EXHIBIT 10.23
STOCK PURCHASE AGREEMENT
AGREEMENT made as of this __ day of _________, 20__, by and
between ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. (the "Company") and
_____________________________, Optionee under the Company's 2000 Stock
Option/Stock Issuance Plan.
All capitalized terms in this Agreement have the meanings
assigned to them in this Agreement including the attached Appendix, the Notice
of Grant and Option Agreement (as defined below).
A. EXERCISE OF OPTION
1. Exercise. Optionee hereby purchases ___________ shares (the "Purchased
Shares") of Stock pursuant to that certain option (the "Option") granted to
Optionee on ____________________, 200__ (the "Grant Date") to purchase up to
_______________ shares of Stock under the Plan at the exercise price of $______
per share (the "Exercise Price").
2. Payment. Concurrently with the delivery of this Agreement to the Company,
Optionee shall pay the aggregate Exercise Price for the Purchased Shares in
accordance with the provisions of the Stock Option Agreement relating to the
Purchased Shares (the "Option Agreement") and shall deliver to the Company any
other documents required pursuant to the Option Agreement as a condition to
exercise together with a duly-executed blank Assignment Separate from
Certificate (in the form attached hereto as Exhibit I) with respect to the
Purchased Shares.
3. Company May Hold Purchased Shares. The Company shall have the right to hold
the certificates representing any Purchased Shares which are subject to
Repurchase Rights or First Refusal Rights.
4. Stockholder Rights. Until such time as the Company exercises the Repurchase
Rights or the First Refusal Rights, Optionee (or any successor in interest)
shall have all the rights of a stockholder (including voting, dividend and
liquidation rights) with respect to the Purchased Shares, including any
Purchased Shares held by the Company hereunder, subject, however, to the
transfer restrictions of Articles B and C.
B. SECURITIES LAW COMPLIANCE
1. Restricted Securities. The Purchased Shares have not been registered under
the Securities act of 1933 (the "Securities Act") and are being issued to
Optionee in reliance upon the exemption from such registration provided by
Section 4(2) of the Securities Act or Rule 701 under the Securities Act.
Optionee hereby confirms that Optionee has been informed that the Purchased
Shares are restricted securities under the Securities Act and may not be resold
or transferred unless the Purchased Shares are first registered under the
Federal
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securities laws or unless an exemption from such registration is
available. Accordingly, Optionee hereby acknowledges that Optionee is prepared
to hold the Purchased Shares for an indefinite period and that Optionee is aware
that Rule 144 under the Securities Act, which exempts certain resales of
unrestricted securities, is not currently available to exempt the resale of the
Purchased Shares from the registration requirements of the Securities Act.
2. Restrictions on Disposition of Purchased Shares. Optionee shall make no
disposition of the Purchased Shares (other than a Permitted Transfer) unless and
until there is compliance with all of the following requirements:
(i) Optionee shall have provided the Company with a written summary of the
terms and conditions of the proposed disposition.
(ii) Optionee shall have complied with all requirements of this Agreement
applicable to the disposition of the Purchased Shares.
(iii) Optionee shall have provided the Company with written assurances, in
form and substance satisfactory to the Company, that (a) the proposed
disposition does not require registration of the Purchased Shares under
the Securities Act or (b) all appropriate action necessary for
compliance with the registration requirements of the Securities Act or
any exemption from registration available under the Securities Act
(including Rule 144) has been taken.
The Company shall not be required (i) to transfer on its books
any Purchased Shares which have been sold or transferred in violation of the
provisions of this Agreement or (ii) to treat as the owner of the Purchased
Shares, or otherwise to accord voting, dividend or liquidation rights to, any
transferee to whom the Purchased Shares have been transferred in contravention
of this Agreement.
3. Restrictive Legends. In the Company's sole discretion, the stock certificates
for the Purchased Shares may be endorsed with the following restrictive legends:
(i) "The shares represented by this certificate have not been registered
under the Securities Act of 1933. The shares may not be sold or offered
for sale in the absence of (a) an effective registration statement for
the shares under such Act, (b) a `no action' letter of the Securities
and Exchange Commission with respect to such sale or offer or (c)
satisfactory assurances to the Company that registration under such Act
is not required with respect to such sale or offer."
(ii) "The shares represented by this certificate are subject to certain
repurchase rights and rights of first refusal granted to the Company and
accordingly may not be sold, transferred, assigned, pledged, hypothecated,
encumbered, or in any manner disposed of except in conformity with the terms of
a written Stock Purchase Agreement between the Company and the registered holder
of the shares (or the predecessor in interest to the shares). A copy of such
agreement is maintained at the Company's principal corporate offices."
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C. TRANSFER RESTRICTIONS
1. Restrictions on Transfer. Except for any Permitted Transfer, Optionee shall
not sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose
of any of the Purchased Shares which are subject to the Repurchase Rights. In
addition, Purchased Shares, regardless of whether such Purchased Shares are
subject to the Repurchase Rights, shall not be sold, transferred, assigned,
pledged, hypothecated, encumbered or otherwise disposed of in contravention of
the First Refusal Rights or the Market Stand-Off.
2. Transferee Obligations. Each person (other than the Company) to whom the
Purchased Shares are transferred by means of a Permitted Transfer shall, as a
condition precedent to the validity of such transfer, acknowledge in writing to
the Company that such person is bound by the provisions of this Agreement and
that the transferred shares are subject to (i) the Repurchase Rights, (ii) the
First Refusal Rights and (iii) the Market Stand-Off, to the same extent such
shares would be so subject if retained by Optionee.
3. Market Stand-Off.
(a) In connection with any underwritten public offering by the Company of its
equity securities pursuant to an effective registration statement filed under
the Securities Act, including but not limited to the Company's initial public
offering, Optionee (and any other Owner) shall not sell, make any short sale of,
loan, hypothecate, pledge, grant any option for the purchase of, or otherwise
dispose or transfer for value or otherwise agree to engage in any of the
foregoing transactions with respect to, any Purchased Shares without the prior
written consent of the Company or its lead underwriter. Such restriction (the
"Market Stand-Off") shall be in effect for such period of time from and after
the date of the final prospectus for the offering as may be requested by the
Company or such underwriter. In no event, however, shall such period exceed one
hundred eighty (180) days with respect to any particular offering and the Market
Stand-Off shall in all events terminate two (2) years after the effective date
of the Company's initial public offering.
(b) Optionee (and any other Owner) shall be subject to the Market Stand-Off
provided and only if and for the same duration officers and directors of the
Company are also subject to similar restrictions.
(c) Any new, substituted or additional securities or other property which is by
reason of any Recapitalization or Reorganization distributed with respect to, or
exchanged for, the Purchased Shares shall be immediately subject to the Market
Stand-Off, to the same extent the Purchased Shares are at the time subject to
such provisions.
(d) In order to enforce the Market Stand-Off, the Company may impose
stop-transfer instructions with respect to the Purchased Shares until the end of
the applicable stand-off period.
D. REPURCHASE RIGHTS
1. Grant. The Company is hereby granted rights ("Repurchase Rights"),
exercisable at any time during the 90-day period following the date Optionee
ceases
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Employment with the Company for any reason other than Permanent
Disability, death or Retirement or (if later) during the 90-day period following
the execution date of this Agreement, to repurchase at the Exercise Price all or
any portion of the Purchased Shares as to which Repurchase Rights have not
lapsed in accordance with the schedule set forth in the Notice of Grant.
2. Exercise of Repurchase Rights. Repurchase Rights shall be exercised by
written notice given to an Owner on or prior to the last day of the 90-day
exercise period. The notice shall indicate the number of Purchased Shares to be
repurchased and the date on which the repurchase is to be effected, such date to
be not more than 30 days after such notice is given. If the Company does not
hold the certificates representing Purchased Shares to be repurchased, such
certificates, together with a stock power(s) duly executed in blank, shall be
delivered to the Company prior to the close of business on the date specified
for the repurchase. On the date of repurchase, the Company shall pay to Owner,
in cash or cash equivalents (including the cancellation of any purchase-money
indebtedness), an amount equal to the Exercise Price previously paid for the
Purchased Shares which are being repurchased.
3. Termination of the Repurchase Rights. Repurchase Rights shall lapse with
respect to any Purchased Shares for which they are not timely exercised under
Paragraph D.2. In addition, Repurchase Rights shall lapse in accordance with the
schedule set forth in the Notice of Grant, Section 5 of the Option Agreement
relating to termination of Employment with the Company, Section 7(a) of the
Option Agreement relating to the consummation of a Corporate Transaction
pursuant to which the Repurchase Rights are not assigned to the successor
corporation (or parent thereof), and Section 7(d) of the Option Agreement
relating to Optionee's Involuntary Termination within 18 months after the
consummation of a Corporation Transaction. All Purchased Shares as to which
Repurchase Rights lapse shall, subject to the terms of this Agreement and under
the Option Agreement, remain subject to (i) the First Refusal Rights and (ii)
the Market Stand-Off.
4. Aggregate Limitation. If the Option is exercised in more than one increment
so that Optionee is a party to one or more other Stock Purchase Agreements (the
"Prior Purchase Agreements") which are executed prior to the date of this
Agreement, then the total number of Purchased Shares under this Agreement and
all Prior Purchase Agreements which are not subject to Repurchase Rights shall
not exceed in the aggregate the number of Purchased Shares which would not be
subject to repurchase had all the Purchased Shares (including those acquired
under the Prior Purchase Agreements) been acquired exclusively under this
Agreement.
5. Recapitalization/Reorganization. Subject to Sections 7(a) and 7(d) of the
Option Agreement, any new, substituted or additional securities or other
property which is by reason of any Recapitalization or Reorganization
distributed with respect to, or exchanged for, the Purchased Shares shall be
immediately subject to Repurchase Rights, but only to the extent the Purchased
Shares are at the time subject to Repurchase Rights. Appropriate adjustments to
reflect such distribution shall be made to price per share to be paid upon
exercise of Repurchase Rights in order to reflect the effect of any such
Recapitalization or Reorganization upon the Company's capital structure;
provided, however, that the aggregate Exercise Price shall remain
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the same. Any securities or other property so distributed with respect to
Purchased Shares that are subject to Repurchase Rights may be held by the
Company.
E. RIGHTS OF FIRST REFUSAL
1. Grant. The Company is hereby granted rights of first refusal (the "First
Refusal Rights"), exercisable in connection with any proposed transfer of
Purchased Shares which are not subject to Repurchase Rights. For purposes of
this Article E, the term "transfer" shall include any sale, transfer,
assignment, pledge, hypothecate, encumbrance or other disposition of the
Purchased Shares proposed or intended to be made by Owner, but shall not include
any Permitted Transfer.
2. Notice of Disposition. In the event any Owner of Purchased Shares which are
not subject to Repurchase Rights desires to accept a bona fide third-party offer
for the transfer of any or all of such shares (the Purchased Shares subject to
such offer to be hereinafter referred to as the "Target Shares"), Owner shall
promptly (i) deliver to the Company written notice (the "Disposition Notice") of
the terms of the offer, including the proposed purchase price and the identity
of the third-party offeror, and (ii) provide proof satisfactory to the Company
that the disposition of the Target Shares to such third-party offeror would not
be in contravention of the provisions set forth in Articles B and C.
3. Exercise of First Refusal Rights. The Company shall, for a period of 45 days
after the Disposition Notice is given, have the right to repurchase any or all
of the Target Shares subject to the Disposition Notice upon the same terms as
those specified in the Disposition Notice or upon such other terms (not
materially different from those specified in the Disposition Notice) to which
Owner consents. First Refusal Rights shall be exercised by written notice (the
"Exercise Notice") given to an Owner on or prior to the last day of the 45-day
exercise period. If First Refusal Rights are exercised with respect to all the
Target Shares, then the Company shall effect the repurchase of such shares,
including payment of the purchase price, not more than 15 business days after
the Exercise Notice is given. If the Company does not hold the certificates
representing the Target Shares, such certificates, together with stock power(s)
duly executed in blank, shall be delivered to the Company prior to the close of
business on the date specified for repurchase.
Should the purchase price specified in the Disposition Notice
be payable in property other than cash or evidences of indebtedness, the Company
shall have the right to pay the purchase price in the form of cash equal in
amount to the value of such property. If Owner and the Company cannot agree on
such cash value within 30 days after the Disposition Notice is given, the
valuation shall be made by an appraiser of recognized standing selected by Owner
and the Company or, if they cannot agree on an appraiser within 45 days after
the Disposition Notice is given, each shall select an appraiser of recognized
standing and the two (2) appraisers shall designate a third appraiser of
recognized standing, whose appraisal shall be determinative of such value. The
cost of such appraisal shall be shared equally by Owner and the Company. The
repurchase of Target Shares shall then be held on the later of (i) the 15th
business day after the Exercise Notice is given or (ii) the 15th business day
after such valuation shall have been made.
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4. Non-Exercise of First Refusal Rights. In the event an Exercise Notice is not
given to Owner on or prior to the last day of the 45-day exercise period, Owner
shall have a period of 30 days thereafter in which to sell or otherwise dispose
of the Target Shares to the third-party offeror identified in the Disposition
Notice upon terms (including the purchase price) no more favorable to such
third-party offeror than those specified in the Disposition Notice; provided,
however, that any such sale or disposition shall not be effected in violation of
Article B and Paragraph C.3. The third-party offeror shall acquire the Target
Shares free and clear of the Repurchase Rights and the First Refusal Rights, but
the acquired shares shall remain subject to Article B and Paragraph C.3. In the
event Owner does not effect such sale or disposition of the Target Shares within
the specified 30-day period, the First Refusal Rights shall continue to be
applicable to any subsequent disposition of the Target Shares by Owner until the
First Refusal Rights lapse in accordance with this Article.
5. Partial Exercise of First Refusal Rights. In the event the Company gives a
timely Exercise Notice with respect to a portion, but not all, of the Target
Shares specified in the Disposition Notice, Owner shall have the option,
exercisable by written notice to the Company given within 15 business days after
Owner is given the Exercise Notice, to effect the sale of Target Shares pursuant
to either of the following alternatives:
(i) sale or other disposition of all the Target Shares to the third-party
offeror identified in the Disposition Notice, but in full compliance
with the requirements of Paragraph E.4, as if the Company did not
exercise the First Refusal Rights; or
(ii) sale to the Company of the portion of the Target Shares which the
Company has elected to purchase, such sale to be effected in
substantial conformity with the provisions of Paragraph E.3. First
Refusal Rights shall continue to be applicable to any subsequent
disposition of the remaining Target Shares until the First Refusal
Rights lapse in accordance with this Article.
Failure of Owner to give timely notification under this
Paragraph E.5 to the Corporation shall be deemed to be an election by Owner to
sell the Target Shares pursuant to alternative (i) above.
6. Recapitalization/Reorganization. Any new, substituted or
additional securities or other property which is by reason of any
Recapitalization or Reorganization distributed with respect to, or exchanged
for, the Purchased Shares shall be immediately subject to First Refusal Rights,
but only to the extent the Purchased Shares are at the time subject to First
Refusal Rights. Any securities or other property so distributed with respect to
Purchased Shares that are subject to First Refusal Rights may be held by the
Company.
7. Lapse. First Refusal Rights shall lapse upon the earliest to occur of (i) the
first date on which shares of Stock are held of record by more than 500 persons,
(ii) a determination is made by the board of directors of the Company that a
public market exists for the Stock or (iii) the closing of a firm commitment
underwritten public offering, pursuant to an effective registration statement
under the Securities Act, covering the offer and sale of Stock in the aggregate
amount of at least ten million dollars ($10,000,000). All Purchased Shares as to
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which First Refusal Rights lapse, subject to the terms of this Agreement and the
Option Agreement, remain subject to (i) the Repurchase Rights and (ii) the
Market Stand-Off.
F. SPECIAL TAX ELECTION
The acquisition of the Purchased Shares may result in adverse
tax consequences which may be avoided or mitigated by filing an election under
Code Section 83(b). Such election must be filed within 30 days after the date of
this Agreement. A description of the tax consequences applicable to the
acquisition of the Purchased Shares and the form for making the Code Section
83(b) election are set forth in Exhibit II. OPTIONEE SHOULD CONSULT WITH HIS OR
HER TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF ACQUIRING THE PURCHASED
SHARES AND THE ADVANTAGES AND DISADVANTAGES OF FILING THE CODE SECTION 83(b)
ELECTION. OPTIONEE ACKNOWLEDGES THAT IT IS OPTIONEE'S SOLE RESPONSIBILITY, AND
NOT THE COMPANY'S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF
OPTIONEE REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON HIS
OR HER BEHALF.
G. GENERAL PROVISIONS
1. Assignment. The Company may assign Repurchase Rights and/or First Refusal
Rights to any person or entity selected by the board of directors of the
Company, including (without limitation) one or more stockholders of the Company.
2. No Employment or Service Contract. Subject to any rights Optionee may have
under any other agreement with the Company, nothing in this Notice or in the
Option Agreement or Plan confers upon Optionee any right to continue in the
employment of the company for any period of time or interfere with or otherwise
restrict in any way the rights of the Company (or any Parent or Subsidiary
employing or retaining Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Employment at any time for
any reason, with or without cause.
3. Notices. All notices, requests or other communications provided for in this
Option Agreement shall be made, if to the Company, to ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: Controller, and if to Optionee, to the
address indicated below Optionee's signature line on the Notice of Grant. All
notices, requests or other communications provided for in this Option Agreement
shall be in writing either (a) by personal delivery, (b) by facsimile with
confirmation of receipt, (c) by mailing in the United States mails to the last
known address of the party entitled thereto or (d) by express courier service.
The notice, request or other communication shall be deemed given upon personal
delivery, upon confirmation of receipt of facsimile transmission or upon receipt
by the party entitled thereto if by United States mail or express courier
service; provided, however, that if a notice, request or other communication
sent to the Company is not given during regular business hours, it shall be
deemed to be given on the next succeeding business day of the Company.
4. No Waiver. The failure of the Company in any instance to exercise Repurchase
Rights or First Refusal Rights shall not constitute a waiver of any other
repurchase
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rights and/or rights of first refusal that may subsequently arise
under the provisions of this Agreement or any other agreement between the
Company and Optionee. No waiver of any breach or condition of this Agreement
shall be deemed to be a waiver of any other or subsequent breach or condition,
whether of like or different nature.
5. Cancellation of Shares. If the Company shall make available, at the time and
place and in the amount and form provided in this Agreement, the consideration
for the Purchased Shares to be repurchased in accordance with the provisions of
this Agreement, then from and after such time, the person from whom such shares
are to be repurchased shall no longer have any rights as a holder of such shares
(other than the right to receive payment of such consideration in accordance
with this Agreement). Such shares shall be deemed purchased in accordance with
the applicable provisions hereof, and the Company shall be deemed the owner and
holder of such shares, whether or not the certificates therefor have been
delivered as required by this Agreement.
6. Optionee Undertaking. Optionee hereby agrees to take whatever additional
action and execute whatever additional documents the Company may deem necessary
or advisable in order to carry out or effect one or more of the obligations or
restrictions imposed on either Optionee or the Purchased Shares pursuant to the
provisions of this Agreement.
7. Governing Law. The interpretation, performance and enforcement of this
Agreement, the Notice of Grant, the Option Agreement and the Plan, to the extent
not governed by the laws of the United States, shall be governed by the laws of
the State of Illinois and construed in accordance therewith without giving
effect to principles of conflicts of laws.
8. Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of any successors or assigns of the Company and any person or persons
who shall, pursuant to Section 8(c) of the Option Agreement, acquire any rights
under the Option in accordance with the Notice of Grant, this Option Agreement
or the Plan.
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IN WITNESS WHEREOF, the parties have executed this Agreement
on the day and year first indicated above.
▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, INC.
By:
Title:
Address:
OPTIONEE
Name:
Address:
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APPENDIX
The following definitions shall be in effect under the
Agreement:
A. Fair Market Value of a share of Common Stock on any relevant date, prior to
the initial public offering of the Common Stock, shall be determined by the Plan
Administrator after taking into account such factors as it shall deem
appropriate.
B. Owner means Optionee and all subsequent holders of the Purchased Shares who
derive their chain of ownership through a Permitted Transfer from Optionee.
C. Permitted Transfer shall mean (i) a gratuitous transfer of the Purchased
Shares, provided and only if Optionee obtains the Company's prior written
consent to such transfer, (ii) a transfer of title to the Purchased Shares
effected pursuant to Optionee's will or the laws of intestate succession
following Optionee's death or (iii) a transfer to the Company in pledge as
security for any purchase-money indebtedness incurred by Optionee in connection
with the acquisition of the Purchased Shares.
D. Recapitalization means any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Stock as a class without the Company's receipt of
consideration.
E. Reorganization means any of the following transactions:
(i) a merger or consolidation in which the Company is not the surviving entity,
(ii) a sale, transfer or other disposition of all or substantially all of the
Company's assets,
(iii)a reverse merger in which the Company is the surviving entity but in which
the Company's outstanding voting securities are transferred in whole or in
part to a person or persons different from the persons holding those
securities immediately prior to the merger, or
(iv) any transaction effected primarily to change the state in which the Company
is incorporated or to create a holding company structure.
A-1
EXHIBIT I
ASSIGNMENT SEPARATE FROM CERTIFICATE
FOR VALUE RECEIVED ____________________ hereby sell(s),
assign(s) and transfer(s) unto ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. (the "Company"),
__________________ (_______) shares of the Common Stock of the Company standing
in his or her name on the books of the Company represented by Certificate No(s).
__________________ herewith and do(es) hereby irrevocably constitute and appoint
__________________________ Attorney to transfer the said stock on the books of
the Company with full power of substitution in the premises.
Dated: _________________
Signature:
----------------------------------------
Name:
----------------------------------------------
Instruction: Please do not fill in any blanks other than the signature line.
Please sign exactly as you would like your name to appear on the issued stock
certificate. The purpose of this assignment is to enable the Company to exercise
the Repurchase Rights or First Refusal Rights without requiring additional
signatures on the part of Optionee.
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EXHIBIT II
FEDERAL INCOME TAX CONSEQUENCES
AND SECTION 83(b) TAX ELECTION
I. Federal Income Tax Consequences and Section 83(b) Election For Exercise of
Non-Statutory Option. If the Purchased Shares are acquired pursuant to the
exercise of a Non-Statutory Option, as specified in the Notice of Grant, then
under Code Section 83, the excess of the Fair Market Value of the Purchased
Shares on the date any forfeiture restrictions applicable to such shares lapse
over the Exercise Price paid for such shares will be reportable as ordinary
income on the lapse date. For this purpose, the term "forfeiture restrictions"
includes the right of the Company to repurchase the Purchased Shares pursuant to
the Repurchase Rights. However, Optionee may elect under Code Section 83(b) to
be taxed at the time the Purchased Shares are acquired, rather than when and as
such Purchased Shares cease to be subject to such forfeiture restrictions. Such
election must be filed with the Internal Revenue Service within 30 days after
the date of this Agreement. Even if the Fair Market Value of the Purchased
Shares on the date of this Agreement equals the Exercise Price paid (and thus no
tax is payable), the election must be made to avoid adverse tax consequences in
the future. The form for making this election is attached as part of this
Exhibit. FAILURE TO MAKE THIS FILING WITHIN THE APPLICABLE 30-DAY PERIOD WILL
RESULT IN THE RECOGNITION OF ORDINARY INCOME BY OPTIONEE AS THE FORFEITURE
RESTRICTIONS LAPSE.
II. Federal Income Tax Consequences and Conditional Section 83(b) Election
For Exercise of Incentive Option. If the Purchased Shares are acquired
pursuant to the exercise of an Incentive Option, as specified in the Notice
of Grant, then the following tax principles shall apply to the Purchased
Shares:
(i) For regular tax purposes, no taxable income will be recognized at the
time the Option is exercised.
(ii)The excess of (a) the Fair Market Value of the Purchased Shares on the
date the Option is exercised or (if later) on the date any forfeiture
restrictions applicable to the Purchased Shares lapse over (b) the
Exercise Price paid for the Purchased Shares will be includible in
Optionee's taxable income for alternative minimum tax purposes.
(iii)If Optionee makes a disqualifying disposition of the Purchased Shares,
then Optionee will recognize ordinary income in the year of such
disposition equal in amount to the excess of (a) the Fair Market Value
of the Purchased Shares on the date the Option is exercised or (if
later) on the date any forfeiture restrictions applicable to the
Purchased Shares lapse over (b) the Exercise Price paid for the
Purchased Shares. Any additional gain recognized upon the disqualifying
disposition will be either short-term or long-term capital
II-1
gain depending upon the period for which the Purchased Shares are held
prior to the disposition.
(iv) For purposes of the foregoing, the term "forfeiture restrictions"
includes the right of the Company to repurchase the Purchased Shares
pursuant to the Repurchase Rights. The term "disqualifying disposition"
means any sale or other disposition [fn. 1] of the Purchased Shares
within two (2) years after the Grant Date or within one (1) year
after the exercise date of the Option.
(v) Optionee may, in connection with the exercise of the Option for any
Purchased Shares at the time subject to forfeiture restrictions, file a
protective election under Code Section 83(b) which would limit Optionee's
alternative minimum taxable income upon exercise to the excess of the Fair
Market Value of the Purchased Shares on the date the Option is exercised
over the Exercise Price paid for the Purchased Shares. In the absence of
final Treasury Regulations relating to Incentive Options, it is not certain
whether Optionee may similarly file a protective election under Section
83(b) which would limit Optionee's ordinary income upon a disqualifying
disposition to the excess of the Fair Market Value of the Purchased Shares
on the date the Option is exercised over the Exercise Price paid for the
Purchased Shares. Accordingly, such election if properly filed will only be
allowed to the extent the final Treasury Regulations permit such a
protective election. Page 2 of the attached form for making the election
should be filed with any election made in connection with the exercise of
an Incentive Option.
1 Generally, a disposition of shares purchased under an Incentive Option
includes any transfer of legal title, including a transfer by sale, exchange or
gift, but does not include a transfer to the Optionee's spouse, a transfer into
joint ownership with right of survivorship if Optionee remains one of the joint
owners, a pledge, a transfer by bequest or inheritance or certain tax-free
exchanges permitted under the Code.
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SECTION 83(b) ELECTION
This statement is being made under Section 83(b) of the Internal Revenue
Code, pursuant to Treas. Reg. Section 1.83-2.
(1) The taxpayer who performed the services is:
Name:
Address:
Taxpayer Ident. No.:
(2) The property with respect to which the election is being made is
___________ shares of the common stock of ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc.
(3) The property was issued on ____________________.
(4) The taxable year in which the election is being made is the calendar year
____________.
(5) The property is subject to repurchase rights pursuant to which the
issuer has the right to acquire the property at the original purchase
price if for any reason taxpayer's employment with the issuer is
terminated. The issuer's repurchase right lapses in a series of
installments over a four-year period ending on ___________, 200__.
(6) The fair market value at the time of transfer (determined without
regard to any restriction other than a restriction which by its terms
will never lapse) is $_____________ per share.
(7) The amount paid for such property is $__________ per share.
(8) A copy of this statement was furnished to ▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. for whom
taxpayer rendered the services underlying the transfer of property.
(9) This statement is executed on _________________________.
---------------------- ------------------------
Spouse (if any) Taxpayer
This election must be filed with the Internal Revenue Service Center with which
taxpayer files his or her Federal income tax returns and must be made within 30
days after the execution date of the Stock Purchase Agreement. This filing
should be made by registered or certified mail, return receipt requested.
Optionee must retain two (2) copies of the completed form for filing with his or
her Federal and state tax returns for the current tax year and an additional
copy for his or her records.
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The property described in the above Section 83(b) election is comprised of
shares of common stock acquired pursuant to the exercise of an incentive stock
option under Section 422 of the Internal Revenue Code (the "Code"). Accordingly,
it is the intent of the Taxpayer to utilize this election to achieve the
following tax results:
1. The purpose of this election is to have the alternative minimum taxable
income attributable to the purchased shares measured by the amount by which the
fair market value of such shares at the time of their transfer to the Taxpayer
exceeds the purchase price paid for the shares. In the absence of this election,
such alternative minimum taxable income would be measured by the spread between
the fair market value of the purchased shares and the purchase price which
exists on the various lapse dates in effect for the forfeiture restrictions
applicable to such shares. The election is to be effective to the full extent
permitted under the Code.
2. Section 421(a)(1) of the Code expressly excludes from income any excess of
the fair market value of the purchased shares over the amount paid for such
shares. Accordingly, this election is also intended to be effective in the event
there is a "disqualifying disposition" of the shares, within the meaning of
Section 421(b) of the Code, which would otherwise render the provisions of
Section 83(a) of the Code applicable at that time. Consequently, the Taxpayer
hereby elects to have the amount of disqualifying disposition income measured by
the excess of the fair market value of the purchased shares on the date of
transfer to the Taxpayer over the amount paid for such shares. Since Section
421(a) presently applies to the shares which are the subject of this Section
83(b) election, no taxable income is actually recognized for regular tax
purposes at this time, and no income taxes are payable, by the Taxpayer as a
result of this election.
THIS PAGE 2 IS TO BE ATTACHED TO ANY SECTION 83(b) ELECTION FILED IN CONNECTION
WITH THE EXERCISE OF AN INCENTIVE STOCK OPTION UNDER THE FEDERAL TAX LAWS.
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