INCENTIVE STOCK OPTION AGREEMENT
This INCENTIVE STOCK OPTION AGREEMENT, dated as of August 16, 2004
(this "AGREEMENT"), is between ACME PACKET
, INC., a Delaware
"COMPANY"), and Dino DiPalma (the "OPTIONEE"). Capitalized terms used herein
without definition shall have the meaning ascribed to such terms in the
Company's 2000 Equity Incentive Plan, a copy of which is attached hereto as
EXHIBIT A (the "PLAN").
1. GRANT OF OPTION. Pursuant to the Plan, the Company grants to the
Optionee an option (the "OPTION") to purchase from the Company all or any number
of an aggregate of 50,000 shares, subject to adjustment pursuant to Section 8 of
the Plan (the "OPTION SHARES"), of the Company's common stock, $.001 par value
per share, at a price of $.30 per share. The Option is granted as of August 16,
2004 (the "GRANT DATE").
2. CHARACTER OF OPTION. The Option is intended to be treated as an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "CODE").
3. DURATION OF OPTION. Unless subject to earlier expiration or
termination pursuant to the terms of the Plan, the Option shall expire on ten
year anniversary of the Grant Date.
4. EXERCISE OF OPTION.
(a) VESTING SCHEDULE. Until its expiration or termination, the
Option may be exercised, in the manner specified in Section 7.1(g) of the Plan,
for 25% of the Option Shares on August 16, 2005, and for the balance of the
Option Shares in monthly installments, with each installment being as nearly
equal as practicable (as determined by the Company in its reasonable
discretion), at the end of each calendar month beginning September 30, 2005 and
ending August 31, 2008. The provisions of this Section 4(a) shall be subject to
the provisions of Section 7.1(e) of the Plan.
(b) ACCELERATION OF VESTING
Notwithstanding anything in Section 4(a) above to the contrary but
subject to the provisions of Section 7.1(e) of the Plan, in the event a Sale of
the Company Transaction (as defined below in Section 4(d) below) occurs and the
Option is not exercisable in full for all of the Option Shares immediately prior
to such Sale of the Company Transaction, then the exercisability of the Option
shall be accelerated such that, immediately prior to such Sale of the Company
Transaction, the Option shall become exercisable for an additional number of
Option Shares equal to fifty percent (50%) of the then Unvested Option Shares
(as defined below in Section 4(d) below). The foregoing provisions of this
Section 4(b) shall be implemented ratably across all Unvested Option Shares that
are subject to the Option immediately prior to such Sale of the Company
Transaction regardless of when the Option would have otherwise become
exercisable for such Unvested Option Shares pursuant to Section 4(a) above.
(c) Notwithstanding anything express or implied to the contrary in
the foregoing provisions of this Section 4, the Option may, as provided in
Section 7.1(d) of the Plan, at any time be further accelerated at the discretion
of the Committee, PROVIDED that, without the consent of the Optionee, such
acceleration would not cause the Option to fail to comply with the provisions of
Section 422 of the Code.
(d) For purposes of this Agreement, the following terms shall have
the respective meanings ascribed to such terms below:
"SALE OF THE COMPANY TRANSACTION" shall mean any Transaction in which
the shareholders of the Company immediately prior to such Transaction
do not own or hold, immediately after consummation of such
Transaction, shares of capital stock of the surviving person or entity
or acquiring person or entity, as applicable, in connection with such
Transaction representing at least a majority of the total voting power
of the outstanding capital stock of such surviving person or entity or
such acquiring person or entity, as the case may be.
"TRANSACTION" shall mean any merger or consolidation of the Company
with or into another person or entity, the sale or transfer of all or
substantially all of the assets of the Company, or the sale or
transfer by the stockholders of the Company of all outstanding shares
of capital stock of the Company, in each case in a single transaction
or in a series of related transactions.
"UNVESTED OPTION SHARES" shall mean, at the relevant time of reference
thereto, those Option Shares for which the Option has not yet become
exercisable at such time pursuant to Section 4(a) and without giving
effect to the provisions of Section 4(b) above.
5. TERMINATION OF ASSOCIATION WITH THE COMPANY. If the Optionee's
employment with the Company is terminated, whether voluntarily or otherwise, the
Option, to the extent the Option is exercisable on the date of termination, may
be exercised by the Optionee, but only within 90 days after the Optionee ceases
to be an employee of the Company, unless terminated earlier by its terms. For
purposes of this Section 5, military or sick leave shall not be deemed a
termination of employment, PROVIDED that it does not exceed the longer of 120
days or the period during which the absent Optionee's reemployment rights, if
any, are guaranteed by statute or by contract. Death or disability (other than
sick leave as specified in the preceding sentence) shall be deemed to be a
termination of employment.
6. TRANSFER OF OPTION. Other than as expressly permitted by the
provisions of Section 7.1(f) of the Plan, the Option may not be transferred
except by will or the laws of descent and distribution and, during the lifetime
of the Optionee, may be exercised only by the Optionee.
7. INCORPORATION OF PLAN TERMS. The Option is granted subject to
all of the applicable terms and provisions of the Plan, including, but not
limited to, the limitations on the Company's obligation to deliver Optioned
Shares upon exercise set forth in Section 9.1 (Violation of Law), Section 9.2
(Corporate Restrictions on Rights in Stock), Section 9.3 (Investment
Representations) and Section 9.7 (Tax Withholding).
8. MISCELLANEOUS. This Agreement shall be construed and enforced in
accordance with the internal, substantive laws of The Commonwealth of
and shall be binding upon and inure to the benefit of any
successor or assign of the Company and any executor, administrator, trustee,
guardian, or other legal representative of the Optionee.
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IN WITNESS WHEREOF, the parties have executed this Incentive Stock
Option Agreement as a sealed instrument as of the date first above written.
, INC. OPTIONEE
By:/s/ Andrew D. Ory
/s/ Dino DiPalma
Name: Andrew D. Ory
2000 EQUITY INCENTIVE PLAN