EXHIBIT 10.3
DIVA SYSTEMS CORPORATION
1995 STOCK PLAN
STOCK OPTION AGREEMENT
(NO EARLY EXERCISE; CUSTOM VESTING)
Unless otherwise defined herein, the terms defined in the Plan shall have
the same defined meanings in this Option Agreement.
1. NOTICE OF STOCK OPTION GRANT
Optionee Name:
Optionee Address:
____________________________________________________________
____________________________________________________________
You have been granted an option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
Grant Number __________________
Date of Grant __________________
Total Number of Shares Granted ______
Exercise Price per Share $ ______
Total Exercise Price $ ______
Vesting Commencement Date ______
Type of Option: ______ Incentive Stock Option
______ Nonstatutory Stock Option
Term/Expiration Date: ______ Years from _______
VESTING SCHEDULE:
_____% of the Shares subject to the Option shall vest six (6) months after
the Vesting Commencement Date, and 5% of the Shares subject to the Option shall
vest each three (3) month period after
the Vesting Commencement Date, so that all of the Shares shall be vested
_______(___) months after the Vesting Commencement Date.
TERMINATION PERIOD:
This Option may be exercised for 30 days after termination of employment or
consulting relationship, or such longer period as may be applicable upon death
or Disability of Optionee as provided in the Plan, but in no event later than
the Term/Expiration Date as provided above.
2. AGREEMENT
1. GRANT OF OPTION. DIVA Systems Corporation, a Delaware corporation
(the "COMPANY"), hereby grants to the Optionee named in the Notice of Grant (the
"OPTIONEE"), an option (the "OPTION") to purchase a total number of shares of
Common Stock (the "SHARES") set forth in the Notice of Grant, at the exercise
price per share set forth in the Notice of Grant (the "EXERCISE PRICE") subject
to the terms, definitions and provisions of the 1995 Stock Plan (the "PLAN")
adopted by the Company, which is incorporated herein by reference. Capitalized
terms not otherwise defined herein shall have the respective meanings set forth
for them.
If designated in the Notice of Grant as an Incentive Stock Option,
this Option is intended to qualify as an Incentive Stock Option as defined in
Section 422 of the Code. However, if this Option is intended to be an Incentive
Stock Option, to the extent that it exceeds the $100,000 rule of Code Section
422(d) it shall be treated as a Nonstatutory Stock Option.
2. EXERCISE OF OPTION. This Option shall be exercisable during its term
in accordance with the Exercise Schedule set out in the Notice of Grant and with
the provisions of Section 9 of the Plan as follows:
(i) RIGHT TO EXERCISE.
(a) Subject to subsections 2(i)(b) through 2(i)(d) below, this
Option shall be exercisable cumulatively according to the vesting schedule set
out in the Notice of Grant. For purposes of this Stock Option Agreement, Shares
subject to this Option shall vest based on Optionee's Continuous Status as an
Employee or Consultant to the Company.
(b) This Option may not be exercised for a fraction of a share.
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(c) In the event of Optionee's death, disability or other
termination of employment, the exercisability of the Option is governed by
Sections 6, 7 and 8 below, subject to the limitation contained in subsection
2(i)(d).
(d) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in the Notice of Grant.
(ii) METHOD OF EXERCISE. This Option shall be exercisable by written
notice (in the form attached as EXHIBIT A) which shall state the election to
exercise the Option, the number of Shares in respect of which the Option is
being exercised, and such other representations and agreements with respect to
such shares of Common Stock as may be required by the Company pursuant to the
provisions of the Plan. Such written notice shall be signed by the Optionee
and, together with the Investment Representation Statement attached as EXHIBIT B
signed by the Optionee (and, if the Optionee resides in a community property
state, executed by the Optionee's spouse), This Option shall be deemed to be
exercised upon receipt by the Company of such documentation accompanied by the
Exercise Price.
No Shares will be issued pursuant to the exercise of an Option
unless such issuance and such exercise shall comply with all relevant provisions
of law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.
3. OPTIONEE'S REPRESENTATIONS. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, if required by the Company, concurrently with the exercise of
all or any portion of this Option, deliver to the Company his Investment
Representation Statement in the form attached hereto as EXHIBIT B and, if
applicable, shall review the applicable rules of the Commissioner of
Corporations attached to such Investment Representation Statement.
4. METHOD OF PAYMENT. Payment of the Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:
(i) cash;
(ii) check; or
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(iii) surrender of other shares of Common Stock of the Company which
(A) in the case of Shares acquired pursuant to the exercise of a Company option,
have been owned by the Optionee for more than six (6) months on the date of
surrender, and (B) have a fair market value on the date of surrender equal to
the Exercise Price of the Shares as to which the Option is being exercised; or
(iv) delivery of a properly executed exercise notice together with
such other documentation as the Board and the broker, if applicable, shall
require to effect an exercise of the Option and delivery to the Company of the
sale or the exercise price.
5. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such
time as the Plan has been approved by the stockholders of the Company, or if the
issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule under
Part 207 of Title 12 of the Code of Federal Regulations ("REGULATION G") as
promulgated by the Federal Reserve Board. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.
6. TERMINATION OF RELATIONSHIP. In the event of termination of
Optionee's Continuous Status as an Employee or Consultant, Optionee may, to the
extent otherwise so entitled at the date of such termination (the "TERMINATION
DATE"), exercise this Option during the Termination Period set out in the Notice
of Grant. To the extent that Optionee was not entitled to exercise this Option
at the date of such termination, or if Optionee does not exercise this Option
within the time specified herein, the Option shall terminate.
7. DISABILITY OF OPTIONEE. Notwithstanding the provisions of Section 6
above, in the event of termination of Optionee's Continuous Status as an
Employee or Consultant as a result of total and permanent disability (as defined
in Section 22(e)(3) of the Code), Optionee may, but only within twelve (12)
months from the date of termination of employment (but in no event later than
the date of expiration of the term of this Option as set forth in Section 10
below), exercise the Option to the extent otherwise so entitled at the date of
such termination. To the extent that Optionee was not entitled to exercise the
Option at the date of termination, or if Optionee does not exercise such Option
(to the extent otherwise so entitled) within the time specified herein, the
Option shall terminate.
8. DEATH OF OPTIONEE. In the event of termination of Optionee's
Continuous Status as an Employee or Consultant as a
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result of the death of Optionee, the Option may be exercised at any time within
twelve (12) months following the date of death (but in no event later than the
date of expiration of the term of this Option as set forth in Section 10 below),
by Optionee's estate or by a person who acquired the right to exercise the
Option by bequest or inheritance, but only to the extent the Optionee could
exercise the Option at the date of death.
9. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by Optionee. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.
10. TERM OF OPTION. This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option. The limitations set out
in Section 7 of the Plan regarding Options designated as Incentive Stock Options
and granted to more than ten percent (10%) stockholders shall apply to this
Option.
11. TAXATION UPON EXERCISE OF OPTION. Optionee understands that, upon
exercising a nonstatutory Option, he or she will recognize income for tax
purposes in an amount equal to the excess of the then fair market value of the
Shares over the exercise price. However, the timing of this income recognition
may be deferred for up to six months if Optionee is subject to Section 16 of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"). If the
Optionee is an employee, the Company will be required to withhold from
Optionee's compensation, or collect from Optionee and pay to the applicable
taxing authorities an amount equal to a percentage of this compensation income.
Additionally, the Optionee may at some point be required to satisfy tax
withholding obligations with respect to the disqualifying disposition of an
Incentive Stock Option. The Optionee shall satisfy his or her tax withholding
obligation arising upon the exercise of this Option out of Optionee's
compensation or by payment to the Company.
12. TAX CONSEQUENCES. Set forth below is a brief summary as of the date
of this Option of some of the federal and California tax consequences of
exercise of this Option and disposition of the Shares. THIS SUMMARY IS
NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT TO CHANGE.
OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING
OF THE SHARES.
(i) EXERCISE OF INCENTIVE STOCK OPTION. If this Option qualifies as
an Incentive Stock Option ("ISO"), there will be no
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regular federal income tax liability or California income tax liability upon the
exercise of the Option, although the excess, if any, of the fair market value of
the Shares on the date of exercise over the Exercise Price will be treated as an
adjustment to the alternative minimum tax for federal tax purposes and may
subject the Optionee to the alternative minimum tax in the year of exercise.
(ii) EXERCISE OF NONSTATUTORY STOCK OPTION. There may be a regular
federal income tax liability and California income tax liability upon the
exercise of a Nonstatutory Stock Option ("NSO"). The Optionee will be treated
as having received compensation income (taxable at ordinary income tax rates)
equal to the excess, if any, of the fair market value of the Shares on the date
of exercise over the Exercise Price. If Optionee is an employee, the Company
will be required to withhold from Optionee's compensation or collect from
Optionee and pay to the applicable taxing authorities an amount equal to a
percentage of this compensation income at the time of exercise.
(iii) DISPOSITION OF SHARES. In the case of an NSO, if Shares are
held for at least one year, any gain realized on disposition of the Shares will
be treated as long-term capital gain for federal and California income tax
purposes. In the case of an ISO, if Shares transferred pursuant to the Option
are held for at least one year after exercise and are disposed of at least two
years after the Date of Grant, any gain realized on disposition of the Shares
will also be treated as long-term capital gain for federal and California income
tax purposes. If Shares purchased under an ISO are disposed of within such one-
year period or within two years after the Date of Grant, any gain realized on
such disposition will be treated as compensation income (taxable at ordinary
income rates) to the extent of the difference between the Exercise Price and the
lesser of (1) the fair market value of the Shares on the date of exercise, or
(2) the sale price of the Shares.
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(iv) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the
Option granted to Optionee herein is an ISO, and if Optionee sells or otherwise
disposes of any of the Shares acquired pursuant to the ISO on or before the
later of (1) the date two years after the Date of Grant, or (2) the date one
year after the date of exercise, the Optionee shall immediately notify the
Company in writing of such disposition. Optionee agrees that Optionee may be
subject to income tax withholding by the Company on the compensation income
recognized by the Optionee.
DIVA SYSTEMS CORPORATION
A DELAWARE CORPORATION
By:
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Title:
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OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
THE OPTION HEREOF IS EARNED ONLY BY CONTINUING CONSUL TANCY OR EMPLOYMENT AT
THE WILL OF THE COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS
OPTION OR ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES
THAT NOTHING IN THIS AGREEMENT, NOR IN THE COMPANY'S STOCK OPTION PLAN WHICH IS
INCORPORATED HEREIN BY REFERENCE, SHALL CONFER UPON OPTIONEE ANY RIGHT WITH
RESPECT TO CONTINUATION OF EMPLOYMENT OR CONSULTANCY BY THE COMPANY, NOR SHALL
IT INTERFERE IN ANY WAY WITH HIS RIGHT OR THE COMPANY'S RIGHT TO TERMINATE HIS
EMPLOYMENT OR CONSULTANCY AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he
or she is familiar with the terms and provisions thereof, and hereby accepts
this Option subject to all of the terms and provisions thereof. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully under
stands all provisions of the Option. Optionee hereby agrees to accept as
binding, conclusive and final all decisions or interpretations of the
Administrator upon any questions arising under the Plan or this Option.
Dated:
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Optionee
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EXHIBIT A
1995 STOCK PLAN
EXERCISE NOTICE
DIVA Systems Corporation
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Attention: Chief Financial Officer
1. EXERCISE OF OPTION. Effective as of today, ___________________, the
undersigned ("OPTIONEE") hereby elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "SHARES") of DIVA Systems Corporation
(the "COMPANY") under and pursuant to the 1995 Stock Plan, as amended (the
"PLAN") and the [ ] Incentive [ ] Nonstatutory Stock Option Agreement dated
__________________ (the "OPTION AGREEMENT").
2. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has
received, read and understood the Plan and Option Agreement and agrees to abide
by and be bound by their terms and conditions.
3. RIGHTS AS STOCKHOLDER. Until the stock certificate evidencing such
Shares is issued (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company), no right to vote
or receive dividends or any other rights as a stockholder shall exist with
respect to the optioned Stock, notwithstanding the exercise of the Option. The
Company shall issue (or cause to be issued) such stock certificate promptly
after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock certificate
is issued, except as provided in Section 12 of the Plan.
Optionee shall enjoy rights as a stockholder until such time as
Optionee disposes of the Shares. Upon such exercise, Optionee shall have no
further rights as a holder of the Shares so purchased except the right to
receive payment for the Shares so purchased in accordance with the provisions of
this Agreement, and Optionee shall forthwith cause the certificate(s) evidencing
the Shares so purchased to be surrendered to the Company for transfer or
cancellation.
4. MARKET STAND-OFF AGREEMENT. Optionee hereby agrees that if so
requested by the Company or any representative of the underwriters
in connection with any registration of the offering of any securities of the
Company under the 1933 Act, Optionee shall not sell or otherwise transfer any
Shares or other securities of the Company during the 180-day period following
the effective date of a registration statement of the Company filed under the
1933 Act; provided, however, that such restriction shall only apply to the first
registration statement of the Company to become effective under the 1933 Act
which includes securities to be sold on behalf of the Company to the public in
an underwritten public offering. The Company may impose stop-transfer
instructions with respect to securities subject to the foregoing restrictions
until the end of such 180-day period.
5. RIGHT OF FIRST REFUSAL.
(i) GENERAL. Before any of the Shares may be sold or otherwise
transferred (including transfer by gift or operation of law), the Company or its
assignee(s) shall have a right of first refusal to purchase the Shares on the
terms and conditions set forth in this Section (the "RIGHT OF FIRST REFUSAL").
(ii) NOTICE OF PROPOSED TRANSFER. The Optionee shall deliver to the
Company a written notice (the "NOTICE") stating: (i) the Optionee's bona fide
intention to sell or otherwise transfer such Shares (the "OFFERED SHARES"); (ii)
the name of each proposed purchaser or other transferee ("PROPOSED TRANSFEREE");
(iii) the number of Offered Shares to be transferred to each Proposed
Transferee; and (iv) the bona fide cash price or other consideration for which
the Optionee proposes to transfer the Offered Shares (the "OFFERED PRICE"), and
the Optionee shall offer the Offered Shares at the Offered Price to the Company
or its assignee(s).
(iii) EXERCISE OF RIGHT OF FIRST REFUSAL. At any time within 30 days
after receipt of the Notice, the Company or its assignee(s) may, by giving
written notice to the Optionee, elect to purchase all, but not less than all, of
the Offered Shares, at the purchase price determined in accordance with
subsection 5(iv) below.
(iv) PURCHASE PRICE. The purchase price ("PURCHASE PRICE") for the
Offered Shares purchased by the Company or its assignee(s) under this Section
shall be the Offered Price. If the Offered Price includes consideration other
than cash, the cash equivalent value of the non-cash consideration shall be
determined by the Board of Directors of the Company in good faith.
(v) PAYMENT. Payment of the Purchase Price shall be made, at the
option of the Company or its assignee(s), in
cash (by check), by cancellation of all or a portion of any outstanding
indebtedness of the Optionee to the Company (or, in the case of repurchase by an
assignee, to the assignee), or by any combination thereof within forty (40) days
after receipt of the Notice or in the manner and at the times set forth in the
Notice.
(vi) OPTIONEE'S RIGHT TO TRANSFER. If all of the Offered Shares
proposed in the Notice to be transferred to a given Proposed Transferee are not
purchased by the Company or its assignee(s) as provided in this Section, then
the Optionee may sell or otherwise transfer the Shares to that Proposed
Transferee at the Offered Price or at a higher price, provided that such sale or
other transfer (i) is consummated within 120 days after the date of the Notice,
(ii) is in accordance with all the terms of this Agreement and (iii) is effected
in accordance with any applicable securities laws and the Proposed Transferee
agrees in writing that the provisions of this Agreement shall continue to apply
to the Offered Shares in the hands of such Proposed Transferee. If the Shares
described in the Notice are not transferred to the Proposed Transferee within
such period, a new Notice shall be given to the Company, and the Company or its
assignees shall again be offered the Rights of First Refusal before any Shares
held by the Optionee may be sold or otherwise transferred.
(vii) EXCEPTION FOR CERTAIN TRANSFERS. Anything to the contrary
contained in this Section notwithstanding, the transfer of any or all of the
Offered Shares during the Optionee's lifetime or on the Optionee's death by will
or intestacy to (i) the Optionee's immediate family, (ii) a trust for the
benefit of the Optionee or the Optionee's immediate family (iii) an affiliate of
the Optionee or (iv) the Optionee's partners through a distribution shall be
exempt from the provisions of this Section. "IMMEDIATE FAMILY" as used herein
shall mean spouse, lineal descendant or antecedent, father, mother, brother or
sister. In such case, the transferee or other recipient shall receive and hold
the Offered Shares so transferred subject to the provisions of this Section, and
there shall be no further transfer of such Offered Shares except in accordance
with the terms of this Section.
(viii) TERMINATION OF RIGHT OF FIRST REFUSAL. The Right of First
Refusal under Section 5 shall not apply to and shall terminate immediately
before the i) the closing of the Company's initial public offering of Common
Stock with proceeds to the Company greater than $10,000,000 pursuant to a
registration statement filed with and declared effective by the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "SECURITIES ACT")
6. TAX CONSULTATION. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase
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or disposition of the Shares. Optionee represents that Optionee has consulted
with any tax consultants Optionee deems advisable in connection with the
purchase or disposition of the Shares and that Optionee is not relying on the
Company for any tax advice.
7. RESTRICTIVE LEGENDS AND STOP-TRANSFER ORDERS.
(a) LEGENDS. Optionee understands and agrees that the Company shall
cause the legends set forth below or legends substantially equivalent thereto,
to be placed upon any certificate(s) evidencing ownership of the Shares together
with any other legends that may be required by state or federal securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL IN FORM AND
SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER,
SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY
THE ISSUER OR ITS ASSIGNEE(S) AS SET FORTH IN THE EXERCISE NOTICE
BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
TRANSFER RESTRICTIONS AND RIGHT OF FIRST REFUSAL ARE BINDING ON
TRANSFEREES OF THESE SHARES.
Optionee understands that transfer of the Shares may be restricted by
Section 260.141.11 of the Rules of the California Corporations Commissioner, a
copy of which is attached to EXHIBIT B, the Investment Representation Statement,
and if so the Shares will bear the following additional legend:
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR,
WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS
OF THE STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S
RULES.
(b) STOP-TRANSFER NOTICES. Optionee agrees that, in order to ensure
compliance with the restrictions referred to
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herein, the Company may issue appropriate "stop transfer" instructions to its
transfer agent, if any, and that, if the Company transfers its own securities,
it may make appropriate notations to the same effect in its own records.
(c) REFUSAL TO TRANSFER. The Company shall not be required (i) to
transfer on its books any Shares that have been sold or otherwise transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such Shares or to accord the right to vote or pay dividends to any purchaser
or other transferee to whom such Shares shall have been so transferred.
8. SUCCESSORS AND ASSIGNS. The Company may assign any of its rights
under this Agreement to single or multiple assignees, and this Agreement shall
inure to the benefit of the successors and assigns of the Company. Subject to
the restrictions on transfer herein set forth, this Agreement shall be binding
upon Optionee and his or her heirs, executors, administrators, successors and
assigns.
9. INTERPRETATION. Any dispute regarding the interpretation of this
Agreement shall be submitted by Optionee or by the Company forthwith to the
Company's Board of Directors or the committee thereof that administers the Plan,
which shall review such dispute at its next regular meeting. The resolution of
such a dispute by the Board or committee shall be final and binding on the
Company and on Optionee.
10. GOVERNING LAW; SEVERABILITY. This Agreement shall be governed by and
construed in accordance with the laws of the State of California excluding that
body of law pertaining to conflicts of law. Should any provision of this
Agreement be determined by a court of law to be illegal or unenforceable, the
other provisions shall nevertheless remain effective and shall remain
enforceable.
11. NOTICES. Any notice required or permitted hereunder shall be given in
writing and shall be deemed effectively given upon personal delivery or upon
deposit in the United States mail by certified mail, with postage and fees
prepaid, addressed to the other party at its address as shown below beneath its
signature, or to such other address as such party may designate in writing from
time to time to the other party.
12. FURTHER INSTRUMENTS. The parties agree to execute such further
instruments and to take such further action as may be reasonably necessary to
carry out the purposes and intent of this Agreement.
13. DELIVERY OF PAYMENT. Optionee herewith delivers to the Company the
full Exercise Price for the Shares.
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14. ENTIRE AGREEMENT. The Plan and Notice of Grant/Option Agreement are
incorporated herein by reference. This Agreement, the Plan, the Option
Agreement and the Investment Representation Statement constitute the entire
agreement of the parties and supersede in their entirety all prior undertakings
and agreements of the Company and Optionee with respect to the subject matter
hereof.
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Submitted by: Accepted by:
OPTIONEE: DIVA SYSTEMS CORPORATION,
A DELAWARE CORPORATION
By:
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(signature)
Its:
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ADDRESS: ADDRESS:
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EXHIBIT B
INVESTMENT REPRESENTATION STATEMENT
OPTIONEE :
COMPANY : DIVA SYSTEMS CORPORATION
SECURITY : COMMON STOCK
AMOUNT :
DATE :
In connection with the purchase of the above-listed Securities, the undersigned
Optionee represents to the Company the following:
(a) Optionee is aware of the Company's business affairs and financial
condition and has acquired sufficient information about the Company to reach an
informed and knowledgeable decision to acquire the securities. Optionee is
acquiring these securities for investment for Optionee's own account only and
not with a view to, or for resale in connection with, any "distribution" thereof
within the meaning of the Securities Act of 1933, as amended (the "SECURITIES
ACT").
(b) Optionee acknowledges and understands that the securities
constitute "restricted securities" under the Securities Act and have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of Optionee's investment intent as expressed herein. In this connection,
Optionee understands that, in the view of the Securities and Exchange
Commission, the statutory basis for such exemption may be unavailable if
Optionee's representation was predicated solely upon a present intention to hold
these Securities for the minimum capital gains period specified under tax
statutes, for a deferred sale, for or until an increase or decrease in the
market price of the Securities, or for a period of one year or any other fixed
period in the future. Optionee further understands that the Securities must be
held indefinitely unless they are subsequently registered under the Securities
Act or an exemption from such registration is available. Optionee further
acknowledges and understands that the Company is under no obligation to register
the securities. Optionee understands that the certificate evidencing the
securities will be imprinted with a legend which prohibits the transfer of the
Securities unless they are registered or such registration is not required in
the opinion of counsel satisfactory to the Company, if applicable a legend
prohibiting their transfer without the consent of the Commissioner of
Corporations of the State of California, and any other legend required under
applicable state securities laws.
(c) Optionee is familiar with the provisions of Rule 701 and Rule 144,
each promulgated under the Securities Act, which, in substance, permit limited
public resale of "restricted
securities" acquired, directly or indirectly from the issuer thereof, in a non-
public offering subject to the satisfaction of certain conditions. Rule 701
provides that if the issuer qualifies under Rule 701 at the time of the grant of
the Option to the Optionee, the exercise will be exempt from registration under
the Securities Act. In the event the Company becomes subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,
ninety (90) days thereafter (or such longer period as any market stand-off
agreement may require) the securities exempt under Rule 701 may be resold,
subject to the satisfaction of certain of the conditions specified by Rule 144,
including: (1) the resale being made through a broker in an unsolicited
"broker's transaction" or in transactions directly with a market maker (as said
term is defined under the Securities Exchange Act of 1934); and, in the case of
an affiliate, (2) the availability of certain public information about the
Company, (3) the amount of securities being sold during any three month period
not exceeding the limitations specified in Rule 144(e), and (4) the timely
filing of a Form 144, if applicable.
In the event that the Company does not qualify under Rule 701 at the
time of grant of the Option, then the securities may be resold in certain
limited circumstances subject to the provisions of Rule 144, which requires the
resale to occur not less than two years after the party has purchased, and made
full payment for, within the meaning of Rule 144, the securities to be sold;
and, in the case of an affiliate, or of a non-affiliate who has held the
securities less than three years, the satisfaction of the conditions set forth
in sections (1), (2), (3) and (4) of the paragraph immediately above.
(d) Optionee further understands that in the event all of the
applicable requirements of Rule 701 or 144 are not satisfied, registration under
the Securities Act, compliance with Regulation A, or some other registration
exemption will be required; and that, notwithstanding the fact that Rules 144
and 701 are not exclusive, the Staff of the Securities and Exchange Commis sion
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rules 144 or 701 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk. Optionee understands that no assurances can be given that
any such other registration exemption will be available in such event.
(e) Optionee understands that the certificate evidencing the
Securities will, if required, be imprinted with a legend which prohibits the
transfer of the Securities without the consent of the Commissioner of
Corporations of California. If such prohibition is applicable, Optionee has
read the applicable Commissioner's Rules with respect to such restriction, a
copy of which is attached.
Date:
------------------- ---------------------------------------------
(Signature of Optionee)
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ATTACHMENT 1
STATE OF CALIFORNIA - CALIFORNIA ADMINISTRATIVE CODE
----------------------------------------------------
Title 10. Investment - Chapter 3. Commissioner of Corporations
260.141.11: Restriction on Transfer. (a) The issuer of any security upon
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which a restriction on transfer has been imposed pursuant to Sections 260.102.6,
260.141.10 or 260.534 shall cause a copy of this section to be delivered to each
issuee or transferee of such security at the time the certificate evidencing the
security is delivered to the issuee or transferee.
(b) It is unlawful for the holder of any such security to consummate a sale
or transfer of such security, or any interest therein, without the prior written
consent of the Commissioner (until this condition is removed pursuant to Section
260.141.12 of these rules), except:
(1) to the issuer;
(2) pursuant to the order or process of any court;
(3) to any person described in Subdivision (i) of Section 25102 of the
Code or Section 260.105.14 of these rules;
(4) to the transferror's ancestors, descendants or spouse, or any
custodian or trustee for the account of the transferrer or the
transferror's ancestors, descendants, or spouse; or to a transferee
by a trustee or custodian for the account of the transferee or the
transferee's ancestors, descendants or spouse;
(5) to holders of securities of the same class of the same issuer;
(6) by way of gift or donation inter vivos or on death;
(7) by or through a broker-dealer licensed under the Code (either acting
as such or as a finder) to a resident of a foreign state, territory
or country who is neither domiciled in this state to the knowledge of
the broker-dealer, nor actually present in this state if the sale of
such securities is not in violation of any securities law of the
foreign state, territory or country concerned;
(8) to a broker-dealer licensed under the Code in a principal
transaction, or as an underwriter or member of an underwriting
syndicate or selling group;
(9) if the interest sold or transferred is a pledge or other lien given
by the purchaser to the seller upon a sale of the security for which
the Commissioner's written consent is obtained or under this rule not
required;
(10) by way of a sale qualified under Sections 25111, 25112, 25113 or
25121 of the Code, of the securities to be transferred, provided that
no order under Section 25140 or subdivision (a) of Section 25143 is
in effect with respect to such qualification;
(11) by a corporation to a wholly owned subsidiary of such corporation,
or by a wholly owned subsidiary of a corporation to such corporation;
(12) by way of an exchange qualified under Section 25111, 25112 or 25113
of the Code, provided that no order under Section 25140 or
subdivision (a) of Section 25143 is in effect with respect to such
qualification;
(13) between residents of foreign states, territories or countries who
are neither domiciled nor actually present in this state;
(14) to the State Controller pursuant to the Unclaimed Property Law or to
the administrator of the unclaimed property law of another state; or
(15) by the State Controller pursuant to the Unclaimed Property Law or by
the administrator of the unclaimed property law of another state if,
in either such case, such person (i) discloses to potential
purchasers at the sale that transfer of the securities is restricted
under this rule, (ii) delivers to each purchaser a copy of this rule,
and (iii) advises the Commissioner of the name of each purchaser;
(16) by a trustee to a successor trustee when such transfer does not
involve a change in the beneficial ownership of the securities;
(17) by way of an offer and sale of outstanding securities in an issuer
transaction that is subject to the qualification requirement of
Section 25110 of the Code but exempt from that qualification
requirement by subdivision (f) of Section 25102;
provided that any such transfer is on the condition that any certificate
evidencing the security issued to such transferee shall contain the legend
required by this section.
(c) The certificates representing all such securities subject to such a
restriction on transfer, whether upon initial issuance or upon any transfer
thereof, shall bear on their face a legend, prominently stamped or printed
thereon in capital letters of not less than 10-point size, reading as follows:
"IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR
ANY INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT
THE PRIOR WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE
STATE OF CALIFORNIA, EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES."
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