AAROHI COMMUNICATIONS, INC. STOCK OPTION AGREEMENT (Immediately Exercisable)
EXHIBIT 99.3
Aarohi Communications, Inc. has granted to the individual (the “Optionee”) named in the Notice
of Grant of Stock Option (the “Notice”) to which this Stock Option Agreement (the “Option
Agreement”) is attached an option (the “Option”) to purchase certain shares of Stock upon the terms
and conditions set forth in the Notice and this Option Agreement. The Option has been granted
pursuant to and shall in all respects be subject to the terms and conditions of the Aarohi
Communications, Inc. 2001 Stock Option Plan (the “Plan”), as amended to the Date of Option Grant,
the provisions of which are incorporated herein by reference. By signing the Notice, the Optionee:
(a) represents that the Optionee has received copies of, and has read and is familiar with the
terms and conditions of, the Notice, the Plan and this Option Agreement, (b) accepts the Option
subject to all of the terms and conditions of the Notice, the Plan and this Option Agreement, and
(c) agrees to accept as binding, conclusive and final all decisions or interpretations of the Board
upon any questions arising under the Notice, the Plan or this Option Agreement.
1. Definitions and Construction.
1.1 Definitions. Unless otherwise defined herein, capitalized terms shall have the meanings
assigned to such terms in the Notice or the Plan.
1.2 Construction. Captions and titles contained herein are for convenience only and shall
not affect the meaning or interpretation of any provision of this Option Agreement. Except when
otherwise indicated by the context, the singular shall include the plural and the plural shall
include the singular. Use of the term “or” is not intended to be exclusive, unless the context
clearly requires otherwise.
2. Tax Consequences.
2.1 Tax Status of Option. This Option is intended to have the tax status designated in the
Notice.
(a) Incentive Stock Option. If the Notice so designates, this Option is intended to be an
Incentive Stock Option within the meaning of Section 422(b) of the Code, but the Company does not
represent or warrant that this Option qualifies as such. The Optionee should consult with the
Optionee’s own tax advisor regarding the tax effects of this Option and the requirements necessary
to obtain favorable income tax treatment under Section 422 of the Code, including, but not limited
to, holding period requirements. (NOTE TO OPTIONEE: If the Option is exercised more than three (3)
months after the date on which you cease to be an Employee (other than by reason of your death or
permanent and total disability as defined in Section 22(e)(3) of the Code), the Option will be
treated as a Nonstatutory Stock Option and not as an Incentive Stock Option to the extent required
by Section 422 of the Code.)
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(b) Nonstatutory Stock Option. If the Notice so designates, this Option is intended to be a
Nonstatutory Stock Option and shall not be treated as an Incentive Stock Option within the meaning
of Section 422(b) of the Code.
2.2 ISO Fair Market Value Limitation. If the Notice designates this Option as an Incentive
Stock Option, then to the extent that the Option (together with all Incentive Stock Options granted
to the Optionee under all stock option plans of the Participating Company Group, including the
Plan) becomes exercisable for the first time during any calendar year for shares having a Fair
Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options
which exceeds such amount will be treated as Nonstatutory Stock Options. For purposes of this
Section 2.2, options designated as Incentive Stock Options are taken into account in the order in
which they were granted, and the Fair Market Value of stock is determined as of the time the option
with respect to such stock is granted. If the Code is amended to provide for a different
limitation from that set forth in this Section 2.2, such different limitation shall be deemed
incorporated herein effective as of the date required or permitted by such amendment to the Code.
If the Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in
part by reason of the limitation set forth in this Section 2.2, the Optionee may designate which
portion of such Option the Optionee is exercising. In the absence of such designation, the
Optionee shall be deemed to have exercised the Incentive Stock Option portion of the Option first.
Separate certificates representing each such portion shall be issued upon the exercise of the
Option. (NOTE TO OPTIONEE: If the aggregate Exercise Price of the Option (that is, the Exercise
Price multiplied by the Number of Option Shares) plus the aggregate exercise price of any other
Incentive Stock Options you hold (whether granted pursuant to the Plan or any other stock option
plan of the Participating Company Group) is greater than $100,000, you should contact the Chief
Financial Officer of the Company to ascertain whether the entire Option qualifies as an Incentive
Stock Option.)
2.3 Election Under Section 83(b) of the Code. If the Optionee exercises this Option to
purchase shares of Stock that are both nontransferable and subject to a substantial risk of
forfeiture, the Optionee understands that the Optionee should consult with the Optionee’s tax
advisor regarding the advisability of filing with the Internal Revenue Service an election under
Section 83(b) of the Code, which must be filed no later than thirty (30) days after the date on
which the Optionee exercises the Option. Shares acquired upon exercise of the Option are
nontransferable and subject to a substantial risk of forfeiture if, for example, (a) they are
unvested and are subject to a right of the Company to repurchase such shares at the Optionee’s
original purchase price if the Optionee’s Service terminates, (b) the Optionee is an Insider and,
under certain circumstances, exercises the Option within six (6) months of the Date of Option Grant
(if a class of equity security of the Company is registered under Section 12 of the Exchange Act),
or (c) the Optionee is subject to a restriction on transfer to comply with “Pooling-of-Interests
Accounting” rules. Failure to file an election under Section 83(b), if appropriate, may result in
adverse tax consequences to the Optionee. The Optionee acknowledges that the Optionee has been
advised to consult with a tax advisor prior to the exercise of the Option regarding the tax
consequences to the Optionee of the exercise of the Option. AN ELECTION UNDER SECTION 83(b) MUST
BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH THE OPTIONEE PURCHASES SHARES. THIS TIME PERIOD
CANNOT BE EXTENDED. THE OPTIONEE ACKNOWLEDGES THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS
THE OPTIONEE’S SOLE RESPONSIBILITY,
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EVEN IF THE OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TO FILE SUCH ELECTION ON HIS
OR HER BEHALF.
3. Administration.
All questions of interpretation concerning this Option Agreement shall be determined by the
Board. All determinations by the Board shall be final and binding upon all persons having an
interest in the Option. Any Officer shall have the authority to act on behalf of the Company with
respect to any matter, right, obligation, or election which is the responsibility of or which is
allocated to the Company herein, provided the Officer has apparent authority with respect to such
matter, right, obligation, or election.
4. Exercise of the Option.
4.1 Right to Exercise. Except as otherwise provided herein, the Option shall be exercisable
on and after the Initial Exercise Date and prior to the termination of the Option (as provided in
Section 6) in an amount not to exceed the Number of Option Shares less the number of shares
previously acquired upon exercise of the Option, subject to the Company’s repurchase rights set
forth in Section 11 and Section 12.
4.2 Method of Exercise. Exercise of the Option shall be by written notice to the Company
which must state the election to exercise the Option, the number of whole shares of Stock for which
the Option is being exercised and such other representations and agreements as to the Optionee’s
investment intent with respect to such shares as may be required pursuant to the provisions of this
Option Agreement. The written notice must be signed by the Optionee and must be delivered in
person, by certified or registered mail, return receipt requested, by confirmed facsimile
transmission, or by such other means as the Company may permit, to the Chief Financial Officer of
the Company, or other authorized representative of the Participating Company Group, prior to the
termination of the Option as set forth in Section 6, accompanied by (i) full payment of the
aggregate Exercise Price for the number of shares of Stock being purchased and (ii) an executed
copy, if required herein, of the then current form of escrow agreement referenced below. The Option
shall be deemed to be exercised upon receipt by the Company of such written notice, the aggregate
Exercise Price, and, if required by the Company, such executed agreement.
4.3 Payment of Exercise Price.
(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the
aggregate Exercise Price for the number of shares of Stock for which the Option is being exercised
shall be made (i) in cash, by check, or cash equivalent, (ii) by tender to the Company, or
attestation to the ownership, of whole shares of Stock owned by the Optionee having a Fair Market
Value not less than the aggregate Exercise Price, (iii) by means of a Cashless Exercise, as defined
in Section 4.3(b), or (iv) by any combination of the foregoing.
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(b) Limitations on Forms of Consideration.
(i) Tender of Stock. Notwithstanding the foregoing, the Option may not be exercised by tender
to the Company, or attestation to the ownership, of shares of Stock to the extent such tender or
attestation would constitute a violation of the provisions of any law, regulation or agreement
restricting the redemption of the Company’s stock. The Option may not be exercised by tender to
the Company, or attestation to the ownership, of shares of Stock unless such shares either have
been owned by the Optionee for more than six (6) months (and not used for another option exercise
by attestation during such period) or were not acquired, directly or indirectly, from the Company.
(ii) Cashless Exercise. A “Cashless Exercise” means the delivery of a properly executed
notice together with irrevocable instructions to a broker in a form acceptable to the Company
providing for the assignment to the Company of the proceeds of a sale or loan with respect to some
or all of the shares of Stock acquired upon the exercise of the Option pursuant to a program or
procedure approved by the Company (including, without limitation, through an exercise complying
with the provisions of Regulation T as promulgated from time to time by the Board of Governors of
the Federal Reserve System). The Company reserves, at any and all times, the right, in the
Company’s sole and absolute discretion, to decline to approve or terminate any such program or
procedure.
4.4 Tax Withholding. At the time the Option is exercised, in whole or in part, or at any
time thereafter as requested by the Company, the Optionee hereby authorizes withholding from
payroll and any other amounts payable to the Optionee, and otherwise agrees to make adequate
provision for (including by means of a Cashless Exercise to the extent permitted by the Company),
any sums required to satisfy the federal, state, local and foreign tax withholding obligations of
the Participating Company Group, if any, which arise in connection with the Option, including,
without limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option,
(ii) the transfer, in whole or in part, of any shares acquired upon exercise of the Option, (iii)
the operation of any law or regulation providing for the imputation of interest, or (iv) the
lapsing of any restriction with respect to any shares acquired upon exercise of the Option. The
Option is not exercisable unless the tax withholding obligations of the Participating Company Group
are satisfied. Accordingly, the Company shall have no obligation to deliver shares of Stock or to
release shares of Stock from an escrow established pursuant to this Option Agreement until the tax
withholding obligations of the Participating Company Group have been satisfied by the Optionee.
4.5 Certificate Registration. Except in the event the Exercise Price is paid by means of a
Cashless Exercise, the certificate for the shares as to which the Option is exercised shall be
registered in the name of the Optionee, or, if applicable, in the names of the heirs of the
Optionee.
4.6 Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and
the issuance of shares of Stock upon exercise of the Option shall be subject to compliance with all
applicable requirements of federal, state or foreign law with respect to such securities. The
Option may not be exercised if the issuance of shares of Stock upon exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
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law or regulations or the requirements of any stock exchange or market system upon which the
Stock may then be listed. In addition, the Option may not be exercised unless (i) a registration
statement under the Securities Act shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the opinion of legal counsel
to the Company, the shares issuable upon exercise of the Option may be issued in accordance with
the terms of an applicable exemption from the registration requirements of the Securities Act. THE
OPTIONEE IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISED UNLESS THE FOREGOING CONDITIONS ARE
SATISFIED. ACCORDINGLY, THE OPTIONEE MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN
THOUGH THE OPTION IS VESTED. The inability of the Company to obtain from any regulatory body
having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to
the lawful issuance and sale of any shares subject to the Option 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. As a condition to the exercise of the Option, the Company
may require the Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any representation or
warranty with respect thereto as may be requested by the Company.
4.7 Fractional Shares. The Company shall not be required to issue fractional shares upon the
exercise of the Option.
5. Nontransferability of the Option.
The Option may be exercised during the lifetime of the Optionee only by the Optionee or the
Optionee’s guardian or legal representative and may not be assigned or transferred in any manner
except by will or by the laws of descent and distribution. Following the death of the Optionee,
the Option, to the extent provided in Section 7, may be exercised by the Optionee’s legal
representative or by any person empowered to do so under the deceased Optionee’s will or under the
then applicable laws of descent and distribution.
6. Termination of the Option.
The Option shall terminate and may no longer be exercised after the first to occur of (a) the
Option Expiration Date, (b) the last date for exercising the Option following termination of the
Optionee’s Service as described in Section 7, or (c) a Change in Control to the extent provided in
Section 8.
7. Effect of Termination of Service.
7.1 Option Exercisability.
(a) Disability. If the Optionee’s Service terminates because of the Disability of the
Optionee, the Option, to the extent unexercised and exercisable on the date on which the Optionee’s
Service terminated, may be exercised by the Optionee (or the Optionee’s guardian or legal
representative) at any time prior to the expiration of twelve (12) months after the date on which
the Optionee’s Service terminated, but in any event no later than the Option Expiration Date.
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(b) Death. If the Optionee’s Service terminates because of the death of the Optionee, the
Option, to the extent unexercised and exercisable on the date on which the Optionee’s Service
terminated, may be exercised by the Optionee’s legal representative or other person who acquired
the right to exercise the Option by reason of the Optionee’s death at any time prior to the
expiration of twelve (12) months after the date on which the Optionee’s Service terminated, but in
any event no later than the Option Expiration Date. The Optionee’s Service shall be deemed to have
terminated on account of death if the Optionee dies within three (3) months after the Optionee’s
termination of Service.
(c) Other Termination of Service. If the Optionee’s Service terminates for any reason, except
Disability or death, the Option, to the extent unexercised and exercisable by the Optionee on the
date on which the Optionee’s Service terminated, may be exercised by the Optionee at any time prior
to the expiration of three (3) months (or such other longer period of time as determined by the
Board, in its discretion) after the date on which the Optionee’s Service terminated, but in any
event no later than the Option Expiration Date.
7.2 Additional Limitation on Option Exercise. Notwithstanding the provisions of Section 7.1,
the Option may not be exercised after the Optionee’s termination of Service to the extent that the
shares to be acquired upon exercise of the Option would be subject to the Unvested Share Repurchase
Option as provided in Section 11.
7.3 Extension if Exercise Prevented by Law. Notwithstanding the foregoing, if the exercise
of the Option within the applicable time periods set forth in Section 7.1 is prevented by the
provisions of Section 4.6, the Option shall remain exercisable until three (3) months after the
date the Optionee is notified by the Company that the Option is exercisable, but in any event no
later than the Option Expiration Date.
7.4 Extension if Optionee Subject to Section 16(b). Notwithstanding the foregoing, if a sale
within the applicable time periods set forth in Section 7.1 of shares acquired upon the exercise of
the Option would subject the Optionee to suit under Section 16(b) of the Exchange Act, the Option
shall remain exercisable until the earliest to occur of (i) the tenth (10th) day following the date
on which a sale of such shares by the Optionee would no longer be subject to such suit, (ii) the
one hundred and ninetieth (190th) day after the Optionee’s termination of Service, or (iii) the
Option Expiration Date.
8. Change in Control.
8.1 Definitions.
(a) An “Ownership Change Event” shall be deemed to have occurred if any of the following
occurs with respect to the Company: (i) the direct or indirect sale or exchange in a single or
series of related transactions by the shareholders of the Company of more than fifty percent (50%)
of the voting stock of the Company; (ii) a merger or consolidation in which the Company is a party;
(iii) the sale, exchange, or transfer of all or substantially all of the assets of the Company; or
(iv) a liquidation or dissolution of the Company.
(b) A “Change in Control” shall mean an Ownership Change Event or a series of related
Ownership Change Events (collectively, a “Transaction”) wherein the
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shareholders of the Company immediately before the Transaction do not retain immediately after
the Transaction, in substantially the same proportions as their ownership of shares of the
Company’s voting stock immediately before the Transaction, direct or indirect beneficial ownership
of more than fifty percent (50%) of the total combined voting power of the outstanding voting
securities of the Company or, in the case of a Transaction described in Section 8.1(a)(iii), the
corporation or other business entity to which the assets of the Company were transferred (the
“Transferee”), as the case may be. For purposes of the preceding sentence, indirect beneficial
ownership shall include, without limitation, an interest resulting from ownership of the voting
securities of one or more corporations or other business entities which own the Company or the
Transferee, as the case may be, either directly or through one or more subsidiary corporations or
other business entities. The Board shall have the right to determine whether multiple sales or
exchanges of the voting securities of the Company or multiple Ownership Change Events are related,
and its determination shall be final, binding and conclusive.
8.2 Effect of Change in Control on Option. In the event of a Change in Control, the
surviving, continuing, successor, or purchasing corporation or other business entity or parent
thereof, as the case may be (the “Acquiring Corporation”), may, without the consent of the
Optionee, either assume the Company’s rights and obligations under the Option or substitute for the
Option a substantially equivalent option for the Acquiring Corporation’s stock. In the event the
Acquiring Corporation elects not to assume the Company’s rights and obligations under the Option or
substitute for the Option in connection with the Change in Control, and provided that the
Optionee’s Service has not terminated prior to such date, the Vested Ratio shall be deemed to be
1/1 and all shares acquired upon exercise of the Option shall be Vested Shares for purposes of
Section 11 as of the date ten (10) days prior to the date of the Change in Control. Any vesting of
the Option that was permissible solely by reason of this Section 8.2 shall be conditioned upon the
consummation of the Change in Control. The Option shall terminate and cease to be outstanding
effective as of the date of the Change in Control to the extent that the Option is neither assumed
or substituted for by the Acquiring Corporation in connection with the Change in Control nor
exercised as of the date of the Change in Control. Notwithstanding the foregoing, shares acquired
upon exercise of the Option prior to the Change in Control and any consideration received pursuant
to the Change in Control with respect to such shares shall continue to be subject to all applicable
provisions of this Option Agreement except as otherwise provided herein. Furthermore,
notwithstanding the foregoing, if the corporation the stock of which is subject to the Option
immediately prior to an Ownership Change Event described in Section 8.1(a)(i) constituting a Change
in Control is the surviving or continuing corporation and immediately after such Ownership Change
Event less than fifty percent (50%) of the total combined voting power of its voting stock is held
by another corporation or by other corporations that are members of an affiliated group within the
meaning of Section 1504(a) of the Code without regard to the provisions of Section 1504(b) of the
Code, the Option shall not terminate unless the Board otherwise provides in its discretion.
9. Adjustments for Changes in Capital Structure.
In the event of any stock dividend, stock split, reverse stock split, recapitalization,
combination, reclassification, or similar change in the capital structure of the Company,
appropriate adjustments shall be made in the number, Exercise Price and class of shares of stock
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subject to the Option. If a majority of the shares which are of the same class as the shares
that are subject to the Option are exchanged for, converted into, or otherwise become (whether or
not pursuant to an Ownership Change Event) shares of another corporation (the “New Shares”), the
Board may unilaterally amend the Option to provide that the Option is exercisable for New Shares.
In the event of any such amendment, the Number of Option Shares and the Exercise Price shall be
adjusted in a fair and equitable manner, as determined by the Board, in its discretion.
Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this
Section 9 shall be rounded down to the nearest whole number, and in no event may the Exercise Price
be decreased to an amount less than the par value, if any, of the stock subject to the Option. The
adjustments determined by the Board pursuant to this Section 9 shall be final, binding and
conclusive.
10. Rights as a Shareholder, Employee or Consultant.
The Optionee shall have no rights as a shareholder with respect to any shares covered by the
Option until the date of the issuance of a certificate for the shares for which the Option has been
exercised (as evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company). No adjustment shall be made for dividends,
distributions or other rights for which the record date is prior to the date such certificate is
issued, except as provided in Section 9. If the Optionee is an Employee, the Optionee understands
and acknowledges that, except as otherwise provided in a separate, written employment agreement
between a Participating Company and the Optionee, the Optionee’s employment is “at will” and is for
no specified term. Nothing in this Option Agreement shall confer upon the Optionee any right to
continue in the Service of a Participating Company or interfere in any way with any right of the
Participating Company Group to terminate the Optionee’s Service as an Employee or Consultant, as
the case may be, at any time.
11. Unvested Share Repurchase Option.
11.1 Grant of Unvested Share Repurchase Option. In the event the Optionee’s Service with the
Participating Company Group is terminated for any reason or no reason, with or without cause, or,
if the Optionee, the Optionee’s legal representative, or other holder of shares acquired upon
exercise of the Option attempts to sell, exchange, transfer, pledge, or otherwise dispose of (other
than pursuant to an Ownership Change Event) any Unvested Shares, as defined in Section 11.2 below
(the “Unvested Shares”), the Company shall have the right to repurchase the Unvested Shares under
the terms and subject to the conditions set forth in this Section 11 (the “Unvested Share
Repurchase Option”).
11.2 Unvested Shares Defined. The “Unvested Shares” shall mean, on any given date, the number
of shares of Stock acquired upon exercise of the Option which exceed the Vested Shares determined
as of such date.
11.3 Exercise of Unvested Share Repurchase Option. The Company may exercise the Unvested
Share Repurchase Option by written notice to the Optionee within sixty (60) days after (a)
termination of the Optionee’s Service (or exercise of the Option, if later) or (b) the Company has
received notice of the attempted disposition of Unvested Shares. If the Company fails to give
notice within such sixty (60) day period, the Unvested Share ▇▇▇▇▇▇▇▇▇▇
▇
Option shall terminate unless the Company and the Optionee have extended the time for the
exercise of the Unvested Share Repurchase Option. The Unvested Share Repurchase Option must be
exercised, if at all, for all of the Unvested Shares, except as the Company and the Optionee
otherwise agree.
11.4 Payment for Shares and Return of Shares to Company. The purchase price per share being
repurchased by the Company shall be an amount equal to the Optionee’s original cost per share, as
adjusted pursuant to Section 9 (the “Repurchase Price”). The Company shall pay the aggregate
Repurchase Price to the Optionee in cash within thirty (30) days after the date of the written
notice to the Optionee of the Company’s exercise of the Unvested Share Repurchase Option. For
purposes of the foregoing, cancellation of any purchase money indebtedness of the Optionee to any
Participating Company for the shares shall be treated as payment to the Optionee in cash to the
extent of the unpaid principal and any accrued interest canceled. The shares being repurchased
shall be delivered to the Company by the Optionee at the same time as the delivery of the
Repurchase Price to the Optionee.
11.5 Assignment of Unvested Share Repurchase Option. The Company shall have the right to
assign the Unvested Share Repurchase Option at any time, whether or not such option is then
exercisable, to one or more persons as may be selected by the Company.
11.6 Ownership Change Event. Upon the occurrence of an Ownership Change Event, any and all
new, substituted or additional securities or other property to which the Optionee is entitled by
reason of the Optionee’s ownership of Unvested Shares shall be immediately subject to the Unvested
Share Repurchase Option and included in the terms “Stock” and “Unvested Shares” for all purposes of
the Unvested Share Repurchase Option with the same force and effect as the Unvested Shares
immediately prior to the Ownership Change Event. While the aggregate Repurchase Price shall remain
the same after such Ownership Change Event, the Repurchase Price per Unvested Share upon exercise
of the Unvested Share Repurchase Option following such Ownership Change Event shall be adjusted as
appropriate. For purposes of determining the Vested Shares following an Ownership Change Event,
credited Service shall include all Service with any corporation which is a Participating Company at
the time the Service is rendered, whether or not such corporation is a Participating Company both
before and after the Ownership Change Event.
12. Right of First Refusal.
12.1 Grant of Right of First Refusal. Except as provided in Section 12.7 below, in the event
the Optionee, the Optionee’s legal representative, or other holder of shares acquired upon exercise
of the Option proposes to sell, exchange, transfer, pledge, or otherwise dispose of any Vested
Shares (the “Transfer Shares”) to any person or entity, including, without limitation, any
shareholder of a Participating Company, the Company shall have the right to repurchase the Transfer
Shares under the terms and subject to the conditions set forth in this Section 12 (the “Right of
First Refusal”).
12.2 Notice of Proposed Transfer. Prior to any proposed transfer of the Transfer Shares, the
Optionee shall deliver written notice (the “Transfer Notice”) to the Company describing fully the
proposed transfer, including the number of Transfer Shares, the
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name and address of the proposed transferee (the “Proposed Transferee”) and, if the transfer
is voluntary, the proposed transfer price, and containing such information necessary to show the
bona fide nature of the proposed transfer. In the event of a bona fide gift or involuntary
transfer, the proposed transfer price shall be deemed to be the Fair Market Value of the Transfer
Shares, as determined by the Board in good faith. If the Optionee proposes to transfer any
Transfer Shares to more than one Proposed Transferee, the Optionee shall provide a separate
Transfer Notice for the proposed transfer to each Proposed Transferee. The Transfer Notice shall
be signed by both the Optionee and the Proposed Transferee and must constitute a binding commitment
of the Optionee and the Proposed Transferee for the transfer of the Transfer Shares to the Proposed
Transferee subject only to the Right of First Refusal.
12.3 Bona Fide Transfer. If the Company determines that the information provided by the
Optionee in the Transfer Notice is insufficient to establish the bona fide nature of a proposed
voluntary transfer, the Company shall give the Optionee written notice of the Optionee’s failure to
comply with the procedure described in this Section 12, and the Optionee shall have no right to
transfer the Transfer Shares without first complying with the procedure described in this Section
12. The Optionee shall not be permitted to transfer the Transfer Shares if the proposed transfer
is not bona fide.
12.4 Exercise of Right of First Refusal. If the Company determines the proposed transfer to
be bona fide, the Company shall have the right to purchase all, but not less than all, of the
Transfer Shares (except as the Company and the Optionee otherwise agree) at the purchase price and
on the terms set forth in the Transfer Notice by delivery to the Optionee of a notice of exercise
of the Right of First Refusal within thirty (30) days after the date the Transfer Notice is
delivered to the Company. The Company’s exercise or failure to exercise the Right of First Refusal
with respect to any proposed transfer described in a Transfer Notice shall not affect the Company’s
right to exercise the Right of First Refusal with respect to any proposed transfer described in any
other Transfer Notice, whether or not such other Transfer Notice is issued by the Optionee or
issued by a person other than the Optionee with respect to a proposed transfer to the same Proposed
Transferee. If the Company exercises the Right of First Refusal, the Company and the Optionee
shall thereupon consummate the sale of the Transfer Shares to the Company on the terms set forth in
the Transfer Notice within sixty (60) days after the date the Transfer Notice is delivered to the
Company (unless a longer period is offered by the Proposed Transferee); provided, however, that in
the event the Transfer Notice provides for the payment for the Transfer Shares other than in cash,
the Company shall have the option of paying for the Transfer Shares by the present value cash
equivalent of the consideration described in the Transfer Notice as reasonably determined by the
Company. For purposes of the foregoing, cancellation of any indebtedness of the Optionee to any
Participating Company shall be treated as payment to the Optionee in cash to the extent of the
unpaid principal and any accrued interest canceled.
12.5 Failure to Exercise Right of First Refusal. If the Company fails to exercise the Right
of First Refusal in full (or to such lesser extent as the Company and the Optionee otherwise agree)
within the period specified in Section 12.4 above, the Optionee may conclude a transfer to the
Proposed Transferee of the Transfer Shares on the terms and conditions described in the Transfer
Notice, provided such transfer occurs not later than ninety (90) days following delivery to the
Company of the Transfer Notice. The Company shall have
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the right to demand further assurances from the Optionee and the Proposed Transferee (in a
form satisfactory to the Company) that the transfer of the Transfer Shares was actually carried out
on the terms and conditions described in the Transfer Notice. No Transfer Shares shall be
transferred on the books of the Company until the Company has received such assurances, if so
demanded, and has approved the proposed transfer as bona fide. Any proposed transfer on terms and
conditions different from those described in the Transfer Notice, as well as any subsequent
proposed transfer by the Optionee, shall again be subject to the Right of First Refusal and shall
require compliance by the Optionee with the procedure described in this Section 12.
12.6 Transferees of Transfer Shares. All transferees of the Transfer Shares or any interest
therein, other than the Company, shall be required as a condition of such transfer to agree in
writing (in a form satisfactory to the Company) that such transferee shall receive and hold such
Transfer Shares or interest therein subject to all of the terms and conditions of this Option
Agreement, including this Section 12 providing for the Right of First Refusal with respect to any
subsequent transfer. Any sale or transfer of any shares acquired upon exercise of the Option shall
be void unless the provisions of this Section 12 are met.
12.7 Transfers Not Subject to Right of First Refusal. The Right of First Refusal shall not
apply to any transfer or exchange of the shares acquired upon exercise of the Option if such
transfer or exchange is in connection with an Ownership Change Event. If the consideration
received pursuant to such transfer or exchange consists of stock of a Participating Company, such
consideration shall remain subject to the Right of First Refusal unless the provisions of Section
12.9 below result in a termination of the Right of First Refusal.
12.8 Assignment of Right of First Refusal. The Company shall have the right to assign the
Right of First Refusal at any time, whether or not there has been an attempted transfer, to one or
more persons as may be selected by the Company.
12.9 Early Termination of Right of First Refusal. The other provisions of this Option
Agreement notwithstanding, the Right of First Refusal shall terminate and be of no further force
and effect upon (a) the occurrence of a Change in Control, unless the Acquiring Corporation assumes
the Company’s rights and obligations under the Option or substitutes a substantially equivalent
option for the Acquiring Corporation’s stock for the Option, or (b) the existence of a public
market for the class of shares subject to the Right of First Refusal. A “public market” shall be
deemed to exist if (i) such stock is listed on a national securities exchange (as that term is used
in the Exchange Act) or (ii) such stock is traded on the over-the-counter market and prices
therefor are published daily on business days in a recognized financial journal.
13. Escrow.
13.1 Establishment of Escrow. To ensure that shares subject to the Unvested Share Repurchase
Option will be available for repurchase, the Company may require the Optionee to deposit the
certificate evidencing the shares which the Optionee purchases upon exercise of the Option with an
agent designated by the Company under the terms and conditions of an escrow agreement approved by
the Company. If the Company does not require such deposit as a condition of exercise of the
Option, the Company reserves the right at any time to
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require the Optionee to so deposit the certificate in escrow. Upon the occurrence of an
Ownership Change Event or a change, as described in Section 9, in the character or amount of any of
the outstanding stock of the corporation the stock of which is subject to the provisions of this
Option Agreement, any and all new, substituted or additional securities or other property to which
the Optionee is entitled by reason of the Optionee’s ownership of shares of Stock acquired upon
exercise of the Option that remain, following such Ownership Change Event or change described in
Section 9, subject to the Unvested Share Repurchase Option shall be immediately subject to the
escrow to the same extent as such shares of Stock immediately before such event. The Company shall
bear the expenses of the escrow.
13.2 Delivery of Shares to Optionee. As soon as practicable after the expiration of the
Unvested Share Repurchase Option, but not more frequently than twice each calendar year, the escrow
agent shall deliver to the Optionee the shares and any other property no longer subject to such
restriction.
13.3 Notices and Payments. In the event the shares and any other property held in escrow are
subject to the Company’s exercise of the Unvested Share Repurchase Option or the Right of First
Refusal, the notices required to be given to the Optionee shall be given to the escrow agent, and
any payment required to be given to the Optionee shall be given to the escrow agent. Within thirty
(30) days after payment by the Company, the escrow agent shall deliver the shares and any other
property which the Company has purchased to the Company and shall deliver the payment received from
the Company to the Optionee.
14. Stock Distributions Subject to Option Agreement.
If, from time to time, there is any stock dividend, stock split or other change, as described
in Section 9, in the character or amount of any of the outstanding stock of the corporation the
stock of which is subject to the provisions of this Option Agreement, then in such event any and
all new, substituted or additional securities to which the Optionee is entitled by reason of the
Optionee’s ownership of the shares acquired upon exercise of the Option shall be immediately
subject to the Unvested Share Repurchase Option and the Right of First Refusal with the same force
and effect as the shares subject to the Unvested Share Repurchase Option and the Right of First
Refusal immediately before such event.
15. Notice of Sales Upon Disqualifying Disposition.
The Optionee shall dispose of the shares acquired pursuant to the Option only in accordance
with the provisions of this Option Agreement. In addition, if the Notice designates this Option as
an Incentive Stock Option, the Optionee shall (a) promptly notify the Chief Financial Officer of
the Company if the Optionee disposes of any of the shares acquired pursuant to the Option within
one (1) year after the date the Optionee exercises all or part of the Option or within two (2)
years after the Date of Option Grant and (b) provide the Company with a description of the
circumstances of such disposition. Until such time as the Optionee disposes of such shares in a
manner consistent with the provisions of this Option Agreement, unless otherwise expressly
authorized by the Company, the Optionee shall hold all shares acquired pursuant to the Option in
the Optionee’s name (and not in the name of any nominee) for the one-year period immediately after
the exercise of the Option and the two-year period immediately
12
after Date of Option Grant. At any time during the one-year or two-year periods set forth
above, the Company may place a legend on any certificate representing shares acquired pursuant to
the Option requesting the transfer agent for the Company’s stock to notify the Company of any such
transfers. The obligation of the Optionee to notify the Company of any such transfer shall
continue notwithstanding that a legend has been placed on the certificate pursuant to the preceding
sentence.
16. Legends.
The Company may at any time place legends referencing the Unvested Share Repurchase Option,
the Right of First Refusal, and any applicable federal, state or foreign securities law
restrictions on all certificates representing shares of stock subject to the provisions of this
Option Agreement. The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the Option in the
possession of the Optionee in order to carry out the provisions of this Section. Unless otherwise
specified by the Company, legends placed on such certificates may include, but shall not be limited
to, the following:
16.1 “THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED
UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE
SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER,
ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF
SUCH ACT.”
16.2 “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO AN UNVESTED SHARE REPURCHASE
OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”
16.3 “THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A RIGHT OF FIRST REFUSAL
OPTION IN FAVOR OF THE CORPORATION OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE
CORPORATION AND THE REGISTERED HOLDER, OR SUCH HOLDER’S PREDECESSOR IN INTEREST, A COPY OF WHICH IS
ON FILE AT THE PRINCIPAL OFFICE OF THIS CORPORATION.”
16.4 “THE SHARES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE CORPORATION TO THE
REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (“ISO”). IN ORDER TO OBTAIN THE PREFERENTIAL TAX
TREATMENT AFFORDED TO ISOs, THE SHARES SHOULD NOT
13
BE TRANSFERRED PRIOR TO [INSERT DISQUALIFYING DISPOSITION DATE HERE]. SHOULD THE REGISTERED
HOLDER ELECT TO TRANSFER ANY OF THE SHARES PRIOR TO THIS DATE AND FOREGO ISO TAX TREATMENT, THE
TRANSFER AGENT FOR THE SHARES SHALL NOTIFY THE CORPORATION IMMEDIATELY. THE REGISTERED HOLDER
SHALL HOLD ALL SHARES PURCHASED UNDER THE INCENTIVE STOCK OPTION IN THE REGISTERED HOLDER’S NAME
(AND NOT IN THE NAME OF ANY NOMINEE) PRIOR TO THIS DATE OR UNTIL TRANSFERRED AS DESCRIBED ABOVE.”
17. Lock-Up Agreement.
The Optionee hereby agrees that in the event of any underwritten public offering of stock,
including an initial public offering of stock, made by the Company pursuant to an effective
registration statement filed under the Securities Act, the Optionee shall not offer, sell, contract
to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise
dispose of any shares of stock of the Company or any rights to acquire stock of the Company for
such period of time from and after the effective date of such registration statement as may be
established by the underwriter for such public offering; provided, however, that such period of
time shall not exceed one hundred eighty (180) days from the effective date of the registration
statement to be filed in connection with such public offering. The foregoing limitation shall not
apply to shares registered in the public offering under the Securities Act.
18. Restrictions on Transfer of Shares.
No shares acquired upon exercise of the Option may be sold, exchanged, transferred (including,
without limitation, any transfer to a nominee or agent of the Optionee), assigned, pledged,
hypothecated or otherwise disposed of, including by operation of law, in any manner which violates
any of the provisions of this Option Agreement and, except pursuant to an Ownership Change Event,
until the date on which such shares become Vested Shares, and any such attempted disposition shall
be void. The Company shall not be required (a) to transfer on its books any shares which will have
been transferred in violation of any of the provisions set forth in this Option Agreement or (b) to
treat as owner of such shares or to accord the right to vote as such owner or to pay dividends to
any transferee to whom such shares will have been so transferred.
19. Miscellaneous Provisions.
19.1 Binding Effect. Subject to the restrictions on transfer set forth herein, this Option
Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective
heirs, executors, administrators, successors and assigns.
19.2 Termination or Amendment. The Board may terminate or amend the Plan or the Option at any
time; provided, however, that except as provided in Section 8.2 in connection with a Change in
Control, no such termination or amendment may adversely affect the Option or any unexercised
portion hereof without the consent of the Optionee unless such termination or amendment is
necessary to comply with any applicable law or government regulation or is required to enable the
Option, if designated an Incentive Stock Option in the
14
Notice, to qualify as an Incentive Stock Option. No amendment or addition to this Option
Agreement shall be effective unless in writing.
19.3 Notices. Any notice required or permitted hereunder shall be given in writing and shall
be deemed effectively given (except to the extent that this Option Agreement provides for
effectiveness only upon actual receipt of such notice) upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail, with postage and fees prepaid,
addressed to the other party at the address shown below that party’s signature or at such other
address as such party may designate in writing from time to time to the other party.
19.4 Integrated Agreement. The Notice, this Option Agreement and the Plan constitute the
entire understanding and agreement of the Optionee and the Participating Company Group with respect
to the subject matter contained herein or therein and supersedes any prior agreements,
understandings, restrictions, representations, or warranties among the Optionee and the
Participating Company Group with respect to such subject matter other than those as set forth or
provided for herein or therein. To the extent contemplated herein or therein, the provisions of
the Notice and the Option Agreement shall survive any exercise of the Option and shall remain in
full force and effect.
19.5 Applicable Law. This Option Agreement shall be governed by the laws of the State of
California as such laws are applied to agreements between California residents entered into and to
be performed entirely within the State of California.
19.6 Counterparts. The Notice may be executed in counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same instrument.
15
TM Incentive Stock Option
|
Optionee: | |||
TM Nonstatutory Stock Option |
||||
| Date: | ||||
STOCK OPTION EXERCISE NOTICE
(IMMEDIATELY EXERCISABLE)
(IMMEDIATELY EXERCISABLE)
Aarohi Communications, Inc.
Attention: Chief Financial Officer
Attention: Chief Financial Officer
Ladies and Gentlemen:
1. Option.
I was granted an option (the
“Option”) to purchase shares of the common
stock (the “Shares”) of Aarohi
Communications, Inc. (the “Company”) pursuant to the Company’s 2001
Stock Option Plan (the “Plan”),
my Notice of Grant of Stock Option (the
“Notice”) and my Stock
Option Agreement (the “Option
Agreement”) as follows:
| Grant Number: | ||||||||||
| Date of Option Grant: | ||||||||||
| Number of Option Shares: | ||||||||||
| Exercise Price per Share: | $ | |||||||||
2. Exercise of Option. I hereby elect to exercise the Option to purchase the
following number of Shares:
| Vested Shares: | ||||||||||
| Unvested Shares: | ||||||||||
| Total Shares Purchased: | ||||||||||
| Total Exercise Price (Total Shares X Price per Share) | $ | |||||||||
3. Payments. I enclose payment in full of the total exercise price for the Shares in
the following form(s), as authorized by my Option Agreement:
| TM Cash: | $ | |||||||||
| TM Check: | $ | |||||||||
| TM Tender of Company Stock: | Contact Plan Administrator | |||||||||
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4. Tax Withholding. I authorize payroll withholding and otherwise will make adequate
provision for the federal, state, local and foreign tax withholding obligations of the Company, if
any, in connection with the Option. If I am exercising a Nonstatutory Stock Option, I enclose
payment in full of my withholding taxes, if any, as follows:
(Contact Plan Administrator for amount of tax due.)
| TM Cash: | $ | |||||||||
| TM Check: | $ | |||||||||
5. Optionee Information.
| My address is: | ||||||
| My Social Security Number is: | ||||||
6. Notice of Disqualifying Disposition. If the Option is an Incentive Stock Option, I
agree that I will promptly notify the Chief Financial Officer of the Company if I transfer any of
the Shares within one (1) year from the date I exercise all or part of the Option or within two (2)
years of the Date of Option Grant.
7. Binding Effect. I agree that the Shares are being acquired in accordance with and
subject to the terms, provisions and conditions of the Option Agreement, including the Unvested
Share Repurchase Option and the Right of First Refusal set forth therein, to all of which I hereby
expressly assent. This Agreement shall inure to the benefit of and be binding upon the my heirs,
executors, administrators, successors and assigns. If required by the Company, I agree to deposit
the certificate(s) evidencing the Shares, along with a blank stock assignment separate from
certificate executed by me, with an escrow agent designated by the Company, to be held pursuant to
the Company’s standard Joint Escrow Instructions.
8. Transfer. I understand and acknowledge that the Shares have not been registered
under the Securities Act of 1933, as amended (the “Securities Act”), and that consequently the
Shares must be held indefinitely unless they are subsequently registered under the Securities Act,
an exemption from such registration is available, or they are sold in accordance with Rule 144 or
Rule 701 under the Securities Act. I further understand and acknowledge that the Company is under
no obligation to register the Shares. I understand that the certificate or certificates evidencing
the Shares will be imprinted with legends which prohibit the transfer of the Shares unless they are
registered or such registration is not required in the opinion of legal counsel satisfactory to the
Company.
I am aware that Rule 144 under the Securities Act, which permits limited public resale of
securities acquired in a nonpublic offering, is not currently available with respect to the Shares
and, in any event, is available only if certain conditions are satisfied. I understand that any
sale of the Shares that might be made in reliance upon Rule 144 may only be made in limited amounts
in accordance with the terms and conditions of such rule and that a copy of Rule 144 will be
delivered to me upon request.
9. Election Under Section 83(b) of the Code. I understand and acknowledge that if I
am exercising the Option to purchase Unvested Shares (i.e., shares that remain subject to the
Company’s Unvested Share Repurchase Option), that I should consult with my tax advisor regarding
the advisability
2
of filing with the Internal Revenue Service an election under Section 83(b) of the Code, which must
be filed no later than thirty (30) days after the date on which I exercise the Option. I
acknowledge that I have been advised to consult with a tax advisor prior to the exercise of the
Option regarding the tax consequences to me of exercising the Option. AN ELECTION UNDER SECTION
83(b) MUST BE FILED WITHIN 30 DAYS AFTER THE DATE ON WHICH I PURCHASE SHARES. THIS TIME PERIOD
CANNOT BE EXTENDED. I ACKNOWLEDGE THAT TIMELY FILING OF A SECTION 83(b) ELECTION IS MY SOLE
RESPONSIBILITY, EVEN IF I REQUEST THE COMPANY OR ITS REPRESENTATIVES TO FILE SUCH ELECTION ON MY
BEHALF.
I understand that I am purchasing the Shares pursuant to the terms of the Plan, the Notice and my
Option Agreement, copies of which I have received and carefully read and understand.
Very truly yours,
(Signature)
Receipt of the above is hereby acknowledged.
AAROHI COMMUNICATIONS, INC.
By: |
||||
Title: |
||||
Dated: |
||||
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