EXHIBIT 99.3
FORM OF STOCK OPTION ASSUMPTION AGREEMENT
DIGITAL ISLAND, INC.
STOCK OPTION ASSUMPTION AGREEMENT
SANDPIPER NETWORKS, INC.
1997 STOCK PLAN
Optionee: ((First_Name)) ((Last_Name)),
STOCK OPTION ASSUMPTION AGREEMENT effective as of the 28th day of
December, 1999.
WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase shares of the common stock of Sandpiper
Networks, Inc., a California corporation ("Sandpiper"), which were granted to
Optionee under the Sandpiper 1997 Stock Plan (the "Plan").
WHEREAS, each of those options is evidenced by a Stock Option
Agreement (the "Option Agreement") issued to Optionee under the Plan.
WHEREAS, Sandpiper has been acquired by Digital Island, Inc., a
Delaware corporation ("Digital Island") through the merger of Sandpiper with and
into Digital Island (the "Merger") pursuant to the Agreement and Plan of
Reorganization, by and between Digital Island and Sandpiper (the "Merger
Agreement").
WHEREAS, the provisions of the Merger Agreement require the
obligations of Sandpiper under each outstanding option under the Plan to be
assumed by Digital Island at the consummation of the Merger and the holder of
each outstanding option to be issued an agreement evidencing the assumption of
such option.
WHEREAS, pursuant to the provisions of the Merger Agreement, the
exchange ratio (the "Exchange Ratio") in effect for the Merger is 1.0727 shares
of Digital Island common stock ("Digital Island Stock") for each outstanding
share of Sandpiper common stock ("Sandpiper Stock").
WHEREAS, the purpose of this Agreement is to evidence the assumption
by Digital Island of the outstanding options held by Optionee at the time of the
consummation of the Merger (the "Effective Time") and to reflect certain
adjustments to those options which have become necessary in connection with
their assumption by Digital Island in the Merger.
NOW, THEREFORE, it is hereby agreed as follows:
1. The number of shares of Sandpiper Stock subject to the options
held by Optionee immediately prior to the Effective Time (the "Sandpiper
Options") and the exercise price payable per share are set forth below. Digital
Island hereby assumes, as of the Effective Time, all the duties and obligations
of Sandpiper under each of the Sandpiper Options. In connection with such
assumption, the number of shares of Digital Island Stock purchasable under
each Sandpiper Option hereby assumed and the exercise price payable thereunder
have been adjusted to reflect the Exchange Ratio. Accordingly, the number of
shares of Digital Island Stock subject to each Sandpiper Option hereby assumed
shall be as specified for that option below, and the adjusted exercise price
payable per share of Digital Island Stock under the assumed Sandpiper Option
shall also be as indicated for that option below.
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SANDPIPER STOCK OPTIONS DIGITAL ISLAND ASSUMED OPTIONS
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# of Shares of # of Shares
Sandpiper Exercise Price of Digital Island Adjusted Exercise
Common Stock per Share Common Stock Price per Share
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Sandpiper Shares $Sandpiper Price Digital Island $Digital Island Price
Shares
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2. The intent of the foregoing adjustments to each assumed Sandpiper
Option is to assure that the spread between the aggregate fair market value of
the shares of Digital Island Stock purchasable under each such option and the
aggregate exercise price as adjusted pursuant to this Agreement will,
immediately after the consummation of the Merger, be not less than the spread
which existed, immediately prior to the Merger, between the then aggregate fair
market value of the Sandpiper Stock subject to the Sandpiper Option and the
aggregate exercise price in effect at such time under the Option Agreement. Such
adjustments are also intended to preserve, immediately after the Merger, on a
per share basis, the same ratio of exercise price per option share to fair
market value per share which existed under the Sandpiper Option immediately
prior to the Merger.
3. The following provisions shall govern each Sandpiper Option hereby
assumed by Digital Island:
(a) Unless the context otherwise requires, all references
in each Option Agreement and, if applicable, in the Plan (to the
extent incorporated into such Option Agreement) (i) to the "Company"
shall mean Digital Island, (ii) to "Share" shall mean share of Digital
Island Stock, (iii) to the "Board" shall mean the Board of Directors
of Digital Island and (iv) to the "Committee" shall mean the
Compensation Committee of the Digital Island Board of Directors.
(b) Except as modified by this Agreement, the grant date
and the expiration date of each assumed Sandpiper Option and all other
provisions which govern either the exercise or the termination of the
assumed Sandpiper Option shall remain the same as set forth in the
Option Agreement applicable to that option, and the provisions of the
Plan and the Option Agreement shall accordingly govern and control
Optionee's rights under this Agreement to purchase Digital Island
Stock under the assumed Sandpiper Option.
(c) Pursuant to the terms of the Option Agreement, none of
the assumed Sandpiper Options shall vest or become exercisable on an
accelerated basis upon the consummation of the Merger. Accordingly,
each Sandpiper Option assumed by Digital Island shall continue to vest
and become exercisable for any
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unvested shares of Digital Island Stock subject to that option in
accordance with the same installment vesting schedule in effect under
the applicable Option Agreement immediately prior to the Effective
Time; provided, however, that the number of shares subject to each
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such installment shall be adjusted to reflect the Exchange Ratio.
(d) For purposes of applying any and all provisions of the
Option Agreement and/or the Plan relating to Optionee's status as an
employee or a consultant of Sandpiper, Optionee shall be deemed to
continue in such status as an employee or a consultant for so long as
Optionee renders services as an employee or a consultant to Digital
Island or any present or future majority-owned Digital Island
subsidiary. Accordingly, the provisions of the Option Agreement
governing the termination of the assumed Sandpiper Options upon
Optionee's cessation of service as an employee or a consultant of
Sandpiper shall hereafter be applied on the basis of Optionee's
cessation of employee or consultant status with Digital Island and its
subsidiaries, and each assumed Sandpiper Option shall accordingly
terminate, within the designated time period in effect under the
Option Agreement for that option, following such cessation of employee
or consultant status.
(e) The adjusted exercise price payable for the Digital
Island Stock subject to each assumed Sandpiper Option shall be payable
in any of the forms authorized under the Option Agreement applicable
to that option. For purposes of determining the holding period of any
shares of Digital Island Stock delivered in payment of such adjusted
exercise price, the period for which such shares were held as
Sandpiper Stock prior to the Merger shall be taken into account.
(f) In order to exercise each assumed Sandpiper Option,
Optionee must deliver to Digital Island a written notice of exercise
in which the number of shares of Digital Island Stock to be purchased
thereunder must be indicated. The exercise notice must be accompanied
by payment of the adjusted exercise price payable for the purchased
shares of Digital Island Stock and should be delivered to Digital
Island at the following address:
Digital Island, Inc.
00 Xxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attention: Xxxxxx Xxxx
4. Except to the extent specifically modified by this Option
Assumption Agreement, all of the terms and conditions of each Option Agreement
as in effect immediately prior to the Merger shall continue in full force and
effect and shall not in any way be amended, revised or otherwise affected by
this Stock Option Assumption Agreement.
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IN WITNESS WHEREOF, Digital Island, Inc. has caused this Stock Option
Assumption Agreement to be executed on its behalf by its duly-authorized officer
as of the 28th day of December, 1999.
DIGITAL ISLAND, INC.
By: ______________________________________
Xxxxx Xxxxx, Chief Executive Officer
ACKNOWLEDGMENT
The undersigned acknowledges receipt of the foregoing Stock Option
Assumption Agreement and understands that all rights and liabilities with
respect to each of his or her Sandpiper Options hereby assumed by Digital Island
are as set forth in the Option Agreement, the Plan, as applicable, and such
Stock Option Assumption Agreement.
_________________________________________
((First_Name)) ((Last_Name)), OPTIONEE
DATED: __________________, 2000
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