1999 Stock Option Plan for Non-Employee Directors - NaviSite Inc.
NAVISITE, INC.
1999 STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
1. Purpose.
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The purpose of this 1999 Stock Option Plan for Non-Employee Directors (the
"Plan") of NaviSite, Inc. (the "Company") is to encourage ownership in the Com
pany by non-employee directors of the Company whose continued services are
considered essential to the Company's future progress and to provide them with a
further incentive to remain as directors of the Company.
2. Administration.
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The Board of Directors (the "Board") shall supervise and administer the
Plan. All questions concerning interpretation of the Plan or any options granted
under it shall be resolved by the Board of Directors and such resolution shall
be final and binding upon all persons having an interest in the Plan. The Board
of Directors may, to the full extent permitted by or consistent with applicable
laws or regulations, delegate any or all of its powers under the Plan to a
committee appointed by the Board of Directors, and if a committee is so
appointed, all references to the Board of Directors in the Plan shall mean and
relate to such committee.
3. Eligibility.
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There shall be eligible to receive options under the Plan each director of
the Company who: (i) is not an employee of the Company or any of its
subsidiaries or affiliates, (ii) unless otherwise determined by the Board, is
not an affiliate (as such term is defined in Rule 144(a)(1) promulgated under
the Securities Act of 1993), employee or designee of an institutional or
corporate investor that owns, at the time of his or her initial election as a
director of the Company, more than 5% of the outstanding shares of Common Stock
of the Company (an "Affiliated Director").
4. Stock Subject to the Plan.
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(a) A total of 250,000 shares of the Company's Common Stock, par value $.01
per share ("Common Stock") may be issued under the Plan, subject to adjust ment
as provided in Section 7.
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(b) All options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended.
5. Terms, Conditions and Form of Options.
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Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board of Directors shall from time to time
approve, which agreements shall comply with and be subject to the following
terms and conditions:
(a) (i) Initial Grants. Each eligible director who is elected for the
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first time to the Board of Directors of the Company after this Plan is adopted
by the Board of Directors shall be granted, upon the date of such initial
election, an option to acquire 25,000 shares of Common Stock under the Plan (the
"Initial Option"), provided that if such initial election occurs prior to the
approval of the Plan by the stockholders of the Company, such option may, at the
discretion of the Board, be granted on the date of such approval. Each
Affiliated Director who ceases to be an Affiliated Director and is not otherwise
an employee of the Company or any of its subsidiaries or affiliates shall be
granted, on the date such director ceases to be an Affiliated Director but
remains as a member of the Board or Directors, an Initial Option to acquire
25,000 shares of Common Stock under the Plan.
(ii) Annual Grants. On the first anniversary of the grant of the
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Initial Option to an eligible director, and on each subsequent anniversary
thereof, the Company shall grant to such eligible director an option to purchase
6,250 shares of Common Stock (an "Annual Option"), provided that such eligible
director serves as a member of the Board on the applicable anniversary date.
(iii) Additional Shares. The Board may, in its discretion,
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increase to up to 100,000 the aggregate number of shares of Common Stock that
may be subject to an Initial Option and/or Additional Options covering any
vesting period of up to 48 months that may be granted to an eligible director
after the date of such increase.
(b) Option Exercise Price. The option exercise price per share for each
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option granted under the Plan shall equal (i) the closing price of the Common
Stock on any national securities exchange on which the Common Stock is listed,
(ii) the closing price of the Common Stock on the Nasdaq National Market or
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(iii) the average of the closing bid and asked prices of the Common Stock in the
over-the-counter market, whichever is applicable, on the date of grant, or if
none of clauses (i), (ii) or (iii) applies, the fair market value of the Common
Stock, as determined by the Board, on the date of grant. In the case of clauses
(i), (ii) and (iii), if no sales of Common Stock were made on the date of grant,
the price of the Common Stock shall be the reported price for the next preceding
day on which sales were made.
(c) Transferability of Options. Except as the Board may otherwise provide
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in an option granted under the Plan, any option granted under the Plan to an
optionee shall not be transferable by the optionee other than (i) by will or the
laws of descent and distribution, (ii) pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder, or (iii) to any child, stepchild,
grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law,
sister-in-law, niece, nephew or other person sharing the director's household
(other than a parent or employee) (a "Family Member"), or any trust in which
Family Members have more than 50% of the beneficial interest, any foundation in
which Family Members (or the optionee) control the management of assets, and any
other entity in which Family Members (or the optionee) have more than a 50%
aggregate voting interest. References to an optionee, to the extent relevant in
the context, shall include references to authorized transferees.
(d) Time and Manner of Exercise.
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(i) Vesting.
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(a) Each Initial Option granted under the Plan shall vest and become
exercisable as to 1/48th of the number of shares originally subject to the
option on each monthly anniversary date of the date of grant, provided that the
optionee serves as a director on such monthly anniversary date.
(b) Each Additional Option shall vest and become exercis able as to
1/12th of the number of shares originally subject to the option on each monthly
anniversary date of the date of grant commencing on the 37th monthly anniversary
date, provided that the optionee serves as a director on such monthly
anniversary date.
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(ii) Termination. Except as otherwise provided in the applicable
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option agreement, each option shall terminate, and may no longer be exercised,
on the earlier of (i) the date ten years after the date of grant of such option
or (ii) six months after the date on which the optionee ceases to serve as a
director of the Company (or 12 months if such cessation is due to the death of
such director). Each option may be exercised during the 6 or 12 month period
set forth in clause (ii) above only to the extent it was exercisable at the time
of the optionee's cessation of service as a director.
(iii) Change in Control. All outstanding options granted under
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the Plan shall immediately become exercisable in full upon a Change in Control
(as defined in Section 8).
(iv) Exercise Procedure. An option may be exercised in whole or in
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part, to the extent it is then exercisable, only by written notice to the
Company at its principal office accompanied by (i) payment in cash or by check
of the full exercise price for the shares as to which it is exercised, (ii)
delivery of outstanding shares of Common Stock (which have been outstanding for
at least six months) having a fair market value on the last business day
preceding the date of exercise equal to the option exercise price, (iii) an
irrevocable undertaking by a creditworthy broker to deliver promptly to the
Company sufficient funds to pay the exercise price or delivery of irrevocable
instructions to a creditworthy broker to deliver promptly to the Company cash or
a check sufficient to pay the exercise price, (iv) payment by such other means
as may be approved by the Board, or (v) any combination of the foregoing.
(v) Exercise by Representative Following Death of Director. An
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optionee, by written notice to the Company, may designate one or more persons
(and from time to time change such designation), including his or her legal
representative, who, by reason of the optionee's death, shall acquire the right
to exercise all or a portion of the option. If the person or persons so
designated wish to exercise any portion of the option, they must do so within
the term of the option as provided herein. Any exercise by a representative
shall be subject to the provisions of the Plan.
(vi) Withholding Taxes. An optionee shall pay to the Company, or make
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provisions satisfactory to the Company for payment of, any taxes required by law
to be withheld upon any exercise of an option granted under the Plan, no later
than the date of the event creating such tax liability. In the Board's
discretion, such tax obligation may be paid in whole or in part in shares of
Common Stock, including shares retained from the exercise of the option, valued
at the then fair market value.
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(e) Early Exercise Provisions. Notwithstanding anything to the contrary in
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the Plan, an optionee may at any time exercise any Initial Option or Additional
Option in its entirety, as to both vested and unvested shares, provided that at
the time of and as a condition to such exercise, such optionee executes and
delivers to the Company a stock restriction agreement, in a form approved by the
Board, pursuant to which the Company (or its designee) shall have the right to
purchase from the optionee within 90 days of his or her termination of service
as a director for any reason (or, if later, within 90 days after his or her
exercise of the option), at the original option exercise price, all shares
acquired upon such exercise that would not, but for the provisions of this
Section 5(e), have otherwise been purchasable by the optionee under the
provisions of Section 5(d)(i) on the date of such termination of service.
6. Limitation of Rights.
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(a) No Right to Continue as a Director. Neither the Plan, nor the granting
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of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain the optionee as a director for any period of time.
(b) No Stockholders' Rights for Options. An optionee shall have no rights
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as a stockholder with respect to the shares covered by his or her option until
the date of the issuance to him or her of a stock certificate therefor, and no
adjust ment will be made for dividends or other rights (except as provided in
Section 7) for which the record date is prior to the date such certificate is
issued.
(c) Compliance with Securities Laws. Each option shall be subject to the
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requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or the disclosure of non-
public information or the satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exer cised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board of Directors. Nothing herein shall be deemed to require the Company
to apply for or to obtain such listing, registration or qualifica tion, or to
satisfy such condition.
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7. Adjustment Provisions for Mergers, Recapitalizations and Related
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Transactions.
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If, through or as a result of any merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other similar transaction, (i) the outstanding shares of Common Stock
are exchanged for a different number or kind of securities of the Company or of
another entity, or (ii) additional shares or new or different shares or other
securities of the Company are distributed with respect to such shares of Common
Stock, the Board of Directors shall make an appropriate and proportionate
adjustment in (x) the maximum number and kind of shares reserved for issuance
under the Plan, (y) the number and kind of shares or other securities subject to
then outstanding options under the Plan, and (z) the price for each share
subject to any then outstanding options under the Plan (without changing the
aggregate purchase price for such options), to the end that each option shall be
exercisable, for the same aggregate exercise price, for such securities as such
optionholder would have held immediately following such event if he had
exercised such option immediately prior to such event. No fractional shares
will be issued under the Plan on account of any such adjustments.
8. Change in Control.
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For purposes hereof, "Change in Control" means an event or occurrence set
forth in any one or more of subsections (a) through (d) below (including an
event or occurrence that constitutes a Change in Control under one of such
subsections but is specifically exempted from another such subsection):
(a) the acquisition by an individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")) (a "Person") of beneficial ownership of any
capital stock of the Company if, after such acquisition, such Person
beneficially owns (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) a majority or more of either (i) the then outstanding shares of
common stock of the Company (the "Out standing Company Common Stock") or (ii)
the combined voting power of the then outstanding securities of the Company
entitled to vote generally in the election of directors (the "Outstanding
Company Voting Securities"); provided, however, that for purposes of this
subsection (a), the following acquisitions shall not constitute a Change in
Control: (i) any acquisition directly from the Company (excluding an acquisition
pursuant to the exercise, conversion or exchange of any security exercisable
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for, convertible into or exchangeable for common stock or voting securities of
the Company, unless the Person exercising, converting or exchanging such
security acquired such security directly from the Company or an underwriter or
agent of the Company), (ii) any acquisition by the Company, (iii) any
acquisition by any em ployee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or (iv)
any Business Combination (as defined below) excepted from subsection (c) of this
Section 8 by the proviso set forth therein; or
(b) such time as the Continuing Directors (as defined below) do not
constitute a majority of the Board (or, if applicable, the Board of Directors of
a successor corporation to the Company), where the term "Continuing Director"
means at any date a member of the Board (i) who was a member of the Board on
the date of adoption of this Plan or (ii) who was nominated or elected
subsequent to such date by at least a majority of the directors who were
Continuing Directors at the time of such nomination or election or whose
election to the Board was recommended or endorsed by at least a majority of the
directors who were Continuing Directors at the time of such nomination or
election; provided, however, that there shall be excluded from this clause (ii)
any individual whose initial assumption of office occurred as a result of an
actual or threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or consents, by
or on behalf of a person other than the Board; or
(c) the consummation of a merger, consolidation, reorganization, recapi
talization or statutory share exchange involving the Company or a sale or other
disposition of all or substantially all of the assets of the Company (a
"Business Combination"), provided, that no such Business Combination shall
constitute a Change in Control if, immediately following such Business
Combination, all or substantially all of the individuals and entities who were
the beneficial owners of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, at least a majority of the then
outstanding shares of common stock and the combined voting power of the then
outstanding securities entitled to vote generally in the election of directors,
respectively, of the resulting or acquiring corporation in such Business
Combination (which shall include, without limitation, a corporation which as a
result of such transaction owns the Company or substantially all of the
Company's assets either directly or through one or more subsidiaries) in
substantially the same proportions as their ownership, immediately prior to such
Business Combi nation, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, respectively; or
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(d) approval by the stockholders of the Company of a complete liquidation
or dissolution of the Company.
9. Termination and Amendment of the Plan.
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The Board of Directors may suspend or terminate the Plan or amend it in any
respect whatsoever. In addition, the Board may, in its discretion, accelerate
the vesting of any option or options granted under the Plan.
Adopted by the Board of Directors as of
October 8, 1999
Approved by the Stockholders as of
October 8, 1999
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