may be optioned and sold under the Plan is 7,430,000 shares of Class A Stock./1/ The shares may be authorized, but unissued, or reacquired Class A Stock. If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares that were subject thereto shall, unless the Plan shall ______________________________ /1/ Reflects (i) share increase of 440,000 shares (pre-split) on September 26, 1996 by the Board; (ii) share increase of 800,000 shares (pre-split) on January 16, 1997 by the Board; (iii) share increase of 1,000,000 shares (post-split) on November 13, 1997 by the Board; (iv) share increase of 200,000 shares (post- split) on March 9, 1998 by the Board;and (v) share increase of 450,000 shares (post-(post-split) on December 4, 1998 by the Board; (vi) 300,000-share increase approved by the Board on May 1, 1999 and (vii) 500,000-share increase approved by the Board on June 17, 1999. On November 13, 1997 the Board approved a 2 for 1 stock split of its stock. 3 have been terminated, become available for future grant under the Plan. In addition, any shares of Class A Stock which are retained by the Company upon exercise of an Option or Stock Purchase Right in order to satisfy the exercise or purchase price for such Option or Stock Purchase Right or any withholding taxes due with respect to such exercise shall be treated as not issued and shall continue to be available under the Plan. 4. Administration of the Plan. -------------------------- (a) Initial Plan Procedure. Prior to the date, if any, upon which ---------------------- the Company becomes subject to the Exchange Act, the Plan shall be administered by the Board or a committee appointed by the Board. (b) Plan Procedure After the Date, if any, Upon Which the Company ------------------------------------------------------------- Becomes Subject to the Exchange Act. - ----------------------------------- (i) Multiple Administrative Bodies. If permitted by Rule 16b- ------------------------------ 3, the Plan may be administered by different bodies with respect to directors, non-director officers and Employees or Consultants who are not Reporting Persons. (ii) Administration With Respect to Reporting Persons. With ------------------------------------------------ respect to grants of Options or Stock Purchase Rights to Employees who are Reporting Persons, the Plan shall be administered by (A) the Board if the Board may administer the Plan in compliance with Rule 16b-3 with respect to a plan intended to qualify thereunder as a discretionary plan, or (B) a committee designated by the Board to administer the Plan, which committee shall be constituted in such a manner as to permit the Plan to comply with Rule 16b-3 with respect to a plan intended to qualify thereunder as a discretionary plan. Once appointed, such committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, and remove all members of the committee and thereafter directly administer the Plan, all to the extent permitted by Rule 16b-3 with respect to a plan intended to qualify thereunder as a discretionary plan. No person serving as a member of an Administrator that has authority with respect to grants to Reporting Persons shall be eligible to receive any grant under the Plan which would cause such member to cease to be "disinterested" within the meaning of Rule 16b-3. (iii) Administration With Respect to Consultants and Other ---------------------------------------------------- Employees. With respect to grants of Options or Stock Purchase Rights to - --------- Employees or Consultants who are not Reporting Persons, the Plan shall be administered by (A) the Board or (B) a committee designated by the Board, which committee shall be constituted in such a manner as to satisfy the legal requirements relating to the administration of incentive stock option plans, if any, of California corporate and securities laws, of the Code and of any applicable Stock Exchange (the "Applicable Laws"). Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. From time to time the Board may increase the size of the Committee and appoint additional members thereof, remove members (with or without cause) and appoint new members in substitution therefor, fill vacancies, however caused, 4 and remove all members of the Committee and thereafter directly administer the Plan, all to the extent permitted by the Applicable Laws. (c) Powers of the Administrator. Subject to the provisions of the --------------------------- Plan and in the case of a Committee, the specific duties delegated by the Board to such Committee, and subject to the approval of any relevant authorities, including the approval, if required, of any Stock Exchange, the Administrator shall have the authority, in its discretion: (i) to determine the Fair Market Value of the Class A Stock, in accordance with Section 2(k) of the Plan; (ii) to select the Consultants and Employees to whom Options and Stock Purchase Rights may from time to time be granted hereunder; (iii) to determine whether and to what extent Options and Stock Purchase Rights or any combination thereof are granted hereunder; (iv) to determine the number of shares of Class A Stock to be covered by each such award granted hereunder; (v) to approve forms of agreement for use under the Plan; (vi) to determine the terms and conditions, not inconsistent with the terms of the Plan, of any award granted hereunder; (vii) to determine whether and under what circumstances an Option may be settled in cash under Section 9(f) instead of Class A Stock; (viii) to reduce the exercise price of any Option to the then current Fair Market Value if the Fair Market Value of the Class A Stock covered by such Option shall have declined since the date the Option was granted; (ix) to determine the terms and restrictions applicable to Stock Purchase Rights and the Restricted Stock purchased by exercising such Stock Purchase Rights; and (x) to construe and interpret the terms of the Plan and awards granted pursuant to the Plan; (xi) in order to fulfill the purposes of the Plan and without amending the Plan, to modify grants of Options or Stock Purchase Rights to participants who are foreign nationals or employed outside of the United States in order to recognize differences in local law, tax policies or customs. (d) Effect of Administrator's Decision. All decisions, ---------------------------------- determinations and interpretations of the Administrator shall be final and binding on all holders of Options or Stock Purchase Rights. 5 5. Eligibility. ----------- (a) Nonstatutory Stock Options and Stock Purchase Rights may be granted to Employees and Consultants. Incentive Stock Options may be granted only to Employees. An Employee or Consultant who has been granted an Option or Stock Purchase Right may, if he or she is otherwise eligible, be granted additional Options or Stock Purchase Rights. (b) Each Option shall be designated in the written option agreement as either an Incentive Stock Option or a Nonstatutory Stock Option. However, notwithstanding such designations, to the extent that the aggregate Fair Market Value of the Shares with respect to which Options designated as Incentive Stock Options are exercisable for the first time by any Optionee during any calendar year (under all plans of the Company or any Parent or Subsidiary) exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock Options. (c) For purposes of Section 5(b), Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares subject to an Incentive Stock Option shall be determined as of the date of the grant of such Option. (d) The Plan shall not confer upon any Optionee any right with respect to continuation of employment or consulting relationship with the Company, nor shall it interfere in any way with such Optionee's right or the Company's right to terminate his or her employment or consulting relationship at any time, with or without cause. 6. Term of Plan. The Plan shall become effective upon the earlier to ------------ occur of its adoption by the Board of Directors or its approval by the stockholders of the Company as described in Section 19 of the Plan. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 15 of the Plan. 7. Term of Option. The term of each Option shall be the term stated in -------------- the Option Agreement; provided, however, that the term shall be no more than ten (10) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement. However, in the case of an Option granted to an Optionee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the term of the Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Option Agreement. 8. Option Exercise Price and Consideration. --------------------------------------- (a) The per share exercise price for the Shares to be issued pursuant to exercise of an Option shall be such price as is determined by the Board, but shall be subject to the following: (i) In the case of an Incentive Stock Option that is: (A) granted to an Employee who, at the time of the grant of such Incentive Stock Option, owns stock representing more than ten percent (10%) of the voting 6 power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of grant. (B) granted to any Employee, the per Share exercise price shall be no less than 100% of the Fair Market Value per Share on the date of grant. (ii) In the case of a Nonstatutory Stock Option that is: (A) granted to a person who, at the time of the grant of such Option, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary, the per Share exercise price shall be no less than 110% of the Fair Market Value per Share on the date of the grant. (B) granted to any person, the per Share exercise price shall be no less than 85% of the Fair Market Value per Share on the date of grant. (b) The consideration to be paid for the Shares to be issued upon exercise of an Option, including the method of payment, shall be determined by the Administrator (and, in the case of an Incentive Stock Option, shall be determined at the time of grant) and may consist entirely of (1) cash, (2) check, (3) promissory note, (4) other Shares that (x) in the case of Shares acquired upon exercise of an Option, have been owned by the Optionee for more than six months on the date of surrender or such other period as may be required to avoid a charge to the Company's earnings, and (y) have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (5) authorization for the Company to retain from the total number of Shares as to which the Option is exercised that number of Shares having a Fair Market Value on the date of exercise equal to the exercise price for the total number of Shares as to which the Option is exercised, (6) delivery of a properly executed exercise notice together with such other documentation as the Administrator and the broker, if applicable, shall require to effect an exercise of the Option and delivery to the Company of the sale or loan proceeds required to pay the exercise price and any applicable income or employment taxes, (7) any combination of the foregoing methods of payment, or (8) such other consideration and method of payment for the issuance of Shares to the extent permitted under Applicable Laws. In making its determination as to the type of consideration to accept, the Administrator shall consider if acceptance of such consideration may be reasonably expected to benefit the Company. 9. Exercise of Option. ------------------ (a) Procedure for Exercise; Rights as a Stockholder. Any Option ----------------------------------------------- granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator, including performance criteria with respect to the Company and/or the Optionee, and as shall be permissible under the terms of the Plan; provided that an Option granted to an Employee who is neither an officer of the Company nor a member of the Board shall become exercisable at the rate of at least twenty percent (20%) per year over five (5) years from the date the Option is granted. 7 An Option may not be exercised for a fraction of a Share. An Option shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Option by the person entitled to exercise the Option and the Company has received full payment for the Shares with respect to which the Option is exercised. Full payment may, as authorized by the Board, consist of any consideration and method of payment allowable under Section 8(b) of the Plan. Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the stock certificate evidencing such Shares, no right to vote or receive dividends or any other rights as a stockholder shall exist with respect to the Optioned Stock, not withstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly upon exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 12 of the Plan. Exercise of an Option in any manner shall result in a decrease in the number of Shares that thereafter may be available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised. (b) Termination of Employment or Consulting Relationship. Subject to ---------------------------------------------------- Section 9(c), in the event of termination of an Optionee's Continuous Status as an Employee or Consultant with the Company, such Optionee may, but only within three (3) months (or such other period of time not less than thirty (30) days as is determined by the Administrator, with such determination in the case of an Incentive Stock Option being made at the time of grant of the Option and not exceeding three (3) months) after the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise his or her Option to the extent that the Optionee was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of such termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. No termination shall be deemed to occur and this Section 9(b) shall not apply if (i) the Optionee is a Consultant who becomes an Employee; or (ii) the Optionee is an Employee who becomes a Consultant. (c) Disability of Optionee. ---------------------- (i) Notwithstanding the provisions of Section 9(b) above, in the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of his or her total and permanent disability (within the meaning of Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. 8 (ii) In the event of termination of an Optionee's Continuous Status as an Employee or Consultant as a result of a disability which does not fall within the meaning of total and permanent disability (as set forth in Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from the date of such termination (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), exercise the Option to the extent otherwise entitled to exercise it at the date of such termination. However, to the extent that such Optionee fails to exercise an Option which is an Incentive Stock Option ("ISO") (within the meaning of Section 422 of the Code) within three (3) months of the date of such termination, the Option will not qualify for ISO treatment under the Code. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within six months (6) from the date of termination, the Option shall terminate. (d) Death of Optionee. In the event of the death of an Optionee ----------------- during the period of Continuous Status as an Employee or Consultant, or within thirty (30) days following the termination of the Optionee's Continuous Status as an Employee or Consultant, the Option may be exercised, at any time within twelve (12) months following the date of death (but in no event later than the expiration date of the term of such Option as set forth in the Option Agreement), by the Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent the Optionee was entitled to exercise the Option at the date of death or, if earlier, the date of termination of the Continuous Status as an Employee or Consultant. To the extent that Optionee was not entitled to exercise the Option at the date of death or termination, as the case may be, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. (e) Rule 16b-3. Options granted to Reporting Persons shall comply ---------- with Rule 16b-3 and shall contain such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption for Plan transactions. (f) Buyout Provisions. The Administrator may at any time offer to ----------------- buy out for a payment in cash or Shares, an Option previously granted, based on such terms and conditions as the Administrator shall establish and communicate to the Optionee at the time that such offer is made. 10. Stock Purchase Rights. --------------------- (a) Rights to Purchase. Stock Purchase Rights may be issued either ------------------ alone, in addition to, or in tandem with other awards granted under the Plan and/or cash awards made outside of the Plan. After the Administrator determines that it will offer Stock Purchase Rights under the Plan, it shall advise the offeree in writing of the terms, conditions and restrictions related to the offer, including the number of Shares that such person shall be entitled to purchase, the price to be paid (which price shall not be less than 85% of the Fair Market Value of the Shares as of the date of the offer, or 100% of the Fair Market Value per share if the Purchaser owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary at the time of Purchase), and the time within which 9 such person must accept such offer, which shall in no event exceed thirty (30) days from the date upon which the Administrator made the determination to grant the Stock Purchase Right. The offer shall be accepted by execution of a Restricted Stock purchase agreement in the form determined by the Administrator. Shares purchased pursuant to the grant of a Stock Purchase Right shall be referred to herein as "Restricted Stock." (b) Repurchase Option. Unless the Administrator determines ----------------- otherwise, the Restricted Stock purchase agreement shall grant the Company a repurchase option exercisable upon the voluntary or involuntary termination of the purchaser's employment with the Company for any reason (including death or disability). The purchase price for Shares repurchased pursuant to the Restricted Stock purchase agreement shall be the original purchase price paid by the purchaser and may be paid by cancellation of any indebtedness of the Purchaser to the Company. The repurchase option shall lapse at such rate as the Administrator may determine, but for an Employee who is neither an officer of the Company nor a member of the Board, at a minimum rate of 20% per year. (c) Other Provisions. The Restricted Stock purchase agreement shall ---------------- contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Administrator in its sole discretion. In addition, the provisions of Restricted Stock purchase agreements need not be the same with respect to each purchaser. (d) Rights as a Stockholder. Once the Stock Purchase Right is ----------------------- exercised, the purchaser shall have the rights equivalent to those of a stockholder, and shall be a stockholder when his or her purchase is entered upon the records of the duly authorized transfer agent of the Company. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Stock Purchase Right is exercised, except as provided in Section 12 of the Plan. 11. Stock Withholding to Satisfy Withholding Tax Obligations. At the -------------------------------------------------------- discretion of the Administrator, Optionees may satisfy withholding obligations as provided in this paragraph. When an Optionee incurs tax liability in connection with an Option or Stock Purchase Right, which tax liability is subject to tax withholding under applicable tax laws, and the Optionee is obligated to pay the Company an amount required to be withheld under applicable tax laws, the Optionee may satisfy the withholding tax obligation by one or some combination of the following methods: (a) by cash payment, or (b) out of Optionee's current compensation, (c) if permitted by the Administrator, in its discretion, by surrendering to the Company Shares that (i) in the case of Shares previously acquired from the Company, have been owned by the Optionee for more than six months on the date of surrender, and (ii) have a fair market value on the date of surrender equal to or less than Optionee's marginal tax rate times the ordinary income recognized, or (d) by electing to have the Company withhold from the Shares to be issued upon exercise of the Option, or the Shares to be issued in connection with the Stock Purchase Right, if any, that number of Shares having a fair market value equal to the amount required to be withheld. For this purpose, the fair market value of the Shares to be withheld shall be determined on the date that the amount of tax to be withheld is to be determined (the "Tax Date"). 10 Any surrender by a Reporting Person of previously owned Shares to satisfy tax withholding obligations arising upon exercise of this Option must comply with the applicable provisions of Rule 16b-3 and shall be subject to such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. All elections by an Optionee to have Shares withheld to satisfy tax withholding obligations shall be made in writing in a form acceptable to the Administrator and shall be subject to the following restrictions: (a) the election must be made on or prior to the applicable Tax Date; (b) once made, the election shall be irrevocable as to the particular Shares of the Option or Stock Purchase Right as to which the election is made; (c) all elections shall be subject to the consent or disapproval of the Administrator; (d) if the Optionee is a Reporting Person, the election must comply with the applicable provisions of Rule 16b-3 and shall be subject to such additional conditions or restrictions as may be required thereunder to qualify for the maximum exemption from Section 16 of the Exchange Act with respect to Plan transactions. In the event the election to have Shares withheld is made by an Optionee and the Tax Date is deferred under Section 83 of the Code because no election is filed under Section 83(b) of the Code, the Optionee shall receive the full number of Shares with respect to which the Option or Stock Purchase Right is exercised but such Optionee shall be unconditionally obligated to tender back to the Company the proper number of Shares on the Tax Date. 12. Adjustments Upon Changes in Capitalization, Merger or Certain Other ------------------------------------------------------------------- Transactions. - ------------ (a) Changes in Capitalization. Subject to any required action by the ------------------------- stockholders of the Company, the number of shares of Class A Stock covered by each outstanding Option or Stock Purchase Right, and the number of shares of Class A Stock that have been authorized for issuance under the Plan but as to which no Options or Stock Purchase Rights have yet been granted or that have been returned to the Plan upon cancellation or expiration of an Option or Stock Purchase Right, as well as the price per share of Class A Stock covered by each such outstanding Option or Stock Purchase Right, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Class A Stock resulting from a stock split, reverse stock split, stock dividend, combination, recapitalization or reclassification of the Class A Stock, or any other increase or decrease in the number of issued shares of Class A Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been "effected without receipt of consideration." Such adjustment shall be made by the 11 Board, whose determination in that respect shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Class A Stock subject to an Option or Stock Purchase Right. (b) Dissolution or Liquidation. In the event of the proposed -------------------------- dissolution or liquidation of the Company, the Board shall notify the Optionee at least fifteen (15) days prior to such proposed action. To the extent it has not been previously exercised, the Option or Stock Purchase Right will terminate immediately prior to the consummation of such proposed action. (c) Merger or Sale of Assets. In the event of a proposed sale of all ------------------------ or substantially all of the Company's assets or a merger of the Company with or into another corporation where the successor corporation issues its securities to the Company's stockholders, each outstanding Option or Stock Purchase Right shall be assumed or an equivalent option or right shall be substituted by such successor corporation or a parent or subsidiary of such successor corporation, unless the successor corporation does not agree to assume the Option or Stock Purchase Right or to substitute an equivalent option or right, in which case such Option or Stock Purchase Right shall terminate upon the consummation of the merger or sale of assets. (d) Certain Distributions. In the event of any distribution to the --------------------- Company's stockholders of securities of any other entity or other assets (other than dividends payable in cash or stock of the Company) without receipt of consideration by the Company, the Administrator may, in its discretion, appropriately adjust the price per share of Class A Stock covered by each outstanding Option or Stock Purchase Right to reflect the effect of such distribution. 13. Non-Transferability of Options, Stock Purchase Rights and Restricted -------------------------------------------------------------------- Stock. Options, Stock Purchase Rights or Restricted Stock may not be sold, - ----- pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised or purchased during the lifetime of the Optionee, Stock Purchase Rights Holder or Restricted Stock Purchaser only by the Optionee, Stock Purchase Rights Holder or Restricted Stock Purchaser. 14. Time of Granting Options and Stock Purchase Rights. The date of grant -------------------------------------------------- of an Option or Stock Purchase Right shall, for all purposes, be the date on which the Administrator makes the determination granting such Option or Stock Purchase Right, or such other date as is determined by the Board. Notice of the determination shall be given to each Employee or Consultant to whom an Option or Stock Purchase Right is so granted within a reasonable time after the date of such grant. 15. Amendment and Termination of the Plan. ------------------------------------- (a) Amendment and Termination. The Board may at any time amend, ------------------------- alter, suspend or discontinue the Plan, but no amendment, alteration, suspension or discontinuation shall be made that would impair the rights of any Optionee under any grant theretofore made, without his or her consent. In addition, to the extent necessary and desirable to comply with 12 Rule 16b-3 or with Section 422 of the Code (or any other applicable law or regulation, including the requirements of any Stock Exchange), the Company shall obtain stockholder approval of any Plan amendment in such a manner and to such a degree as required. (b) Effect of Amendment or Termination. No amendment or termination ---------------------------------- of the Plan shall adversely affect Options already granted, unless mutually agreed otherwise between the Optionee and the Board, which agreement must be in writing and signed by the Optionee and the Company. 16. Conditions Upon Issuance of Shares. Shares shall not be issued ---------------------------------- pursuant to the exercise of an Option or Stock Purchase Right unless the exercise of such Option or Stock Purchase Right and the issuance and delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any Stock Exchange. As a condition to the exercise of an Option, the Company may require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by law. 17. Reservation of Shares. The Company, during the term of this Plan, --------------------- will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan. The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company's counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained. 18. Agreements. Options and Stock Purchase Rights shall be evidenced by ---------- written agreements in such form as the Administrator shall approve from time to time. 19. Stockholder Approval. Continuance of the Plan shall be subject to -------------------- approval by the stockholders of the Company within twelve (12) months before or after the date the Plan is adopted. Such stockholder approval shall be obtained in the degree and manner required under applicable state and federal law and the rules of any Stock Exchange upon which the Class A Stock is listed. All Options and Stock Purchase Rights issued under the Plan shall become void in the event such approval is not obtained. 20. Information to Optionees and Purchasers. The Company shall provide --------------------------------------- financial statements at least annually to each Optionee and to each individual who acquired Shares pursuant to the Plan, during the period such Optionee or purchaser has one or more Options or Stock Purchase Rights outstanding, and in the case of an individual who acquired Shares pursuant to the Plan, during the period such individual owns such Shares. The Company shall not be required to provide such information if the issuance of Options or Stock Purchase Rights 13 under the Plan is limited to key employees whose duties in connection with the Company assure their access to equivalent information. 14 EX-99.(D)(6) 10 dex99d6.txt FORM OF OPTION AGMT - 1995 STOCK PLAN Exhibit (d)(6) INTERTRUST TECHNOLOGIES CORPORATION 1995 STOCK PLAN NOTICE OF STOCK OPTION GRANT [STANDARD] You have been granted an option to purchase Class A Common Stock ("Class A Stock") of InterTrust Technologies Corporation (the "Company") as follows: Date of Grant Exercise Price per Share Total Number of Shares Granted Total Exercise Price Type of Option: Term/Expiration Date: Vesting Commencement Date Vesting Schedule: This Option may be exercised, in whole or in part, in accordance with the following schedule: 6/48 of the Shares subject to the Option shall vest on the six month anniversary of the Vesting Commencement Date, and 1/48 of the Shares subject to the Option shall vest each month thereafter. Termination Period: Option may be exercised for 30 days after termination of employment or consulting relationship except as set out in Sections 7 and 8 of the Stock Option Agreement (but in no event later than the Expiration Date). By your signature and the signature of the Company's representative below, you and the Company agree that this option is granted under and governed by the terms and conditions of the 1995 Stock Plan and the Stock Option Agreement, both of which are attached to and made a part of this document. OPTIONEE: INTERTRUST TECHNOLOGIES CORPORATION ___________________________________ By:__________________________________ Signature ___________________________________ Title:_______________________________ Print Name -2- INTERTRUST TECHNOLOGIES CORPORATION 1995 STOCK PLAN STOCK OPTION AGREEMENT 1. Grant of Option. InterTrust Technologies Corporation, a Delaware --------------- corporation (the "Company"), hereby grants to the Optionee named in the Notice of Stock Option Grant (the "Optionee"), an option (the "Option") to purchase a total number of shares of Class A Stock (the "Shares") set forth in the Notice of Stock Option Grant, at the exercise price per share set forth in the Notice of Stock Option Grant (the "Exercise Price") subject to the terms, definitions and provisions of the InterTrust Technologies Corporation 1995 Stock Plan (the "Plan") adopted by the Company, which is incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Option. If designated an Incentive Stock Option in the Notice of Stock Option Grant, this Option is intended to qualify as an Incentive Stock Option as defined in Section 422 of the Code and, if not so designated, this Option is intended to be a Nonstatutory Stock Option. 2. Exercise of Option. This Option shall be exercisable during its term ------------------ in accordance with the Exercise Schedule set out in the Notice of Stock Option Grant and with the provisions of Section 9 of the Plan as follows: (a) Right to Exercise. ----------------- (i) This Option may not be exercised for a fraction of a share. (ii) In the event of Optionee's death, disability or other termination of employment, the exercisability of the Option is governed by Sections 6, 7 and 8 below, subject to the limitation contained in paragraph (iii) below. (iii) In no event may this Option be exercised after the date of expiration of the term of this Option as set forth in the Notice of Stock Option Grant. (iv) If designated an Incentive Stock Option in the Notice of Stock Option Grant, in the event that the Shares subject to this Option (and all other Incentive Stock Options granted to Optionee by the Company or any Parent or Subsidiary) that first vest in any calendar year have an aggregate fair market value (determined for each Share as of the Date of Grant of the option covering such Share) that exceeds $100,000, the Shares in excess of $100,000 shall be treated as subject to a Nonstatutory Stock Option, in accordance with Section 5 of the Plan. (b) Method of Exercise. This Option shall be exercisable by written ------------------ notice (in the form attached as Exhibit A) which shall state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised, and such other representations and agreements as to the holder's investment intent with respect to such shares of Class A Stock as may be required by the Company pursuant to the provisions of the Plan. Such written notice shall be signed by the Optionee and shall be delivered in person or by certified mail to the Secretary of the Company. The written notice shall be accompanied by payment of the Exercise Price. This Option shall be deemed to be exercised upon receipt by the Company of such written notice accompanied by the Exercise Price. No Shares will be issued pursuant to the exercise of an Option unless such issuance and such exercise shall comply with all relevant provisions of law and the requirements of any stock exchange upon which the Shares may then be listed. Assuming such compliance, for income tax purposes the Shares shall be considered transferred to the Optionee on the date on which the Option is exercised with respect to such Shares. 3. Optionee's Representations. In the event the Shares purchasable -------------------------- pursuant to the exercise of this Option have not been registered under the Securities Act of 1933, as amended, at the time this Option is exercised, Optionee shall, if required by the Company, concurrently with the exercise of all or any portion of this Option, deliver to the Company his Investment Representation Statement in the form attached hereto as Exhibit B, and shall read the applicable rules of the Commissioner of Corporations attached to such Investment Representation Statement. 4. Method of Payment. Payment of the Exercise Price shall be by any of ----------------- the following, or a combination thereof, at the election of the Optionee: (a) cash; (b) check; or (c) such other consideration as may be determined by the Board at the time of grant in its absolute discretion to the extent permitted under the Plan and the California General Corporation Law. 5. Restrictions on Exercise. This Option may not be exercised until such ------------------------ time as the Plan has been approved by the shareholders of the Company, or if the issuance of such Shares upon such exercise or the method of payment of consideration for such shares would constitute a violation of any applicable federal or state securities or other law or regulation, including any rule under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by the Federal Reserve Board. As a condition to the exercise of this Option, the Company may require Optionee to make any representation and warranty to the Company as may be required by any applicable law or regulation. 6. Termination of Relationship. In the event of termination of Optionee's --------------------------- Continuous Status as an Employee or Consultant, Optionee may, to the extent otherwise so entitled at the date of such termination (the "Termination Date"), exercise this Option during the Termination Period set out in the Notice of Stock Option Grant. To the extent that Optionee was not entitled to exercise this Option at the date of such termination, or if Optionee does not exercise this Option within the time specified herein, the Option shall terminate. -2- 7. Disability of Optionee. ---------------------- (i) Notwithstanding the provisions of Section 6 above, in the event of termination of Optionee's Continuous Status as an Employee or Consultant as a result of his total and permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within twelve (12) months from the date of such termination (but in no event later than the date of expiration of the term of this Option as set forth in Section 10 below), exercise this Option to the extent he was entitled to exercise it at the date of such termination. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. (ii) In the event of termination of Optionee's Continuous Status as an Employee or Consultant as a result of any disability not constituting a total and permanent disability (as defined in Section 22(e)(3) of the Code), Optionee may, but only within six (6) months from the date of such termination (but in no event later than the date of expiration of the term of this Option as set forth in Section 10 below), exercise this Option to the extent he was entitled to exercise it at the date of such termination; provided, however, that if this is an Incentive Stock Option and Optionee fails to exercise this Incentive Stock Option within three (3) months from the date of termination of employment, this Option will cease to qualify as an Incentive Stock Option (as defined in Section 422 of the Code) and Optionee will be treated for federal income tax purposes as having received ordinary income at the time of such exercise in an amount generally measured by the difference between the exercise price for the Shares and the fair market value of the Shares on the date of exercise. To the extent that Optionee was not entitled to exercise the Option at the date of termination, or if Optionee does not exercise such Option to the extent so entitled within the time specified herein, the Option shall terminate. 8. Death of Optionee. In the event of the death of Optionee during the ----------------- term of this Option and having been in Continuous Status as an Employee or Consultant since the date of grant of the Option, or within thirty (30) days of termination of such status, the Option may be exercised, at any time within twelve (12) months following the date of death (but in no event later than the date of expiration of the term of this Option as set forth in Section 10 below), by Optionee's estate or by a person who acquired the right to exercise the Option by bequest or inheritance, but only to the extent of the right to exercise that had accrued at the date of death or if earlier, the date of termination. To the extent that Optionee was not entitled to exercise the Option at the date of death or termination, as the case may be, or if Optionee does not exercise such Option to the extent so entitled within the time period specified herein, the Option shall terminate. 9. Non-Transferability of Option. This Option may not be transferred in ----------------------------- any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Optionee only by him. The terms of this Option shall be binding upon the executors, administrators, heirs, successors and assigns of the Optionee. -3- 10. Term of Option. This Option may be exercised only within the term set -------------- out in the Notice of Stock Option Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Option. The limitations set out in Section 7 of the Plan regarding Options designated as Incentive Stock Options and Options granted to more than ten percent (10%) shareholders shall apply to this Option. 11. Tax Consequences. Set forth below is a brief summary of certain of ---------------- the federal and California tax consequences of exercise of this Option and disposition of the Shares under the law in effect as of the date of grant. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. OPTIONEE SHOULD CONSULT HIS OR HER OWN TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES. (i) Exercise of Incentive Stock Option. If this Option qualifies as ---------------------------------- an Incentive Stock Option, there will be no regular federal income tax liability or California income tax liability upon the exercise of the Option, although the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price will be treated as an item of alternative minimum taxable income for federal tax purposes and may subject the Optionee to the alternative minimum tax in the year of exercise. (ii) Exercise of Nonstatutory Stock Option. If this Option is a ------------------------------------- Nonstatutory Stock Option, there may be a regular federal income tax liability and a California income tax liability upon the exercise of the Option. Optionee will be treated as having received compensation income (taxable at ordinary income tax rates) equal to the excess, if any, of the fair market value of the Shares on the date of exercise over the Exercise Price. If Optionee is an employee, the Company will be required to withhold from Optionee's compensation or collect from Optionee and pay to the applicable taxing authorities an amount equal to a percentage of this compensation income at the time of exercise. (iii) Disposition of Shares. If this Option is an Incentive Stock --------------------- Option and if Shares transferred pursuant to the Option are held for more than one year after exercise and more than two years after the Date of Grant, any gain realized on disposition of the Shares will also be treated as long-term capital gain for federal and California income tax purposes. If Shares purchased under an Incentive Stock Option are disposed of before the end of either of such two holding periods, then any gain realized on such disposition will be treated as compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the lesser of (1) the fair market value of the Shares on the date of exercise, or (2) the sale price of the Shares, over the Exercise Price. If this Option is a Nonstatutory Stock Option, then gain realized on the disposition of Shares will be treated as long-term or short-term capital gain depending on whether or not the disposition occurs more than one year after the exercise date. (iv) Notice of Disqualifying Disposition of Incentive Stock Option ------------------------------------------------------------- Shares. If the Option granted to Optionee herein is an Incentive Stock Option, - ------ and if Optionee sells or otherwise disposes of any of the Shares acquired pursuant to the Incentive Stock Option on or before the later of (1) the date two years after the Date of Grant, or (2) the date one year after the date of exercise, the Optionee shall immediately notify the Company in writing of such disposition. Optionee agrees that Optionee may be subject to income tax withholding by the Company on the compensation income recognized by the Optionee from the early disposition by payment in cash or out of the current earnings paid to the Optionee. InterTrust Technologies Corporation, a Delaware corporation By:_________________________________________ Title:______________________________________ OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSULTANCY OR EMPLOYMENT AT THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK PLAN WHICH IS INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE. Optionee acknowledges receipt of a copy of the Plan and represents that he is familiar with the terms and provisions thereof, and hereby accepts this Option subject to all of the terms and provisions thereof. Optionee has reviewed the Plan and this Option in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Option and fully understands all provisions of the Option. Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under the Plan or this Option. Dated: ________________________ ______________________________ Signature of Optionee -5- EXHIBIT A --------- 1995 STOCK PLAN EXERCISE NOTICE InterTrust Technologies Corporation 460 Oakmead Parkway Sunnyvale, California 94086 Attention: Chief Financial Officer 1. Exercise of Option. Effective as of today, _______________, 19___, ------------------ the undersigned ("Optionee") hereby elects to exercise Optionee's option to purchase _____________ shares of the Class A Common Stock (the "Shares") of InterTrust Technologies Corporation (the "Company") under and pursuant to the Company's 1995 Stock Plan, as amended (the "Plan") and the [((ISO))] Incentive [((NSO))] Nonstatutory Stock Option Agreement dated ((Date of Grant)) (the "Option Agreement"). 2. Representations of Optionee. Optionee acknowledges that Optionee has --------------------------- received, read and understood the Plan and the Option Agreement and agrees to abide by and be bound by their terms and conditions. Optionee represents that Optionee is purchasing the Shares for Optionee's own account for investment and not with a view to, or for sale in connection with, a distribution of any of such Shares. 3. Compliance with Securities Laws. Optionee understands and ------------------------------- acknowledges that the Shares have not been registered under the Securities Act of 1933, as amended (the "1933 Act"), and, notwithstanding any other provision of the Option Agreement to the contrary, the exercise of any rights to purchase any Shares is expressly conditioned upon compliance with the 1933 Act, all applicable state securities laws and all applicable requirements of any stock exchange or over the counter market on which the Company's Common Stock may be listed or traded at the time of exercise and transfer. Optionee agrees to cooperate with the Company to ensure compliance with such laws. 4. Federal Restrictions on Transfer. Optionee understands that the -------------------------------- Shares have not been registered under the 1933 Act and therefore cannot be resold and must be held indefinitely unless they are registered under the 1933 Act or unless an exemption from such registration is available and that the certificate(s) representing the Shares may bear a legend to that effect. Optionee understands that the Company is under no obligation to register the Shares and that an exemption may not be available or may not permit Optionee to transfer Shares in the amounts or at the times proposed by Optionee. Specifically, Optionee has been advised that Rule 144 promulgated under the 1933 Act, which permits certain resales of unregistered securities, is not presently available with respect to the Shares and, in any event requires that the Shares be paid for and then be held for at least two years (and in some cases three years) before they may be resold under Rule 144. 5. Rights as Shareholder. Until the stock certificate evidencing such --------------------- Shares is issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a shareholder shall exist with respect to the optioned Stock, notwithstanding the exercise of the Option. The Company shall issue (or cause to be issued) such stock certificate promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the stock certificate is issued, except as provided in Section 12 of the Plan. Optionee shall enjoy rights as a shareholder until such time as Optionee disposes of the Shares or the Company and/or its assignee(s) exercises the Right of First Refusal hereunder. Upon such exercise, Optionee shall have no further rights as a holder of the Shares so purchased except the right to receive payment for the Shares so purchased in accordance with the provisions of this Agreement, and Optionee shall forthwith cause the certificate(s) evidencing the Shares so purchased to be surrendered to the Company for transfer or cancellation. 6. Company's Right of First Refusal. Before any Shares held by Optionee -------------------------------- or any transferee (either being sometimes referred to herein as the "Holder") may be sold or otherwise transferred (including transfer by gift or operation of law), the Company or its assignee(s) shall have a right of first refusal to purchase the Shares on the terms and conditions set forth in this Section (the "Right of First Refusal"). (a) Notice of Proposed Transfer. The Holder of the Shares shall --------------------------- deliver to the Company a written notice (the "Notice") stating: (i) the Holder's bona fide intention to sell or otherwise transfer such Shares; (ii) the name of each proposed purchaser or other transferee ("Proposed Transferee"); (iii) the number of Shares to be transferred to each Proposed Transferee; and (iv) the bona fide cash price or other consideration for which the Holder proposes to transfer the Shares (the "Offered Price"), and the Holder shall offer the Shares at the Offered Price to the Company or its assignee(s). (b) Exercise of Right of First Refusal. At any time within thirty ---------------------------------- (30) days after receipt of the Notice, the Company and/or its assignee(s) may, by giving written notice to the Holder, elect to purchase all, but not less than all, of the Shares proposed to be transferred to any one or more of the Proposed Transferees, at the purchase price determined in accordance with subsection (c) below. (c) Purchase Price. The purchase price ("Purchase Price") for the -------------- Shares purchased by the Company or its assignee(s) under this Section shall be the Offered Price. If the Offered Price includes consideration other than cash, the cash equivalent value of the non-cash consideration shall be determined by the Board of Directors of the Company in good faith. -2- (d) Payment. Payment of the Purchase Price shall be made, at the ------- option of the Company or its assignee(s), in cash (by check), by cancellation of all or a portion of any outstanding indebtedness of the Holder to the Company (or, in the case of repurchase by an assignee, to the assignee), or by any combination thereof within 30 days after receipt of the Notice or in the manner and at the times set forth in the Notice. (e) Holder's Right to Transfer. If all of the Shares proposed in the -------------------------- Notice to be transferred to a given Proposed Transferee are not purchased by the Company and/or its assignee(s) as provided in this Section, then the Holder may sell or otherwise transfer such Shares to that Proposed Transferee at the Offered Price or at a higher price, provided that such sale or other transfer is consummated within 30 days after the lapse of the period of the Right of First Refusal and provided further that any such sale or other transfer is effected in accordance with any applicable securities laws and the Proposed Transferee agrees in writing that the provisions of this Section shall continue to apply to the Shares in the hands of such Proposed Transferee. If the Shares described in the Notice are not transferred to the Proposed Transferee within such period or if the Holder proposes to change the price or other terms to make them more favorable to the Proposed Transferee, a new Notice shall be given to the Company, and the Company and/or its assignees shall again be offered the Right of First Refusal before any Shares held by the Holder may be sold or otherwise transferred. (f) Exception for Certain Family Transfers. Anything to the contrary -------------------------------------- contained in this Section notwithstanding, the transfer of any or all of the Shares during the Optionee's lifetime or on the Optionee's death by will or intestacy to the Optionee's immediate family or a trust for the benefit of the Optionee's immediate family shall be exempt from the provisions of this Section. "Immediate Family" as used herein shall mean spouse, lineal descendant or ---------------- antecedent, father, mother, brother or sister. In such case, the transferee or other recipient shall receive and hold the Shares so transferred subject to the provisions of this Section, and there shall be no further transfer of such Shares except in accordance with the terms of this Section. (g) Termination of Right of First Refusal. The Right of First Refusal ------------------------------------- shall terminate upon the consummation 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 1933 Act. 7. Tax Consultation. Optionee understands that Optionee may suffer ---------------- adverse tax consequences as a result of Optionee's purchase or disposition of the Shares. Optionee represents that Optionee has consulted with any tax consultants Optionee deems advisable in connection with the purchase or disposition of the Shares and that Optionee is not relying on the Company for any tax advice. 8. Restrictive Legends and Stop-Transfer Orders. -------------------------------------------- (a) Legends. Optionee understands and agrees that the Company shall ------- cause the legends set forth below or legends substantially equivalent thereto, to be placed -3- upon any certificate(s) evidencing ownership of the Shares together with any other legends that may be required by state or federal securities laws: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON TRANSFEREES OF THESE SHARES. IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES. Optionee understands that transfer of the Shares may be restricted by Section 260.141.11 of the Rules of the California Corporations Commissioner, a copy of which is attached to Exhibit B, the Investment Representation Statement. (b) Stop-Transfer Notices. Optionee 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, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. (c) Refusal to Transfer. The Company shall not be required (i) to ------------------- transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. -4- 9. Market Standoff Agreement. In connection with the initial public ------------------------- offering of the Company's securities and upon request of the Company or the underwriters managing any underwritten offering of the Company's securities, Optionee hereby agrees not to sell, make any short sale of, loan, grant any option for the purchase of, or otherwise dispose of any Shares (other than those included in the registration) without the prior written consent of the Company or such underwriters, as the case may be, for such period of time (not to exceed 180 days) from the effective date of such registration as may be requested by the Company or such managing underwriters; provided, however, that the Optionee -------- ------- need not so agree unless a majority of the Company's officers and directors and a majority of the holders of at least 5% of the Company's outstanding securities also agree to be similarly bound. 10. Successors and Assigns. The Company may assign any of its rights ---------------------- under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer herein set forth, this Agreement shall be binding upon Optionee and his or her heirs, executors, administrators, successors and assigns. 11. Interpretation. Any dispute regarding the interpretation of this -------------- Agreement shall be submitted by Optionee or by the Company forthwith to the Company's Board of Directors or the committee thereof that administers the Plan, which shall review such dispute at its next regular meeting. The resolution of such a dispute by the Board or committee shall be final and binding on the Company and on Optionee. 12. Governing Law; Severability. This Agreement shall be governed by and --------------------------- construed in accordance with the laws of the State of California excluding that body of law pertaining to conflicts of law. Should any provision of this Agreement be determined by a court of law to be illegal or unenforceable, the other provisions shall nevertheless remain effective and shall remain enforceable. 13. Notices. Any notice required or permitted hereunder shall be given in ------- writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States mail by certified mail, with postage and fees prepaid, addressed to the other party at its address as shown below beneath its signature, or to such other address as such party may designate in writing from time to time to the other party. 14. 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. 15. Delivery of Payment. Optionee herewith delivers to the Company the ------------------- full Exercise Price for the Shares. 16. Entire Agreement. The Plan and Notice of Grant/Option Agreement are ---------------- incorporated herein by reference. This Agreement, the Plan and the Notice of Grant/Option -5- Agreement constitute the entire agreement of the parties and supersede in their entirety all prior undertakings and agreements of the Company and Optionee with respect to the subject matter hereof, and is governed by California law except for that body of law pertaining to conflict of laws. Submitted by: Accepted by: OPTIONEE: INTERTRUST TECHNOLOGIES CORPORATION ____________________ ____________________ By:______________________________ (NameofOptionee) Title:___________________________ Address:____________ Address: 460 Oakmead Parkway ____________________ Sunnyvale, CA. 94086 -6- EXHIBIT B --------- INVESTMENT REPRESENTATION STATEMENT PURCHASER : COMPANY : InterTrust Technologies Corporation SECURITY : Class A Common Stock AMOUNT : DATE : In connection with the purchase of the above-listed Securities, I, the Purchaser, represent to the Company the following: (a) I am aware of the Company's business affairs and financial condition, and have acquired sufficient information about the Company to reach an informed and knowledgeable decision to acquire the Securities. I am purchasing these Securities for my own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). (b) I understand that the Securities have not been registered under the Securities Act in reliance upon a specific exemption therefrom, which exemption depends upon, among other things, the bona fide nature of my investment intent as expressed herein. In this connection, I understand that, in the view of the Securities and Exchange Commission (the "SEC"), the statutory basis for such exemption may be unavailable if my representation was predicated solely upon a present intention to hold these Securities for the minimum capital gains period specified under tax statutes, for a deferred sale, for or until an increase or decrease in the market price of the Securities, or for a period of one year or any other fixed period in the future. (c) I further understand that the Securities must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. Moreover, I understand that the Company is under no obligation to register the Securities. In addition, I understand that the certificate evidencing the Securities will be imprinted with a legend which prohibits the transfer of the Securities unless they are registered or such registration is not required in the opinion of counsel for the Company. (d) I am familiar with the provisions of Rule 701 and Rule 144, each promulgated under the Securities Act, which, in substance, permit limited public resale of "restricted securities" acquired, directly or indirectly, from the issuer thereof, in a non-public offering subject to the satisfaction of certain conditions. Rule 701 provides that if the issuer qualifies under Rule 701 at the time of issuance of the Securities, such issuance will be exempt from registration under the Securities Act. In the event the Company later becomes subject to the reporting requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, ninety (90) days thereafter the securities exempt under Rule 701 may be resold, subject to the satisfaction of certain of the conditions specified by Rule 144, including among other things: (1) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934); and, in the case of an affiliate, (2) the availability of certain public information about the Company, and the amount of securities being sold during any three month period not exceeding the limitations specified in Rule 144(e), if applicable. Notwithstanding this paragraph (d), I acknowledge and agree to the restrictions set forth in paragraph (e) hereof. In the event that the Company does not qualify under Rule 701 at the time of issuance of the Securities, then the Securities may be resold in certain limited circumstances subject to the provisions of Rule 144, which requires among other things: (1) the availability of certain public information about the Company, (2) the resale occurring not less than two years after the party has purchased, and made full payment for, within the meaning of Rule 144, the securities to be sold; and, in the case of an affiliate, or of a non-affiliate who has held the securities less than three years, (3) the sale being made through a broker in an unsolicited "broker's transaction" or in transactions directly with a market maker (as said term is defined under the Securities Exchange Act of 1934) and the amount of securities being sold during any three month period not exceeding the specified limitations stated therein, if applicable. (e) I further understand that in the event all of the applicable requirements of Rule 144 or Rule 701 are not satisfied, registration under the Securities Act, compliance with Regulation A, or some other registration exemption will be required; and that, notwithstanding the fact that Rule 144 and Rule 701 are not exclusive, the Staff of the SEC has expressed its opinion that persons proposing to sell private placement securities other than in a registered offering and otherwise than pursuant to Rule 144 or Rule 701 will have a substantial burden of proof in establishing that an exemption from registration is available for such offers or sales, and that such persons and their respective brokers who participate in such transactions do so at their own risk. (f) I understand that the certificate evidencing the Securities may be imprinted with a legend which prohibits the transfer of the Securities without the consent of the Commissioner of Corporations of California. I have read the applicable Commissioner's Rules with respect to such restriction, a copy of which is attached. Signature of Purchaser: ________________________________________ ((Name of Optionee)) -2- STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE ---------------------------------------------------- Title 10. Investment - Chapter 3. Commissioner of Corporations 260.141.11: Restriction on Transfer. ---------- ----------------------- (a) The issuer of any security upon which a restriction on transfer has been imposed pursuant to Sections 260.102.6, 260.141.10 or 260.534 shall cause a copy of this section to be delivered to each issuee or transferee of such security at the time the certificate evidencing the security is delivered to the issuee or transferee. (b) It is unlawful for the holder of any such security to consummate a sale or transfer of such security, or any interest therein, without the prior written consent of the Commissioner (until this condition is removed pursuant to Section 260.141.12 of these rules), except: (1) to the issuer; (2) pursuant to the order or process of any court; (3) to any person described in Subdivision (i) of Section 25102 of the Code or Section 260.105.14 of these rules; (4) to the transferor's ancestors, descendants or spouse, or any custodian or trustee for the account of the transferor or the transferor's ancestors, descendants, or spouse; or to a transferee by a trustee or custodian for the account of the transferee or the transferee's ancestors, descendants or spouse; (5) to holders of securities of the same class of the same issuer; (6) by way of gift or donation inter vivos or on death; (7) by or through a broker-dealer licensed under the Code (either acting as such or as a finder) to a resident of a foreign state, territory or country who is neither domiciled in this state to the knowledge of the broker-dealer, nor actually present in this state if the sale of such securities is not in violation of any securities law of the foreign state, territory or country concerned; (8) to a broker-dealer licensed under the Code in a principal transaction, or as an underwriter or member of an underwriting syndicate or selling group; (9) if the interest sold or transferred is a pledge or other lien given by the purchaser to the seller upon a sale of the security for which the Commissioner's written consent is obtained or under this rule not required; (10) by way of a sale qualified under Sections 25111, 25112, 25113 or 25121 of the Code, of the securities to be transferred, provided that no order under Section 25140 or Subdivision (a) of Section 25143 is in effect with respect to such qualification; (11) by a corporation to a wholly owned subsidiary of such corporation, or by a wholly owned subsidiary of a corporation to such corporation; (12) by way of an exchange qualified under Section 25111, 25112 or 25113 of the Code, provided that no order under Section 25140 or Subdivision (a) of Section 25143 is in effect with respect to such qualification; (13) between residents of foreign states, territories or countries who are neither domiciled nor actually present in this state; (14) to the State Controller pursuant to the Unclaimed Property Law or to the administrator of the unclaimed property law of another state; (15) by the State Controller pursuant to the Unclaimed Property Law or by the administrator of the unclaimed property law of another state if, in either such case, such person (i) discloses to potential purchasers at the sale that transfer of the securities is restricted under this rule, (ii) delivers to each purchaser a copy of this rule, and (iii) advises the Commissioner of the name of each purchaser; (16) by a trustee to a successor trustee when such transfer does not involve a change in the beneficial ownership of the securities; or (17) by way of an offer and sale of outstanding securities in an issuer transaction that is subject to the qualification requirement of Section 25110 of the Code but exempt from that qualification requirement by subdivision (f) of Section 25102; provided that any such transfer is on the condition that any certificate evidencing the security issued to such transferee shall contain the legend required by this section. (c) The certificates representing all such securities subject to such a restriction on transfer, whether upon initial issuance or upon any transfer thereof, shall bear on their face a legend, prominently stamped or printed thereon in capital letters of not less than 10-point size, reading as follows: "IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OR CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES." -----END PRIVACY-ENHANCED MESSAGE-----