Nonstatutory Stock Option Agreement - InterVideo Inc. and Joseph Liu
INTERVIDEO, INC.
FORM OF NONSTATUTORY STOCK OPTION AGREEMENT
-------------------------------------------
(Immediate Exercise; 50% Vested; Acceleration upon Change in Control)
Optionee:
Joseph Liu Grant Date: June 15, 2001
----------------------- -----------------------------
Vesting
Commencement
Date: June 15, 2001
----------------
Shares: 50,000
-----------
Exercise Price: $2.00
-----------
InterVideo, Inc., a California corporation (the "Company"), hereby grants
to the optionee named above (the "Optionee") an option to purchase the amount of
shares of Common Stock set forth above (the "Shares") of the Company, at the
Exercise Price set forth above and on the terms set forth herein, and in all
respects subject to the terms and provisions of the Company's 1998 Stock Option
Plan, as amended, (the "Plan") applicable to non-statutory stock options, which
terms and provisions hereby are incorporated by reference herein. Unless the
context herein otherwise requires, the terms defined in the Plan shall have the
same meanings herein.
1. Nature of the Option. This Option is intended to be a non-statutory
--------------------
stock option and is not intended to be an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code"), or otherwise to qualify for any special tax benefits to Optionee.
2. Date of Grant; Term of Option. This Option is granted as of the Grant
-----------------------------
Date set forth above, and it may not be exercised later than ten (10) years from
such date.
3. Option Exercise Price. The exercise price for this Option is the
----------------------
Exercise Price per Share set forth above, which price is not less than
eighty-five percent (85%) of the fair market value thereof on the date this
Option was granted (or not less than one hundred ten percent (110%) of the fair
market value thereof on the date this Option was granted, if the Optionee owns
stock representing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or its parents or subsidiaries).
4. Exercise of Option. This Option shall be exercisable during its term
------------------
only in accordance with the terms and provisions of the Plan and this Option as
follows:
<PAGE>
(a) Right to Exercise. This Option shall be exercisable in full or in
-----------------
part immediately upon the Grant Date, provided, however, that Shares which have
not vested under Section 4(d) below shall be subject to the Repurchase Option
set forth in Section 10(a) below, and all Shares shall be subject to all other
transfer restrictions set forth in Section 10 below.
(b) Method of Exercise. This Option shall be exercisable by written
------------------
notice which shall state the election to exercise this Option, the number of
Shares in respect to which this Option is being exercised and such other
representations and agreements as to Optionee's investment intent with respect
to such Shares as may be required by the Company hereunder or pursuant to the
provisions of the Plan. Such written notice shall be signed by Optionee and
shall be delivered in person or by certified mail to the Secretary of the
Company or such other person as may be designated by the Company. The written
notice shall be accompanied by payment of the purchase price and an executed
stock purchase agreement in the form attached as Exhibit A (the "Stock Purchase
----------
Agreement"). Payment of the purchase price shall be made by check or promissory
note in the form as attached to the Stock Purchase Agreement. The certificate or
certificates for the Shares as to which this Option shall be exercised shall be
registered in the name of Optionee and shall carry the legends set forth in the
Plan, the Stock Purchase Agreement and as required under applicable law.
(c) Restrictions on Exercise. This Option may not be exercised if the
-------------------------
issuance of the Shares upon such exercise would constitute a violation of any
applicable federal or state securities laws or other laws or regulations. 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.
(d) Vesting. The Shares shall vest ("Vested Shares") as to one-half
-------
(1/2) of such Shares as of the Vesting Commencement Date and thereafter as to
1/96 of the Shares at the end of each successive one-month period of Continuous
Status as an Employee of the Company until the Shares are fully vested. The
vesting shall occur regardless of whether or not this Option has been exercised
in whole or in part. Until the Shares have vested, Optionee shall have no right
to transfer or to convey such Shares.
(e) Vesting Acceleration. Notwithstanding the vesting provisions of
--------------------
Section 4(d), on the occurrence of the merger or consolidation of the Company
into, or the sale of all or substantially all of the Company's assets or stock
to, another corporation, all the Shares shall vest unless at least fifty-one
percent (51%) of the capital stock of the successor corporation is owned by
persons who are holders of shares of capital stock of the Company immediately
before such merger, consolidation or sale.
5. Investment Representations. In connection with the acquisition of this
--------------------------
Option, Optionee represents and warrants as follows:
(a) Investment Intent. Optionee is acquiring this Option, and upon
-----------------
exercise of this Option, Optionee will be acquiring the Shares for investment
for Optionee's own account, not as a nominee or agent, and not with a view to,
or for resale in connection with, any distribution thereof.
2
<PAGE>
(b) Protection of Interests. Optionee, by reason of Optionee's
-----------------------
business or financial experience, has the capacity to evaluate the merits and
risks of purchasing Common Stock of the Company and to make an informed
investment decision with respect thereto and to protect Optionee's interests in
connection with the acquisition of this Option and the Shares.
6. Termination of Status as an Employee. If Optionee ceases to serve as
------------------------------------
an Employee for any reason other than death or disability and thereby terminates
Optionee's Continuous Status as an Employee, Optionee shall have the right to
exercise this Option at any time within thirty (30) days after the date of such
termination to the extent that Optionee was entitled to exercise this Option at
the date of such termination. If Optionee ceases to serve as an Employee due to
death or disability, this Option may be exercised at any time within six (6)
months after the date of death or termination of employment due to disability,
in the case of death, by Optionee's estate or by a person who acquired the right
to exercise this Option by bequest or inheritance, or, in the case of
disability, by Optionee, but in any case only to the extent Optionee was
entitled to exercise this Option at the date of such termination. To the extent
that Optionee was not entitled to exercise this Option at the date of
termination, or to the extent this Option is not exercised within the time
specified herein, this Option shall terminate. Notwithstanding the foregoing,
this Option shall not be exercisable after the expiration of the term set forth
in Section 2 hereof.
7. Withholding Tax Liability. The Company reserves the right to withhold,
-------------------------
in accordance with any applicable laws, from any compensation or other
consideration payable to the Optionee any taxes required to be withheld by
federal, state or local law as a result of the grant or exercise of this Option
or the sale or other disposition of the Shares issued upon exercise of this
Option, and if such compensation or consideration is insufficient, the Company
may require Optionee to pay to the Company an amount sufficient to cover such
withholding tax liability. The Optionee agrees to notify the Company immediately
in the event of any disqualifying disposition (within the meaning of Section
421(b) of the Code) of the Shares acquired upon exercise of an incentive stock
option.
8. Nontransferability of Option. This Option may not be sold, pledged,
----------------------------
assigned, hypothecated, gifted, transferred or disposed of in any manner either
voluntarily or involuntarily by operation of law or otherwise, other than by
will or by the laws of descent or distribution, and may be exercised during the
lifetime of Optionee only by such Optionee. Subject to the foregoing and the
terms of the Plan, the terms of this Option shall be binding upon the executors,
administrators, heirs, successors and assigns of Optionee.
9. Continuation of Employment. Neither this Option or the Plan nor any
--------------------------
Option granted thereunder shall confer upon any Optionee any right to continue
in the employment of the Company, its Parent, Subsidiary or a successor
corporation or limit in any respect the right of the Company or any such
corporations to discharge the Optionee at any time, with or without cause and
with or without notice.
10. Limitations on Transfer. In addition to any other limitation on
-----------------------
transfer created by applicable securities laws, Optionee will not sell,
transfer, assign, encumber or otherwise dispose
3
<PAGE>
of (including, without limitation by operation of law) any of Optionee's right,
title or interest in and to all or any portion of the Shares except as provided
in this Section:
(a) Repurchase Option. In the event of termination of the Optionee's
-----------------
full time employment with the Company for any reason, with or without cause,
whether voluntarily or involuntarily, including by reason of death or disability
(herein referred to as the "Termination"), upon the date of such Termination the
Company shall have an irrevocable and exclusive option (the "Repurchase Option")
to repurchase that number of Shares by which the aggregate number of Shares
purchased by Optionee pursuant to this Option exceeds the number of Vested
Shares, as determined upon the date of such Termination ("Unvested Shares"). The
Company shall pay to Optionee the Original Issuance Price per Share multiplied
by the number of Unvested Shares as to which the Company exercises the
Repurchase Option (as adjusted for stock splits, stock dividends, combinations
and the like) (the "Repurchase Price").
Within sixty (60) days following the last day upon which Optionee may
purchase Shares pursuant to this Option, the Company shall notify Optionee as to
whether it (or its assignee) wishes to purchase all or a portion of the Shares
subject to the Repurchase Option. The Company shall obtain the consent of
Optionee for the repurchase of a portion but not all of Optionee's Shares
subject to the Repurchase Option. If the Company (or its assignee) elects to
purchase such Shares, it shall notify Optionee in writing of its (or its
assignee's) intention to purchase all or a portion of such Shares) at the
Repurchase Price, and either (i) set a date and location for the closing of the
transaction not later than thirty (30) days from the date of such notice, at
which time the Company (or its assignee) shall tender payment for such Shares,
or (ii) close the transaction by mail by including payment for such Shares with
the Company's notice to Optionee. Payment for the Shares may be in the form of
cash, check, cancellation of all or a portion of Optionee's indebtedness to the
Company or any combination thereof. At such closing, the certificates
representing the Shares so purchased shall be delivered to the Company and
canceled (or the Shares transferred to the Company's assignee, if applicable)
or, in the case of payment by the Company (or its assignee) by mail, such
certificates shall be deemed canceled (or the Shares transferred to the
Company's assignee, if applicable) as of the date of the mailing of the
Company's notice and, thereafter, shall be promptly returned by Optionee to the
Company by certified or registered mail. Shares subject to the Repurchase Option
as to which the Company (or its assignee) has not exercised the Repurchase
Option within sixty (60) days following the last day upon which Optionee may
purchase Shares pursuant to this Option shall be released from the Repurchase
Option.
(b) Right of First Refusal. In the event Optionee desires (or is
----------------------
ptionee shall first offer such Shares for sale to the Company (or its assignee)
at the same price, and upon the same terms (or reasonably similar terms) as
those on which the Optionee is disposing of said Shares ("Right of First
Refusal"). Optionee shall offer such Shares to the Company by delivering a
written notice (the "Notice") to the Company stating (i) Optionee's bona fide
intention to sell or otherwise transfer such Shares, (ii) the number of such
Shares to be sold or otherwise transferred, (iii) the price for which Optionee
proposes to sell such Shares and all additional terms and conditions, if any, of
the sale or transfer and (iv) the name of the proposed buyer or transferee.
Optionee shall
4
<PAGE>
attach to the Notice a copy of the written offer, if any, of the sale or
transfer. In the event of a transfer not involving a sale of such Shares for a
specific sum of money, or if, in the sole judgment of the Company's Board of
Directors, the proposed transfer does not involve a price for the Shares
negotiated by the Optionee and Optionee's proposed transferee in a bona fide
"arm's length transaction," the price of the Shares shall be determined by the
Company's Board of Directors in the manner specified in Section 10(d) below.
Within thirty (30) days after the Company's receipt of the Notice (the
"Acceptance Period"), the Company (or its assignee) may elect to purchase all of
the Shares (or, with the consent of the Optionee, a portion thereof) to which
the Notice refers, at the price per share (or at the fair market value of such
Shares determined pursuant to Section 10(d) hereof in the case of a transfer
other than a bona fide arms-length transaction) and on the same terms and
conditions (or terms and conditions as similar as reasonably possible) as set
forth in the Notice. If the Company (or its assignee) elects to purchase such
Shares hereunder, it shall notify Optionee either orally or in writing during
the Acceptance Period of its intention to purchase all of such Shares (or, with
the consent of Optionee, a portion thereof) and either (i) set a date and
location for the closing of the transaction on or prior to the last day of the
Acceptance Period, or at such later date as the parties may otherwise agree, at
which time the Company (or its assignee) shall tender payment for the Shares or
(ii) include payment for the Shares with the Company's notice to Optionee, if in
writing, or deliver it to Optionee under separate cover. At such closing, the
certificates representing the Shares so purchased shall be delivered to the
Company and canceled or, in the case of payment by the Company by mail, such
certificates shall be deemed to be canceled upon the date of such mailing of the
Company's payment and, thereafter, shall be promptly returned by Optionee to the
Company by certified or registered mail. Optionee hereby authorizes and directs
the Secretary or Transfer Agent of the Company to transfer the Shares as to
which the Right of First Refusal has been exercised from Optionee to the Company
(or its assignee).
Optionee further authorizes the Company to refuse, or to cause its
Transfer Agent to refuse, to transfer or record any Shares to be transferred in
violation of this Agreement. If the Company (or its assignee) does not elect to
purchase the Shares to which the Notice refers, Optionee may sell or otherwise
transfer the Shares to the third party named in the Notice at the price and on
the terms and conditions specified in the Notice or at a higher price, provided
that such sale or transfer is consummated within sixty (60) days from either (i)
the lapse of the Acceptance Period or (ii) the date of the Company's notice,
whether written or oral, advising Optionee that it does not intend to purchase
the Shares hereunder, whichever occurs first in time and provided, further, that
any such sale or transfer is in accordance with all of the terms and conditions
set forth in this Agreement. In the event the Shares are not disposed of by the
Optionee within said 60-day period, such Shares shall once again be subject to
the Right of First Refusal herein provided.
(c) Involuntary Transfer. In the event of any transfer by operation
--------------------
of law or other involuntary transfer (the "Involuntary Transfer"), of all, or a
portion, of the Shares, the Company shall have an option to purchase all of the
Shares transferred (the "Involuntary Transfer Option"). Upon such transfer, the
Optionee and person acquiring the Shares shall
5
<PAGE>
promptly notify in writing the Secretary of the Company of such transfer. The
Company (or its assignee) shall notify Optionee and the person acquiring the
Shares as to whether the Company (or its assignee) wishes to purchase the Shares
pursuant to the Involuntary Transfer Option within thirty (30) days after
receipt by the Company of the written notice of the involuntary transfer of the
Shares. If the Company (or its assignee) elects to purchase said Shares
hereunder, it shall set a date for the closing of the transaction at a place
specified by the Company (or its assignee) not later than thirty (30) days after
receipt by the Company of the written notice of the involuntary transfer of the
Shares, or at such later date as the parties may otherwise agree. At such
closing, the Company (or its assignee) shall tender payment for the Shares and
the certificates representing the Shares so purchased shall be canceled.
Optionee hereby authorizes and directs the Secretary or Transfer Agent of the
Company to transfer the Shares as to which the Involuntary Transfer Option has
been exercised from the Optionee to the Company (or its assignee). Optionee
further authorizes the Company to refuse, or to cause its Transfer Agent to
refuse, to transfer or record any Shares to be transferred in violation of this
Agreement.
(d) Determination of Price. With respect to Shares to be
----------------------
transferred pursuant to the Right of First Refusal where the price is not
determined as a result of a bona fide arms-length transaction by the Optionee
under Section 10(b) or the Involuntary Transfer Option under Section 10(c), the
price per share shall be a price set by the Board of Directors of the Company
that will reflect the then current fair market value of the Shares, as
determined by the Board of Directors in good faith after giving consideration to
the factors set forth in Section 260.140.50 of Title 10 of the California Code
of Regulations.
(e) Intra-family Transfers. Optionee shall have the right,
----------------------
at any time and from time to time during Optionee's lifetime or upon Optionee's
death, to transfer all or any portion of the Vested Shares (the "Transferred
Family Shares") to Optionee's spouse, any of Optionee's or Optionee's spouse's
issue, ancestors or descendants, or a trust for the sole benefit of Optionee,
Optionee's spouse, any of Optionee's issue, ancestors or descendants (any such
individual or trust is hereinafter referred to as an "Intra-family Transferee"),
provided that the Intra-family Transferee receiving the Transferred Family
Shares executes a consent to be bound by the terms of this Agreement with
respect to the Transferred Family Shares. The Transferred Family Shares shall be
and remain subject to all of the terms and conditions of this Agreement as were
applicable to such Shares immediately prior to their transfer pursuant to this
Section 10(e); without limiting the foregoing, the obligations hereunder arising
out of the possession or ownership of such Transferred Family Shares shall be
binding upon the respective Intra-family Transferees. For purposes of exercising
any rights under this Agreement, the Company's right to purchase the Shares of
Optionee shall extend to any Shares owned by an Intra-family Transferee.
(f) Restriction on Alienation. Any sale, transfer,
-------------------------
encumbrance, or other disposition or purported sale, transfer, encumbrance or
disposition of any of the Shares by Optionee, whether voluntarily, by operation
of law or otherwise, shall be null and void unless the terms, conditions and
provisions of this Agreement are strictly complied with. Optionee further
authorizes the Company to refuse, or cause its Transfer Agent to refuse, to
transfer or record any Shares to be transferred in violation of this Agreement.
6
<PAGE>
(g) Assignment by Company. The Company's Repurchase Option,
---------------------
Right of First Refusal and Involuntary Transfer Option may be assigned in whole
or in part to any shareholder or shareholders of the Company.
(h) Obligations Binding Upon Transferees. All transferees of
------------------------------------
Shares or any interest therein will receive and hold such Shares or interests
subject to the provisions of this Agreement, including the Company's Repurchase
Option, Right of First Refusal and Involuntary Transfer Option. Any sale or
transfer of the Shares shall be void unless the provisions of this Agreement are
met.
(i) Termination of Rights. The Right of First Refusal and
---------------------
Involuntary Transfer Option granted the Company by this Section 10 shall
terminate at such time as a public market exists for the Company's Common Stock
(or any other stock issued to purchasers in exchange for the Shares purchased
under this Agreement). For the purpose of this Agreement, a "public market"
shall be deemed to exist if the Common Stock is listed on a national securities
exchange (as that term is used in the Securities Exchange Act of 1934, as
amended), or the Common Stock is traded on the over-the-counter market and
prices are published on business days in a recognized financial journal.
(j) Indebtedness. Any payment by the Company for purchase of
-----------
shares from Optionee, may be made by cancellation of any indebtedness to Company
from Optionee.
(k) Legends. All certificates representing any Shares of the
-------
Company purchased upon exercise of the Options shall have endorsed thereon the
following legends, or substantially similar legends, in addition to any legends
required by state securities laws, unless in the opinion of counsel such legends
are no longer necessary:
(1) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE
SALE, TRANSFER OR DISTRIBUTION THEREOF. NO SUCH SALE, TRANSFER
OR DISTRIBUTION MAY BE EFFECTED WITHOUT AN EFFECTIVE
REGISTRATION STATEMENT RELATING THERETO OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
(2) THESE SECURITIES ARE SUBJECT TO CERTAIN RESTRICTIONS,
INCLUDING A RIGHT OF FIRST REFUSAL OF THE COMPANY, AND MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT
BETWEEN THE COMPANY AND THE SHAREHOLDER, A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF THE COMPANY.
(l) Market Standoff Agreement. The Optionee, if requested by
-------------------------
the Company
7
<PAGE>
and an underwriter of Common Stock (or other securities) of the Company, agrees
not to sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by Optionee during the period not to exceed one
hundred and eighty (180) days as requested by the managing underwriter following
the effective date of a registration statement of the Company filed under the
Securities Act (as hereafter defined), provided that all officers and directors
of the Company are required to enter into similar agreements. Such agreement
shall be in writing in a form satisfactory to the Company and such underwriter.
The Company may impose stop-transfer instructions with respect to the shares (or
other securities) subject to the foregoing restriction until the end of such
period.
11. The Plan. This Option is subject to, and the Company and Optionee
--------
agree to be bound by, all of the terms and conditions of the Plan as such Plan
may be amended from time to time in accordance with the terms thereof, provided
that no such amendment shall deprive Optionee, without Optionee's consent, of
this Option or any rights hereunder. Pursuant to the Plan, the Board of
Directors of the Company is authorized to adopt rules and regulations not
inconsistent with the Plan as it shall deem appropriate and proper. A copy of
the Plan in its present form is available for inspection during business hours
by Optionee or the persons entitled to exercise this Option at the Company's
principal office.
8
<PAGE>
12. Entire Agreement; Amendment. This Agreement contains the entire
---------------------------
understanding between the parties with respect to the subject matter hereof and
supersedes all prior and contemporaneous written or oral negotiations and
agreements between them regarding the subject matter hereof. This Agreement may
be amended only in writing signed by each of the parties hereto.
InterVideo, Inc.
By ________________________________
Name:
Title:
9
<PAGE>
Optionee acknowledges receipt of a copy of the Plan, a copy of which
is attached hereto, and represents that Optionee has read and is familiar with
the terms and provisions thereof, and hereby accepts this Option subject to all
of the terms and provisions thereof. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the Board of
Directors or the Committee upon any questions arising under the Plan.
Date: ____________________________
OPTIONEE
By ______________________________
Joseph Liu
Address:
10
<PAGE>
Exhibit A
---------
Stock Purchase Agreement
-11-