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EXHIBIT 10.6
INTERNAP NETWORK SERVICES CORP.
STOCK OPTION AGREEMENT
Unless the context clearly indicates otherwise, capitalized terms used
in this Agreement shall have the meanings assigned to such terms in Section 21
of this Agreement.
WHEREAS, the Board of Directors of the Company has adopted the Plan for
the purpose of attracting and retaining the services of selected key employees
(including officers and directors), non-employee members of the Board and
consultants and other independent contractors who contribute to the financial
success of the Company; and
WHEREAS, Optionee is an individual who is to render valuable services to
the Company, and this Agreement is executed pursuant to, and is intended to
carry out the purposes of, the Plan in connection with the Company's grant of a
stock option to Optionee;
NOW, THEREFORE, it is agreed as follows:
1. GRANT OF OPTION. Subject to and upon the terms and conditions
set forth in this Agreement and the Plan, the Company hereby grants to Optionee,
as of the Grant Date, a stock option to purchase up to that number of Option
Shares specified in the Grant Notice. The Option Shares shall be purchasable
from time to time during the option term and at the Option Price per share
specified in the Grant Notice.
2. OPTION TERM. This Option shall expire at the close of business
on the Expiration Date specified in the Grant Notice, unless sooner terminated
in accordance with Section 5, 6 or 18 hereof; provided, in no event shall this
option have a maximum term in excess of ten (10) years measured from the Grant
Date.
3. NONTRANSFERABILITY. This option shall be neither transferable
nor assignable by Optionee other than by will or by the laws of descent and
distribution following the Optionee's death and may be exercised, during
Optionee's lifetime, only by Optionee.
4. DATES OF EXERCISE. This option may not be exercised in whole or
in part at any time prior to the time the Plan is approved by the Company's
shareholders in accordance with Section 18 hereof. Provided such shareholder
approval is obtained, this option shall thereupon become exercisable for the
Option Shares as specified in the Grant Notice. If the option becomes
exercisable in installments, such installments shall accumulate and the option
shall remain exercisable for such installments until the Expiration Date or the
sooner termination of the option term under Section 5 or 6 of this Agreement.
5. ACCELERATED TERMINATION OF OPTION TERM. The option term
specified in Section 2 above shall terminate (and this option shall cease to be
exercisable) prior to the Expiration Date should any of the following provisions
become applicable:
(a) Except as otherwise provided in subsection (b) or (c)
below, should Optionee cease to remain in Service while this option is
outstanding, then the period for exercising this option shall be reduced to a
three (3)-month period commencing with the date of
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such cessation of Service, but in no event shall this option be exercisable at
any time after the Expiration Date. Upon the expiration of such three (3)-month
period or (if earlier) upon the Expiration Date, this option shall terminate and
cease to be outstanding.
(b) Should Optionee die while this option is outstanding, then
the personal representative of the Optionee's estate or the person or persons to
whom the option is transferred pursuant to the Optionee's will or in accordance
with the law of descent and distribution shall have the right to exercise this
option. Such right shall lapse, and this option shall cease to be exercisable,
upon the earlier of (i) the expiration of the twelve (12) month period measured
from the date of Optionee's death or (ii) the Expiration Date. Upon the
expiration of such twelve (12) month period or (if earlier) upon the Expiration
Date, this option shall terminate and cease to be outstanding.
(c) Should Optionee become Permanently Disabled and cease by
reason thereof to remain in Service while this option is outstanding, then the
Optionee shall have a period of twelve (12) months (commencing with the date of
such cessation of Service) during which to exercise this option, but in no event
shall this option be exercisable at any time after the Expiration Date. Upon the
expiration of such limited period of exercisability or (if earlier) upon the
Expiration Date, this option shall terminate and cease to be outstanding.
(d) During the limited period of exercisability applicable under
subsections (a), (b) or (c) above, this option may be exercised for any or all
of the Option Shares in which the Optionee, at the time of cessation of Service,
is vested in accordance with the exercise/vesting provisions specified in the
Grant Notice or the special acceleration provisions of Section 6 of this
Agreement.
(e) Notwithstanding any provision of this Section 5 or any other
provision of this Agreement or the Plan to the contrary, any options granted
under the Plan shall terminate as of the date Optionee ceases to be in the
Service of the Company if Optionee was terminated for "cause" or could have been
terminated for "cause." If Optionee has an employment or consulting agreement
with the Company, the term "cause" shall have the meaning given that term in the
employment or consulting agreement. If Optionee does not have such an agreement
with the Company, or if such agreement does not define the term "cause," the
term "cause" shall mean: (1) misconduct or dishonesty that materially adversely
affects the Company, including without limitation (i) an act materially in
conflict with the financial interests of the Company, (ii) an act that could
damage the reputation or customer relations of the Company, (iii) an act that
could subject the Company to liability, (iv) an act constituting sexual
harassment or other violation of the civil rights of coworkers, (v) failure to
obey any lawful instruction of the Board or any officer of the Company, and (vi)
failure to comply with, or perform any duty required under the terms of any
confidentiality, inventions or non-competition agreement Optionee may have with
the Company, or (2) acts constituting the unauthorized disclosure of any of the
trade secrets or confidential information of the Company, unfair competition
with the Company or the inducement of any customer of the Company to breach any
contract with the Company. The right to exercise any option shall be suspended
automatically during the pendency of any investigation by the Board or its
designee, and/or any negotiations by the Board or its designee and Optionee,
regarding any actual or alleged act or omission by Optionee of the type
described in this subsection.
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6. CORPORATE TRANSACTION.
(a) In connection with any Corporate Transaction, the Plan
Administrator, in its sole discretion, may (i) accelerate this option so that
this option, immediately prior to the specified effective date for such
Corporate Transaction, shall become fully exercisable with respect to all of the
Option Shares and may be exercised for all or any portion of such shares, (ii)
arrange for this option either to be assumed by the successor corporation or
parent thereof or to be replaced with a comparable option to purchase shares of
the capital stock of the successor corporation or parent thereof, (iii) arrange
for this option to be replaced by a comparable cash incentive program of the
successor corporation based on the option spread (the amount by which the Fair
Market Value of the shares of Common Stock subject at the time to the option
exceeds the Option Price payable for such shares) or (iv) take none of the
actions described in clauses (i), (ii) or (iii) above and allow this option to
terminate as provided in Section 6(b) below. The determination of comparability
under clauses (ii) and (iii) above shall be made by the Plan Administrator, and
its determination shall be final and conclusive.
(b) This option shall terminate upon the consummation of any
Corporate Transaction, unless the Plan Administrator takes one of the actions
set forth in Section 6(a) above.
(c) The exercisability of this option as an incentive stock
option under the Federal tax laws (if designated as such in the Grant Notice),
in connection with any such Corporate Transaction, shall be subject to the
applicable dollar limitation of Section 19 below.
(d) This Agreement shall not in any way affect the right of
the Company to adjust, reclassify, reorganize or otherwise make changes in its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.
7. ADJUSTMENT IN OPTION SHARES.
(a) In the event any change is made to the Company's
outstanding Common Stock by reason of any stock split, stock dividend,
combination of shares, exchange of shares, or other change affecting the
outstanding Common Stock as a class without receipt of consideration, then
appropriate adjustments shall be made to the total number of Option Shares
subject to this option and the Option Price payable per share in order to
reflect such change and thereby preclude a dilution or enlargement of benefits
hereunder.
(b) If this option is to be assumed or is otherwise to
remain outstanding after a Corporate Transaction, then this option shall be
appropriately adjusted to apply and pertain to the number and class of
securities that would have been issuable to the Optionee in the consummation of
such Corporate Transaction had the option been exercised immediately prior to
such Corporate Transaction, and appropriate adjustments shall also be made to
the Option Price payable per share, provided the aggregate Option Price payable
hereunder shall remain the same.
8. PRIVILEGE OF STOCK OWNERSHIP. The holder of this option shall
not have any of the rights of a shareholder with respect to the Option Shares
until such individual shall have exercised the option and paid the Option Price.
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9. MANNER OF EXERCISING OPTION.
(a) In order to exercise this option with respect to all or
any part of the Option Shares for which this option is at the time exercisable,
Optionee (or other person authorized to exercise this option must take the
following actions:
(1) Execute and deliver to the Secretary of the
Company the Purchase Agreement;
(2) Pay the aggregate Option Price for the purchased
shares either by full payment in cash or check, or any other form approved by
the Plan Administrator at the time of exercise in accordance with the provisions
of Section 15.
(3) Furnish to the Company appropriate documentation
that the person or persons exercising the option (if other than Optionee) have
the right to exercise this option.
(b) Should the Company's outstanding common stock be
registered under Section 12(g) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), at the time the option is exercised, then the Option
Price may also be paid as follows:
(1) in shares of the Common Stock held by the
Optionee for the requisite period necessary to avoid a charge to the Company's
earnings for financial reporting purposes and valued at Fair Market Value on the
Exercise Date; or
(2) through a special sale and remittance procedure
pursuant to which the Optionee (i) is to provide irrevocable written
instructions to a designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Company, out of the sale proceeds, an amount
sufficient to cover the aggregate Option Price payable for the purchased shares
plus all applicable Federal and state income and employment taxes required to be
withheld by the Company by reason of such purchase and (ii) concurrently
provides written directives to the Company to deliver the certificates for the
purchased shares directly to such broker-dealer in order to effect the sale
transaction.
(c) Except to the extent the special sale and remittance
procedure is utilized to exercise this option, or as otherwise permitted by the
Plan Administrator pursuant to Section 15, payment of the Option Price must
accompany the delivery of the Purchase Agreement. As soon after such payment as
practical, the Company shall mail or deliver to Optionee (or to the other person
or persons exercising this option) a certificate or certificates representing
the shares so purchased and paid for, with the appropriate legends affixed
thereto.
(d) In no event may this option be exercised for any
fractional shares.
10. RIGHTS OF FIRST REFUSAL/REPURCHASE RIGHTS. THE OPTIONEE HEREBY
AGREES THAT ALL OPTION SHARES ACQUIRED UPON THE EXERCISE OF THIS OPTION SHALL BE
SUBJECT TO CERTAIN RIGHTS OF FIRST REFUSAL OF THE COMPANY AND ITS ASSIGNS IN
CONNECTION WITH ANY PROPOSED TRANSFER OF ANY SUCH SHARES IN ACCORDANCE WITH
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THE TERMS AND CONDITIONS SPECIFIED IN THE 1998 STOCK OPTION/STOCK ISSUANCE PLAN
AND THE STOCK PURCHASE AGREEMENT.
ADDITIONALLY, THE GRANT NOTICE MAY GRANT THE COMPANY THE RIGHT
TO REPURCHASE ANY SHARES ACQUIRED UNDER THIS OPTION, WHICH RIGHT SHALL LAPSE
OVER TIME BASED UPON THE OPTIONEE'S LENGTH OF SERVICE TO THE COMPANY.
11. COMPLIANCE WITH LAWS AND REGULATIONS.
(a) The exercise of this option and the issuance of Option
Shares upon such exercise shall be subject to compliance by the Company and the
Optionee with all applicable requirements of law relating thereto and with all
applicable regulations of any stock exchange on which shares of the Company's
Common Stock may be listed at the time of such exercise and issuance.
(b) In connection with the exercise of this option, Optionee
shall execute and deliver to the Company such representations in writing as may
be requested by the Company in order for it to comply with the applicable
requirements of Federal and state securities laws.
12. SUCCESSORS AND ASSIGNS. Except to the extent otherwise provided
in Sections 3 and 6 above, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the successors, administrators, heirs, legal
representatives and assigns of Optionee and the successors and assigns of the
Company.
13. LIABILITY OF COMPANY.
(a) If the Option Shares covered by this Agreement exceed,
as of the Grant Date, the number of shares of Common Stock that may be issued
under the Plan without shareholder approval, then this option shall be void with
respect to such excess shares, unless shareholder approval of an amendment
sufficiently increasing the number of shares of Common Stock issuable under the
Plan is obtained in accordance with the applicable provisions of the Plan.
(b) The inability of the Company to obtain approval from any
regulatory body having authority the Company deems necessary to the lawful
issuance and sale of any Common Stock pursuant to this option shall relieve the
Company of any liability with respect to the non-issuance or sale of the Common
Stock as to which such approval shall not have been obtained. The Company shall
use its best efforts to obtain all such approvals.
14. 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 Company in care of the Corporate Secretary at its principal corporate
offices. Any notice required to be given or delivered to Optionee shall be in
writing and addressed to Optionee at the address indicated below Optionee's
signature line on the Grant Notice, or at such other address as the Optionee
shall have furnished the Company in writing at least ten (10) days in advance of
its effective date. All notices shall be deemed to have been given or delivered
upon personal delivery or
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forty-eight hours after deposit in the U.S. mail, postage prepaid and properly
addressed to the party to be notified.
15. LOANS. The Plan Administrator, in its discretion and without any
obligation to do so, may assist the Optionee in the exercise of this option by
authorizing the extension of a loan to the Optionee from the Company or
permitting the Optionee to pay the option price for the purchased Common Stock
in installments over a period of years. The terms of any such loan or
installment method of payment (including the interest rate, the requirements for
collateral and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion.
16. CONSTRUCTION. This Agreement and the option evidenced hereby are
made and granted pursuant to the Plan and are in all respects limited by and
subject to the express terms and provisions of the Plan. All decisions of the
Plan Administrator with respect to any question or issue arising under the Plan
or this Agreement shall be conclusive and binding on all persons having an
interest in this option.
17. GOVERNING LAW. The interpretation, performance and enforcement
of this Agreement shall be governed by the laws of the State of Washington
without resort to its choice of law rules.
18. SHAREHOLDER APPROVAL. The grant of this option is subject to
approval of the Plan by the Company's shareholders within twelve (12) months
after the adoption of the Plan by the Board. NOTWITHSTANDING ANY PROVISION OF
THIS AGREEMENT TO THE CONTRARY, THIS OPTION MAY NOT BE EXERCISED IN WHOLE OR IN
PART UNTIL SUCH SHAREHOLDER APPROVAL IS OBTAINED. In the event that such
shareholder approval is not obtained, then this option shall terminate in its
entirety and the Optionee shall have no rights to acquire any Option Shares
hereunder.
19. ADDITIONAL TERMS APPLICABLE TO AN INCENTIVE STOCK OPTION. In the
event this option is designated an incentive stock option in the Grant Notice,
the following terms and conditions shall also apply to the grant:
(a) This option shall cease to qualify for favorable tax
treatment as an incentive stock option under the Federal tax laws if (and to the
extent) this option is exercised for one or more Option Shares: (i) more than
three (3) months after the date the Optionee ceases to be an Employee for any
reason other than death or Permanent Disability or (ii) more than one (1) year
after the date the Optionee ceases to be an Employee by reason of Permanent
Disability.
(b) In the event this option is designated as immediately
exercisable in the Grant Notice, then except in the event of a Corporate
Transaction, this option shall not become exercisable in the calendar year in
which granted if (and to the extent) the aggregate Fair Market Value (determined
at the Grant Date) of the Common Stock for which this option would otherwise
first become exercisable in such calendar year, when added to the aggregate Fair
Market Value (determined as of the respective date or dates of grant) of the
Common Stock for which one or more other post-1986 incentive stock options
granted to the Optionee prior to the Grant Date (whether under the Plan or any
other option plan of the Company or any Parent or Subsidiary corporations) first
become exercisable during the same calendar year, would exceed one hundred
thousand dollars ($100,000). To the extent the exercisability of this option is
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deferred by reason of the foregoing limitation, the deferred portion first will
become exercisable in the first calendar year or years thereafter in which the
one hundred thousand dollar ($100,000) limitation of this Section 19(b) would
not be contravened.
(c) In the event this option is designated as an installment
option in the Grant Notice, no installment under this option shall qualify for
favorable tax treatment as an incentive stock option under the Federal tax laws
if (and to the extent) the aggregate Fair Market Value (determined at the Grant
Date) of the Common Stock for which such installment first becomes exercisable
hereunder, when added to the aggregate Fair Market Value (determined as of the
respective date or dates of grant) of the Common Stock for which this option or
one or more other post-1986 incentive stock options granted to the Optionee
prior to the Grant Date (whether under the Plan or any other option plan of the
Company or any Parent or Subsidiary corporations) first become exercisable
during the same calendar year, would exceed one hundred thousand dollars
($100,000).
(d) Should the exercisability of this option be accelerated
upon a Corporate Transaction, then this option shall qualify for favorable tax
treatment as an incentive stock option under the Federal tax laws only to the
extent the aggregate Fair Market Value (determined at the Grant Date) of the
Common Stock for which this option first becomes exercisable in the calendar
year in which the Corporate Transaction occurs does not, when added to the
aggregate Fair Market Value (determined as of the respective date or dates of
grant) of the Common Stock for which this option or one or more other post-1986
incentive stock options granted to the Optionee prior to the Grant Date (whether
under the Plan or any other option plan of the Company or any Parent or
Subsidiary corporations) first become exercisable during the same calendar year,
exceed one hundred thousand dollars ($100,000).
(e) To the extent this option should fail to qualify as an
incentive stock option under the Federal tax laws, the Optionee will recognize
compensation income in connection with the acquisition of one or more Option
Shares hereunder, and the Optionee must make appropriate arrangements for the
satisfaction of all Federal, state or local income tax withholding requirements
and Federal social security employee tax requirements applicable to such
compensation income.
20. ADDITIONAL TERMS APPLICABLE TO A NON-STATUTORY STOCK OPTION. In
the event this option is designated a non-statutory stock option in the Grant
Notice, Optionee hereby agrees to make appropriate arrangements with the Company
for the satisfaction of all Federal, state or local income tax withholding
requirements and Federal social security employee tax requirements applicable to
the exercise of this option.
21. DEFINITIONS. The following definitions shall apply to the
respective capitalized terms used herein:
BOARD means the Board of Directors of InterNAP Network Services
Corp.
CODE means the Internal Revenue Code of 1986, as amended.
COMMON STOCK means the Common Stock of InterNAP Network Services
Corp.
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COMPANY means InterNAP Network Services Corp., a Washington
corporation.
CORPORATE TRANSACTION means one or more of the following
transactions: (i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state of the Company's incorporation, (ii) the sale, transfer or
other disposition of all or substantially all of the assets of the Company, or
(iii) any reverse merger in which the Company is the surviving entity but in
which fifty percent (50%) or more of the Company's outstanding voting stock is
transferred to holders different from those who held the stock immediately prior
to such merger.
EMPLOYEE means an individual who is in the employ of the Company
or any Parent or Subsidiary corporation. An optionee shall be considered to be
an Employee for so long as such individual remains in the employ of the Company
or any Parent or Subsidiary corporation, subject to the control and direction of
the employer entity as to both the work to be performed and the manner and
method of performance.
EXERCISE DATE shall be date on which the executed Purchase
Agreement for one or more Option Shares is delivered to the Company in
accordance with Section 9 of this Agreement.
EXPIRATION DATE means the date specified in the Grant Notice as
the date on which the option shall terminate (unless sooner terminated under the
Plan or pursuant hereto).
FAIR MARKET VALUE of a share of Common Stock on any relevant
date shall be determined in accordance with the following provisions:
(a) If the Common Stock is at the time listed or admitted to
trading on any stock exchange, then the Fair Market Value shall be the closing
selling price per share of Common Stock on the date in question on the stock
exchange determined by the Plan Administrator to be the primary market for the
Common Stock. If there is no reported sale of Common Stock on such exchange on
the date in question, then the Fair Market Value shall be the closing selling
price on the exchange on the last preceding date for which such quotation
exists.
(b) If the Common Stock is not at the time listed or
admitted to trading on any stock exchange but is traded in the over-the-counter
market, the Fair Market Value shall be the mean between the highest bid and the
lowest asked prices (or if such information is available the closing selling
price) per share of Common Stock on the date in question in the over-the-counter
market, as such prices are reported by the National Association of Securities
Dealers through its NASDAQ National Market System or any successor system. If
there are no reported bid and asked prices (or closing selling price) for the
Common Stock on the date in question, then the mean between the highest bid and
lowest asked prices (or closing selling price) on the last preceding date for
which such quotations exist shall be determinative of Fair Market Value.
(c) If the Common Stock is at the time neither listed nor
admitted to trading on any stock exchange nor traded in the over-the-counter
market, or if the Plan Administrator otherwise determines that the valuation
provisions of subsections (a) and (b) above will not result in a true and
accurate valuation of the Common Stock, then the Fair Market Value shall be
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determined by the Plan Administrator after taking into account such factors as
the Plan Administrator shall deem appropriate under the circumstances.
GRANT DATE means the date specified in the Grant Notice as the
date on which the option was granted to the Optionee under the Plan.
GRANT NOTICE means the Notice of Grant of Stock Option which
accompanies this Agreement.
INCENTIVE STOCK OPTION means an incentive stock option which
satisfies the requirements of Section 422 of the Code.
NON-STATUTORY STOCK OPTION means an option not intended to meet
the statutory requirements prescribed for an Incentive Stock Option.
OPTION SHARES means the total number of shares of Common Stock
indicated in the Grant Notice as purchasable under this option.
OPTIONEE means the individual identified in the Grant Notice as
the person to whom this option has been granted under the Plan.
OPTION PRICE means the price indicated in the Grant Notice as
the exercise price per share to be paid by the Optionee for the exercise of this
option.
PARENT corporation means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company, provided
each such corporation in the unbroken chain (other than the Company) owns, at
the time of the determination, stock possessing fifty percent (50%) or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
PERMANENTLY DISABLED or Permanent Disability means the inability
of an individual to engage in any substantial gainful activity by reason of any
medically-determinable physical or mental impairment that can be expected to
result in death or that has lasted or can be expected to last for a continuous
period of not less than 12 months.
PLAN means the 1998 Stock Option/Stock Issuance Plan of the
Company, in the form of Exhibit A to the Grant Notice.
PLAN ADMINISTRATOR means either the Board or a committee of two
or more Board members, to the extent such committee may at the time be
responsible for plan administration.
PURCHASE AGREEMENT means the stock purchase agreement, in
substantially the form of Exhibit C to the Grant Notice, which is to be executed
in connection with the exercise of this option for one or more Option Shares.
SERVICE means the performance of services for the Company or any
Parent or Subsidiary corporation by an individual in the capacity of an
Employee, a non-employee member
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of the board of directors or an independent consultant or advisor. Accordingly,
the Optionee shall be deemed to remain in Service for so long as such individual
renders services to the Company or any Parent or Subsidiary corporation on a
periodic basis in the capacity of an Employee, a non-employee member of the
board of directors or an independent consultant or advisor.
SUBSIDIARY corporation means each corporation (other than the
Company) in an unbroken chain of corporations beginning with the Company,
provided each such corporation (other than the last corporation) in the unbroken
chain owns, at the time of the determination, stock possessing fifty percent
(50%) or more of the total combined voting power of all classes of stock in one
of the other corporations in such chain.
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