Outside Director Stock Option Agreement - Handspring Inc.
HANDSPRING, INC.
1999 EXECUTIVE EQUITY INCENTIVE PLAN
FORM OF OUTSIDE DIRECTOR STOCK OPTION AGREEMENT
This Stock Option Agreement (the "AGREEMENT") is made and entered into as
of the date of grant set forth below (the "DATE OF GRANT") by and between
Handspring, Inc. , a California corporation (the "Company"), and the participant
named below (the "PARTICIPANT"). Capitalized terms not defined herein shall have
the meaning ascribed to them in the Company's 1999 Executive Equity Incentive
Plan (the "EXECUTIVE PLAN").
PARTICIPANT:
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SOCIAL SECURITY NUMBER:
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ADDRESS:
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TOTAL OPTION SHARES:
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EXERCISE PRICE PER SHARE:
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DATE OF GRANT:
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FIRST VESTING DATE:
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EXPIRATION DATE:
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(unless earlier terminated under Section 5.6 of
the Executive Plan)
TYPE OF STOCK OPTION:
[ ] INCENTIVE STOCK OPTION
[ ] NONQUALIFIED STOCK OPTION
1. GRANT OF OPTION. The Company hereby grants to Participant an option
(this "OPTION") to purchase the total number of shares of Common Stock of the
Company set forth above as Total Option Shares (the "SHARES") at the Exercise
Price Per Share set forth above (the "EXERCISE PRICE"), subject to all of the
terms and conditions of this Agreement and the Executive Plan. If designated as
an Incentive Stock Option above, the Option is intended to qualify as an
"incentive stock option" (the "ISO") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "CODE").
2. EXERCISE PERIOD.
2.1 Exercise Period of Option. Provided Participant continues to
provide services to the Company or any Subsidiary or Parent of the Company, the
Option will become vested and exercisable as to portions of the Shares as
follows: (i) this Option shall not vest nor be exercisable with respect to any
of the Shares until the First Vesting Date set forth on the first page of this
Agreement (the "FIRST VESTING DATE"); (ii) on the First Vesting Date the
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Option will become vested and exercisable as to twenty-five percent (25%) of the
Shares; and (iii) thereafter at the end of each full succeeding month the Option
will become vested and exercisable as to 2.08333% of the Shares until the Shares
are vested with respect to one hundred percent (100%) of the Shares. If
application of the vesting percentage causes a fractional share, such share
shall be rounded down to the nearest whole share for each month except for the
last month in such vesting period, at the end of which last month this Option
shall become exercisable for the full remainder of the Shares. Notwithstanding
any provision under the Executive Plan to the contrary, in the event of a
Corporate Transaction (as defined below), the vesting of all Shares will
accelerate and the Option will become exercisable in full prior to the
consummation of such Corporate Transaction at such times and on such conditions
as the Board or Compensation Committee of the Board may determine; provided,
however, that the Option must be exercised, if at all, within three (3) months
of the consummation of such Corporate Transaction, after which time any
unexercised Shares shall expire. The term "CORPORATE TRANSACTION" shall mean (i)
a dissolution or liquidation of the Company, (ii) a merger or consolidation in
which the Company is not the surviving corporation (other than a merger or
consolidation with a wholly-owned subsidiary, a reincorporation of the Company
in a different jurisdiction, or other transaction in which there is no
substantial change in the shareholders of the Company or their relative stock
holdings and the options granted under the Executive Plan are assumed, converted
or replaced by the successor corporation, which assumption will be binding on
all optionees), (iii) a merger in which the Company is the surviving corporation
but after which the shareholders of the Company immediately prior to such merger
(other than any shareholder that merges, or which owns or controls another
corporation that merges, with the Company in such merger) cease to own their
shares or other equity interest in the Company, (iv) the sale of substantially
all of the assets of the Company, or (v) the acquisition, sale, or transfer of
more than 50% of the outstanding shares of the Company by tender offer or
similar transaction.
2.2 Vesting of Options. Shares that are vested pursuant to the
schedule set forth in Section 2.1 are "VESTED SHARES." Shares that are not
vested pursuant to the schedule set forth in Section 2.1 are "UNVESTED SHARES."
2.3 Expiration. The Option shall expire on the Expiration Date set
forth above or earlier as provided in Section 3 below or pursuant to Section 5.6
of the Executive Plan.
3. TERMINATION.
3.1 Termination for Any Reason Except Death, Disability or Cause. If
Participant is Terminated for any reason, except death, Disability or for Cause,
the Option, to the extent (and only to the extent) that it would have been
exercisable by Participant on the Termination Date, may be exercised by
Participant no later than three (3) months after the Termination Date, but in
any event no later than the Expiration Date.
3.2 Termination Because of Death or Disability. If Participant is
Terminated because of death or Disability of Participant (or Participant dies
within three (3) months of Termination when Termination is for any reason other
than Participant's Disability or for Cause), the Option, to the extent that it
is exercisable by Participant on the Termination Date,
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may be exercised by Participant (or Participant's legal representative) no later
than twelve (12) months after the Termination Date, but in any event no later
than the Expiration Date. Any exercise beyond (i) three (3) months after the
Termination Date when the Termination is for any reason other than the
Participant's death or disability, within the meaning of Section 22(e)(3) of the
Code; or (ii) twelve (12) months after the Termination Date when the termination
is for Participant's disability, within the meaning of Section 22(e)(3) of the
Code, is deemed to be an NQSO.
3.3 Termination for Cause. If Participant is Terminated for Cause,
then the Option will expire on Participant's Termination Date, or at such later
time and on such conditions as are determined by the Committee.
3.4 No Obligation to Employ. Nothing in the Executive Plan or this
Agreement shall confer on Participant any right to continue in
the employ of, or other relationship with, the Company or any Parent or
Subsidiary of the Company, or limit in any way the right of the Company or any
Parent or Subsidiary of the Company to terminate Participant's employment or
other relationship at any time, with or without Cause.
4. MANNER OF EXERCISE.
4.1 Stock Option Exercise Agreement. To exercise this Option,
Participant (or in the case of exercise after Participant's death or incapacity,
Participant's executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed stock option exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Committee from time to time (the "EXERCISE AGREEMENT"), which shall set forth,
inter alia, (i) Participant's election to exercise the Option, (ii) the number
of Shares being purchased, (iii) any restrictions imposed on the Shares and (iv)
any representations, warranties and agreements regarding Participant's
investment intent and access to information as may be required by the Company to
comply with applicable securities laws. If someone other than Participant
exercises the Option, then such person must submit documentation reasonably
acceptable to the Company verifying that such person has the legal right to
exercise the Option.
4.2 Limitations on Exercise. The Option may not be exercised unless
such exercise is in compliance with all applicable federal and state securities
laws, as they are in effect on the date of exercise. The Option may not be
exercised as to fewer than one hundred (100) Shares unless it is exercised as to
all Shares as to which the Option is then exercisable.
4.3 Payment. The Exercise Agreement shall be accompanied by full
payment of the Exercise Price for the shares being purchased in cash (by check),
or where permitted by law:
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of shares of the Company's Common Stock that (i) either
(A) have been owned by Participant for more than six (6) months and
have been paid for within the meaning of SEC Rule 144 (and, if such
shares were purchased from the Company by use of a promissory note,
such note
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has been fully paid with respect to such shares); or (B) were obtained
by Participant in the open public market; and (ii) are clear of all
liens, claims, encumbrances or security interests;
(c) by waiver of compensation due or accrued to Participant for services
rendered;
(d) provided that a public market for the Company's stock exists: (i)
through a "same day sale" commitment from Participant and a
broker-dealer that is a member of the National Association of
Securities Dealers (an "NASD DEALER") whereby Participant irrevocably
elects to exercise the Option and to sell a portion of the Shares so
purchased sufficient to pay for the total Exercise Price and whereby
the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the total Exercise Price directly to the Company, or (ii)
through a "margin" commitment from Participant and an NASD Dealer
whereby Participant irrevocably elects to exercise the Option and to
pledge the Shares so purchased to the NASD Dealer in a margin account
as security for a loan from the NASD Dealer in the amount of the total
Exercise Price, and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the total Exercise Price directly to
the Company; or
(e) by any combination of the foregoing.
4.4 Tax Withholding. Prior to the issuance of the Shares upon
exercise of the Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes upon
exercise of the Option by requesting that the Company retain Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld. In
such case, the Company shall issue the net number of Shares to the Participant
by deducting the Shares retained from the Shares issuable upon exercise.
4.5 Issuance of Shares. Provided that the Exercise Agreement and
payment are in form and substance satisfactory to counsel for the Company, the
Company shall issue the Shares registered in the name of Participant,
Participant's authorized assignee, or Participant's legal representative, and
shall deliver certificates representing the Shares with the appropriate legends
affixed thereto.
5. NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option is an
ISO, and if Participant sells or otherwise disposes of any of the
Shares acquired pursuant to the ISO on or before the later of (i) the
date two (2) years after the Date of Grant, and (ii) the date one (1)
year after transfer of such Shares to Participant upon exercise of the
Option, Participant shall immediately notify the Company in writing of
such disposition. Participant agrees that Participant may be subject
to income tax withholding by the Company on the compensation income
recognized by Participant from the early disposition by payment in
cash or out of the current wages or other compensation payable to
Participant.
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6. COMPLIANCE WITH LAWS AND REGULATIONS. The Executive Plan and this
Agreement are intended to comply with Section 25102(f) of the California
Corporations Code and any regulations relating thereto. Any provision of this
Agreement which is inconsistent with Section 25102(f) or any regulations
relating thereto shall, without further act or amendment by the Company or the
Board, be reformed to comply with the requirements of Section 25102(f) and any
regulations relating thereto. The exercise of the Option and the issuance and
transfer of Shares shall be subject to compliance by the Company and Participant
with all applicable requirements of federal and state securities laws and with
all applicable requirements of any stock exchange on which the Company's Common
Stock may be listed at the time of such issuance or transfer. Participant
understands that the Company is under no obligation to register or qualify the
Shares with the SEC, any state securities commission or any stock exchange to
effect such compliance.
7. NONTRANSFERABILITY OF OPTION. The Option may not be transferred in any
manner other than by will or by the laws of descent and distribution and may be
exercised during the lifetime of Participant only by Participant or in the event
of Participant's incapacity, by Participant's legal representative. The terms of
the Option shall be binding upon the executors, administrators, successors and
assigns of Participant.
8. COMPANY'S RIGHT OF FIRST REFUSAL. Before any Vested Shares held by
Participant or any transferee of such Vested Shares may be sold or otherwise
transferred (including without limitation a transfer by gift or operation of
law), the Company and/or its assignee(s) shall have an assignable right of first
refusal to purchase the Vested Shares to be sold or transferred on the terms and
conditions set forth in the Exercise Agreement (the "RIGHT OF FIRST REFUSAL").
The Company's Right of First Refusal will terminate when the Company's
securities become publicly traded.
9. TAX CONSEQUENCES. Set forth below is a brief summary as of the
Effective Date of the Executive Plan of some of the federal and California tax
consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION
OR DISPOSING OF THE SHARES.
9.1 Exercise of ISO. If the Option qualifies as an ISO, there will be
no regular federal 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 a tax preference
item for federal alternative minimum tax purposes and may subject the
Participant to the alternative minimum tax in the year of exercise.
9.2 Exercise of Nonqualified Stock Option. If the Option does not
qualify as an ISO, there may be a regular federal and California income tax
liability upon the exercise of the Option. Participant 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 Participant is a current or former employee of the
Company, the Company may be required to withhold from Participant's
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compensation or collect from Participant and pay to the applicable taxing
authorities an amount equal to a percentage of this compensation income at the
time of exercise.
9.3 Disposition of Shares. The following tax consequences may apply
upon disposition of the Shares.
(a) Incentive Stock Options. If the Shares are held for more
than twelve (12) months after the date of the transfer of the Shares pursuant to
the exercise of an ISO and are disposed of more than two (2) years after the
Date of Grant, any gain realized on disposition of the Shares will be treated as
long term capital gain for federal and California income tax purposes. If Shares
purchased under an ISO are disposed of within the applicable one (1) year or two
(2) year period, 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 Fair Market Value of the Shares on the date of exercise
over the Exercise Price.
(b) Nonqualified Stock Options. If the Shares are held for more
than twelve (12) months after the date of the transfer of the Shares pursuant to
the exercise of an NQSO, any gain realized on disposition of the Shares will be
treated as long term capital gain.
(c) Withholding. The Company may be required to withhold from
the Participant's compensation or collect from the Participant and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income.
10. PRIVILEGES OF STOCK OWNERSHIP. Participant shall not have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to Participant.
11. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Participant or the Company to the Committee for
review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
12. ENTIRE AGREEMENT. The Executive Plan is incorporated herein by
reference. This Agreement and the Executive Plan constitute the entire agreement
of the parties and supersede all prior undertakings and agreements with respect
to the subject matter hereof.
13. NOTICES. Any notice required to be given or delivered to the Company
under the terms of this Agreement shall be in writing and addressed to the
Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: (i) personal
delivery; (ii) three (3) days after deposit in the United States mail by
certified or registered mail (return receipt requested); (iii) one (1) business
day after deposit with any return receipt express courier (prepaid); or (iv) one
(1) business day after transmission by facsimile, rapifax or telecopier.
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14. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights under
this Agreement, including the Right of First Refusal. This Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer set forth herein, this
Agreement shall be binding upon Participant and Participant's heirs, executors,
administrators, legal representatives, successors and assigns.
15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with 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 California. If any provision of this Agreement is determined by
a court of law to be illegal or unenforceable, then such provision will be
enforced to the maximum extent possible and the other provisions will remain
fully effective and enforceable.
16. ACCEPTANCE. Participant hereby acknowledges receipt of a copy of the
Executive Plan and this Agreement. Participant has read and understands the
terms and provisions thereof, and accepts the Option subject to all the terms
and conditions of the Executive Plan and this Agreement. Participant
acknowledges that there may be adverse tax consequences upon exercise of the
Option or disposition of the Shares and that Participant should consult a tax
adviser prior to such exercise or disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
triplicate by its duly authorized representative and Participant has executed
this Agreement in triplicate, effective as of the Date of Grant.
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HANDSPRING, INC. PARTICIPANT
By:
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(Signature)
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(Please print name) (Please print name)
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(Please print title)
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