As filed with the Securities and Exchange Commission on August 5, 2009
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
INTUIT INC.
(Exact name of Registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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77-0034661
(I.R.S. Employer
Identification Number)
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2700 Coast Avenue
Mountain View, California 94043
(Address of Registrants principal executive offices)
PAYCYCLE, INC. 1999 EQUITY INCENTIVE PLAN
(Full title of the plan)
Laura A. Fennell, Esq.
Senior Vice President, General Counsel and Corporate Secretary
Intuit Inc.
2700 Coast Avenue
Mountain View, California 94043
(650) 944-6000
(Name, address and telephone number of agent for service)
Copies to:
Michael Dorf
Shearman & Sterling LLP
525 Market Street, Suite 1500, San Francisco, CA 94105
(415) 616-1246
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated
filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
(Check one):
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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(Do not check if a smaller reporting company)
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Smaller reporting company
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Title of Securities to be
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Amount to be
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Offering Price per
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Aggregate Offering
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Amount of
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Registered (1)
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Registered (1)
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Share (2)
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Price
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Registration Fee
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Common Stock, par value $.01 per share
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178,564
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$6.45
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$1,151,737.80
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$64.27
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(1)
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Pursuant to Rule 416(a) under the Securities Act of 1933, as amended (the Securities
Act), this Registration Statement shall also cover any additional shares of Registrants
common stock in respect of the securities identified in the above table by reason of any
stock dividend, stock split, recapitalization or other similar transaction.
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(2)
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Estimated solely for the purpose of calculating the registration fee. Calculated
pursuant to Rules 457(c) and 457(h) under the Securities Act based on the weighted average
exercise price of the currently outstanding options on August 5, 2009, granted under the
PayCycle, Inc. 1999 Equity Incentive Plan (the Plan) as adjusted by the Option Ratio (as
defined in the following Explanatory Note).
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TABLE OF CONTENTS
EXPLANATORY NOTE
On June 2, 2009, Intuit Inc. (the Registrant), Puma Merger Sub Inc., a direct wholly-owned
subsidiary of the Registrant (Merger Sub), PayCycle, Inc. (PayCycle) and Shareholder
Representative Services LLC entered into an Agreement and Plan of Merger (the Merger Agreement),
pursuant to which, among other things, Merger Sub would be merged with and into PayCycle (the
Merger). On July 23, 2009, upon the consummation of the Merger, PayCycle became a direct
wholly-owned subsidiary of the Registrant. In connection with the Merger, certain options to
acquire PayCycle common stock (PayCycle Options) granted under the PayCycle, Inc. 1999 Equity
Incentive Plan, as amended (the Plan) outstanding as of the effective time of the Merger (the
Effective Time), were assumed by Registrant and converted on July 23, 2009 at the Effective Time,
into options to purchase shares of common stock, $.01 par value, of the Registrant (the Registrant
Common Stock and Assumed Options). The post-Merger adjustments to determine the number of
Registrant Common Stock and per share exercise price were based on an option ratio of 10.9288% (the
Option Ratio). The number of shares of Registrant Common Stock subject to the Assumed Options
was determined by multiplying the number of unvested shares subject to the PayCycle Option at the
Effective Time by the Option Ratio and rounding the resulting product down to the next whole number
of shares of Registrant Common Stock. The exercise price per share of Assumed Options was
determined by dividing the pre-Merger exercise price per share of the PayCycle Option by the Option
Ratio and rounding the resulting quotient up to the next whole cent.
PART I: INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION
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ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL INFORMATION
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Information required by Part I to be contained in the
Section 10(a) prospectus is omitted from this Registration Statement in
accordance with Rule 428 under the Securities Act, and the Note to Part I of
Form S-8.
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PART II: INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents of the Registrant filed with the Securities and Exchange Commission
(the Commission) are incorporated herein by reference:
(a) The Registrants Annual Report on Form 10-K for the fiscal year ended July 31, 2008,
filed by the Registrant with the Commission on September 12, 2008;
(b) The Registrants Quarterly Reports on Form 10-Q for the quarterly periods ended (i) April
30, 2009, filed by the Registrant with the Commission on May 29, 2009, (ii) January 31, 2009, filed
by the Registrant with the Commission on March 2, 2009 and (iii) October 31, 2008, filed by the
Registrant with the Commission on December 4, 2008;
(c) The registrants Current Reports on Form 8-K, filed with the Commission on (i) August 21,
2008, (ii) September 15, 2008, (iii) October 28, 2008, (iv) November 19, 2008, (v) December 2,
2008, (vi) December 19, 2008, (vii) February 19, 2009, (viii) May 20, 2009, (ix) July 7, 2009 and
(x) August 3, 2009; and
(d) The Registrants Registration Statement on Form 8-A filed with the Commission on February
4, 1993 pursuant to Section 12(g) of the Securities Exchange Act of 1934, as amended (the Exchange
Act), in which there is described the terms, rights and provisions applicable to the Registrants
Common Stock.
All documents filed by the Registrant pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the effective date of this Registration Statement, but prior to the
filing of a post-effective amendment to this Registration Statement which indicates that all
securities offered hereby have been sold or which deregisters all securities then remaining unsold,
shall be deemed to be incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents, except as to specific sections of such statements
as set forth therein. Any statement contained herein or in a document, all or a portion of which
is incorporated or deemed to be incorporated by reference herein, shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a statement contained
herein or in any other subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to constitute part of this
Registration Statement.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
II-1
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the Delaware General Corporation Law, the Registrants Restated
Certificate of Incorporation includes a provision that eliminates the personal liability of its
directors for monetary damages for breach or alleged breach of their duty of care to the fullest
extent of the law. In addition, as permitted by Section 145 of the Delaware General Corporation
Law, the Registrants Bylaws provide that:
the Registrant is required to indemnify its directors and officers and persons serving
in such capacities in other business enterprises (including, for example, subsidiaries of Intuit)
at the request of the Registrant, to the fullest extent permitted by Delaware law, including those
circumstances in which indemnification would otherwise be discretionary;
the Registrant may, in its discretion, indemnify employees and agents in those
circumstances where indemnification is not required by the Registrants Bylaws;
the Registrant is required to advance expenses, as incurred, to its directors and
officers in connection with defending a proceeding (except that it is not required to advance
expenses to a person against whom the Registrant brings a claim for breach of the duty of loyalty,
failure to act in good faith, intentional misconduct, knowing violation of law or deriving an
improper personal benefit);
the rights conferred in the Registrants Bylaws are not exclusive, and the Registrant is
authorized to enter into indemnification agreements with its directors, officers and employees; and
the Registrant may not retroactively amend the Registrants Bylaw provisions in a way
that is adverse to such directors, officers and employees.
The Registrants policy is to enter into indemnity agreements with each of its and its
subsidiaries directors and executive officers. The agreements provide that the Registrant will
indemnify its directors and officers under Section 145 of the Delaware General Corporation Law and
the Registrants Bylaws. In addition, the indemnity agreements provide that the Registrant will
advance expenses (including attorneys fees) and settlement amounts paid or incurred by the
directors and officers in any action or proceeding, including any derivative action by or in the
right of the Registrant, on account of their services as directors or officers of the Registrant or
as directors or officers of any other company or enterprise when they are serving in such
capacities at the request of the Registrant. The Registrant will not be obligated pursuant to the
agreements to indemnify or advance expenses to an indemnified party with respect to proceedings or
claims initiated by the indemnified party and not by way of defense, except with respect to
proceedings specifically authorized by the Registrants Board of Directors or brought to enforce a
right to indemnification under the indemnity agreement, the Registrants Bylaws or any statute or
law. Under the agreements, the Registrant is not obligated to indemnify the indemnified party:
for any expenses incurred by the indemnified party with respect to any proceeding
instituted by the indemnified party to enforce or interpret the agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the indemnified party in such
proceeding was not made in good faith or was frivolous;
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for any amounts paid in settlement of a proceeding unless the Registrant consents to
such settlement;
with respect to any proceeding brought by the Registrant against the indemnified party
for willful misconduct, unless a court determines that each of such claims was not made in good
faith or was frivolous;
on account of any suit in which judgment is rendered against the indemnified party for
an accounting of profits made from the purchase or sale by the indemnified party of securities of
the Registrant pursuant to the provisions of Section 16(b) of the Exchange Act and related laws;
on account of the indemnified partys conduct which is finally adjudged to have been
knowingly fraudulent or deliberately dishonest, or to constitute willful misconduct or a knowing
violation of the law; or
if a final decision by a court having jurisdiction in the matter shall determine that
such indemnification is not lawful.
The indemnification provision in the Registrants Bylaws, and the indemnity agreements entered
into between the Registrant and its directors and executive officers, may be sufficiently broad to
permit indemnification of the Registrants officers and directors for liabilities arising under the
Securities Act.
The indemnity agreements with the Registrants officers and directors require the Registrant
to maintain director and officer liability insurance to the extent reasonably available. The
Registrant currently maintains a director and officer liability insurance policy.
II-3
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
See Exhibit Index on page II-9 of this Registration Statement.
ITEM 9. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective amendment
to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the effective date of this
Registration Statement (or the most recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the information set forth in the Registration
Statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered
(if the total dollar value of securities offered would not exceed that which was registered) and
any deviation from the low or high end of the estimated maximum offering range may be reflected in
the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the Calculation of Registration Fee table in the effective
registration statement; and
(iii) To include any material information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such information in this
Registration Statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the information
required to be included in a post-effective amendment by those paragraphs is contained in reports
filed with or furnished to the Securities and Exchange Commission by the registrant pursuant to
Section 13 and Section 15(d) of the Exchange Act that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities being
registered which remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of determining any liability
under the Securities Act, each filing of the registrants annual report pursuant to Section 13(a)
or
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Section 15(d) of the Exchange Act (and, where applicable, each filing of an employee benefit plans
annual report pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference in
the registration statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to
directors, officers and controlling persons of the Registrant pursuant to applicable
indemnification provisions, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses incurred or paid by
a director, officer or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered hereby, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is against public policy
as expressed in the Securities Act and will be governed by the final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant certifies that it has
reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and has
duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Mountain View, State of California on the 5
th
day of
August, 2009.
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INTUIT INC.
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By:
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/s/ R. Neil Williams
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Name:
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R. Neil Williams
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Title:
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Senior Vice President and Chief Financial Officer
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POWER OF ATTORNEY
By signing this Form S-8 below, I hereby appoint each of Brad D. Smith and R. Neil Williams as
my true and lawful attorneys-in-fact and agents with full power and authority to do any and all
acts and things and to execute any and all instruments which said attorneys and agents, and any one
of them, determine may be necessary or advisable or required to enable said corporation to comply
with the Securities Act of 1933, and any rules or regulations or requirements of the Securities and
Exchange Commission in connection with this Registration Statement. Without limiting the
generality of the foregoing power and authority, the powers granted include the power and authority
to sign the names of the undersigned officers and directors in the capacities indicated below to
this Registration Statement, to any and all amendments, both pre-effective and post-effective, and
supplements to this Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or supplements thereof,
and each of the undersigned hereby ratifies and confirms that all said attorneys and agents, or any
one of them, shall do or cause to be done by virtue hereof. This Power of Attorney may be signed
in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of Attorney as of the date
indicated. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement
has been signed below by the following persons in the capacities and on the dates indicated.
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Signature
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Title
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Date
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Principal Executive Officer:
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/s/ Brad D. Smith
Brad D. Smith
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President, Chief Executive Officer and Director
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August 5, 2009
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Principal Financial Officer:
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/s/ R. Neil Williams
R. Neil Williams
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Senior Vice President and Chief Financial Officer
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August 5, 2009
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Principal Accounting Officer:
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/s/ Jeffrey P. Hank
Jeffrey P. Hank
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Vice President, Corporate Controller
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August 5, 2009
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Additional Directors:
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/s/ Stephen M. Bennett
Stephen M. Bennett
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Director
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August 5, 2009
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/s/ Christopher W. Brody
Christopher W. Brody
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Director
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August 5, 2009
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/s/ William V. Campbell
William V. Campbell
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Director
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August 5, 2009
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Signature
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Title
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Date
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/s/ Scott D. Cook
Scott D. Cook
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Director
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August 5, 2009
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/s/ Diane B. Greene
Diane B. Greene
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Director
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August 5, 2009
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/s/ Michael R. Hallman
Michael R. Hallman
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Director
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August 5, 2009
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/s/ Edward A. Kangas
Edward A. Kangas
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Director
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August 5, 2009
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/s/ Suzanne Nora Johnson
Suzanne Nora Johnson
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Director
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August 5, 2009
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/s/ Dennis D. Powell
Dennis D. Powell
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Director
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August 5, 2009
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/s/ Stratton D. Sclavos
Stratton D. Sclavos
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Director
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August 5, 2009
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II-8
EXHIBIT INDEX
The following exhibits are filed as part of this Registration Statement:
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Exhibit
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Number
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Exhibit Description
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4.01
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Restated Intuit Certificate of Incorporation, dated as of January 19, 2000
(incorporated herein by reference to the Registrants Registration
Statement on Form 10-Q (No. 000-21180), filed with the Commission on June
14, 2000).
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4.02
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Bylaws of Intuit, as amended and restated effective May 1, 2002
(incorporated herein by reference to the Registrants Registration
Statement on Form 10-Q (No. 000-21180), filed with the Commission on May
31, 2002).
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4.03*
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PayCycle, Inc. 1999 Equity Incentive Plan, as amended, effective November
1, 1999.
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4.04*
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Form of Intuit Inc. Stock Option Assumption Agreement.
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4.05*
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Form of PayCycle, Inc. 1999 Equity Incentive Plan Stock Option Agreement.
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5.01*
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Opinion of Counsel, Shearman & Sterling LLP.
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23.01*
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Consent of Counsel, Shearman & Sterling LLP (included in Exhibit 5.01).
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23.02*
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Consent of Ernst & Young LLP, Independent Registered Public Accounting
Firm.
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24.01*
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Power of Attorney (see pages II-7 and II-8 of this Registration Statement).
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II-9
Exhibit 4.03
PayCycle, Inc.
1999 EQUITY INCENTIVE PLAN
As Adopted on November 1, 1999
and Amended through March 25, 2009
1.
PURPOSE
.
The purpose of this Plan is to provide incentives to attract, retain and
motivate eligible persons whose present and potential contributions are important to the success of
the Company, its Parent and Subsidiaries, by offering them an opportunity to participate in the
Companys future performance through awards of Options and Restricted Stock. Capitalized terms not
defined in the text are defined in Section 22 hereof. This Plan is intended to be a written
compensatory benefit plan within the meaning of Rule 701 promulgated under the Securities Act.
2.
SHARES SUBJECT TO THE PLAN
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2.1
Number of Shares Available
. Subject to Sections 2.2 and 17 hereof, the total
number of Shares reserved and available for grant and issuance pursuant to this Plan will be
13,010,000 Shares or such lesser number of Shares as permitted under Section 260.140.45 of Title 10
of the California Code of Regulations. Subject to Sections 2.2, 5.10 and 17 hereof, Shares subject
to Awards previously granted will again be available for grant and issuance in connection with
future Awards under this Plan to the extent such Shares: (i) cease to be subject to issuance upon
exercise of an Option, other than due to exercise of such Option; (ii) are subject to an Award
granted hereunder but the Shares subject to such Award are forfeited or repurchased by the Company
at the original issue price; or (iii) are subject to an Award that otherwise terminates without
Shares being issued. At all times the Company will reserve and keep available a sufficient number
of Shares as will be required to satisfy the requirements of all Awards granted and outstanding
under this Plan.
2.2
Adjustment of Shares
. In the event that the number of outstanding shares of the
Companys Common Stock is changed by a stock dividend, recapitalization, stock split, reverse stock
split, subdivision, combination, reclassification or similar change in the capital structure of the
Company without consideration, then (i) the number of Shares reserved for issuance under this Plan,
(ii) the Exercise Prices of and number of Shares subject to outstanding Options and (iii) the
Purchase Prices of and number of Shares subject to other outstanding Awards will be proportionately
adjusted, subject to any required action by the Board or the stockholders of the Company and
compliance with applicable securities laws; provided, however, that fractions of a Share will not
be issued but will either be paid in cash at the Fair Market Value of such fraction of a Share or
will be rounded down to the nearest whole Share, as determined by the Committee; and provided,
further, that the Exercise Price of any Option may not be decreased to below the par value of the
Shares.
3.
ELIGIBILITY
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ISOs (as defined in Section 5 hereof) may be granted only to employees
(including officers and directors who are also employees) of the Company or of a
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Parent or Subsidiary of the Company. NQSOs (as defined in Section 5 hereof) and Restricted
Stock Awards may be granted to employees, officers, directors and consultants of the Company or any
Parent or Subsidiary of the Company; provided such consultants render bona fide services not in
connection with the offer and sale of securities in a capital-raising transaction. A person may be
granted more than one Award under this Plan.
4.
ADMINISTRATION
.
4.1
Committee Authority
. This Plan will be administered by the Committee or the Board
if no Committee is created by the Board. Subject to the general purposes, terms and conditions of
this Plan, and to the direction of the Board, the Committee will have full power to implement and
carry out this Plan. Without limitation, the Committee will have the authority to:
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(a)
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construe and interpret this Plan, any Award Agreement and any other
agreement or document executed pursuant to this Plan;
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(b)
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prescribe, amend and rescind rules and regulations relating to this Plan;
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(c)
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approve persons to receive Awards;
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(d)
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determine the form and terms of Awards;
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(e)
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determine the number of Shares or other consideration subject to Awards;
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(f)
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determine whether Awards will be granted singly, in combination with,
in tandem with, in replacement of, or as alternatives to, other Awards under this
Plan or awards under any other incentive or compensation plan of the Company or
any Parent or Subsidiary of the Company;
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(g)
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grant waivers of any conditions of this Plan or any Award;
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(h)
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determine the terms of vesting, exercisability and payment of Awards;
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(i)
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correct any defect, supply any omission, or reconcile any
inconsistency in this Plan, any Award, any Award Agreement, any Exercise Agreement
or any Restricted Stock Purchase Agreement;
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(j)
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determine whether an Award has been earned;
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(k)
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make all other determinations necessary or advisable for the
administration of this Plan; and
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(l)
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extend the vesting period beyond a Participants Termination Date.
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4.2
Committee Discretion
. Unless in contravention of any express terms of this Plan
or Award, any determination made by the Committee with respect to any Award will be made in its
sole discretion either (i) at the time of grant of the Award, or (ii) subject to Section 5.9
hereof, at any later time. Any such determination will be final and binding on the Company
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and on all persons having an interest in any Award under this Plan. The Committee may
delegate to one or more officers of the Company the authority to grant an Award under this Plan,
provided such officer or officers are members of the Board.
5.
OPTIONS
.
The Committee may grant Options to eligible persons described in Section 3
hereof and will determine whether such Options will be Incentive Stock Options within the meaning
of the Code (
ISOs
) or Nonqualified Stock Options (
NQSOs
), the number of Shares subject to the
Option, the Exercise Price of the Option, the period during which the Option may be exercised, and
all other terms and conditions of the Option, subject to the following:
5.1
Form of Option Grant
. Each Option granted under this Plan will be evidenced by an
Award Agreement which will expressly identify the Option as an ISO or an NQSO (
Stock Option
Agreement
), and will be in such form and contain such provisions (which need not be the same for
each Participant) as the Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
5.2
Date of Grant
. The date of grant of an Option will be the date on which the
Committee makes the determination to grant such Option, unless a later date is otherwise specified
by the Committee. The Stock Option Agreement and a copy of this Plan will be delivered to the
Participant within a reasonable time after the granting of the Option.
5.3
Exercise Period
. Options may be exercisable immediately but subject to repurchase
pursuant to Section 11 hereof or may be exercisable within the times or upon the events determined
by the Committee as set forth in the Stock Option Agreement governing such Option; provided,
however, that no Option will be exercisable after the expiration of ten (10) years from the date
the Option is granted; and provided further that no ISO granted to a person who directly or by
attribution owns more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any Parent or Subsidiary of the Company (
Ten Percent Shareholder
) will
be exercisable after the expiration of five (5) years from the date the ISO is granted. The
Committee also may provide for Options to become exercisable at one time or from time to time,
periodically or otherwise, in such number of Shares or percentage of Shares as the Committee
determines. Subject to earlier termination of the Option as provided herein, each Participant who
is not an officer, director or consultant of the Company or of a Parent or Subsidiary of the
Company shall have the right to exercise an Option granted hereunder at the rate of no less than
twenty percent (20%) per year over five (5) years from the date such Option is granted.
5.4
Exercise Price
. The Exercise Price of an Option will be determined by the
Committee when the Option is granted and may not be less than eighty-five percent (85%) of the Fair
Market Value of the Shares on the date of grant; provided that (i) the Exercise Price of an ISO
will not be less than one hundred percent (100%) of the Fair Market Value of the Shares on the date
of grant and (ii) the Exercise Price of any Option granted to a Ten Percent Shareholder will not be
less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of
grant. Payment for the Shares purchased must be made in accordance with Section 7 hereof.
3
5.5
Method of Exercise
. Options may be exercised only by delivery to the Company of a
written stock option exercise agreement (the
Exercise Agreement
) in a form approved by the
Committee (which need not be the same for each Participant). The Exercise Agreement will state (i)
the number of Shares being purchased, (ii) the restrictions imposed on the Shares purchased under
such Exercise Agreement, if any, and (iii) such representations and agreements regarding
Participants investment intent and access to information and other matters, if any, as may be
required or desirable by the Company to comply with applicable securities laws. Participant shall
execute and deliver to the Company the Exercise Agreement together with payment in full of the
Exercise Price, and any applicable taxes, for the number of Shares being purchased.
5.6
Termination
. Subject to earlier termination pursuant to Sections 17 and 18 hereof
and notwithstanding the exercise periods set forth in the Stock Option Agreement, exercise of an
Option will always be subject to the following:
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(a)
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If the Participant is Terminated for any reason other than death,
Disability or for Cause, then the Participant may exercise such Participants
Options only to the extent that such Options are exercisable upon the Termination
Date or as otherwise determined by the Committee. Such Options must be exercised
by the Participant, if at all, as to all or some of the Vested Shares calculated
as of the Termination Date or such other date determined by the Committee, within
three (3) months after the Termination Date (or within such shorter time period,
not less than thirty (30) days, or within such longer time period, not exceeding
five (5) years, after the Termination Date as may be determined by the Committee,
with any exercise beyond three (3) months after the Termination Date deemed to be
an NQSO) but in any event, no later than the expiration date of the Options.
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(b)
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If the Participant is Terminated because of Participants death or
Disability (or the Participant dies within three (3) months after a Termination
other than for Cause), then Participants Options may be exercised only to the
extent that such Options are exercisable by Participant on the Termination Date or
as otherwise determined by the Committee. Such options must be exercised by
Participant (or Participants legal representative or authorized assignee), if at
all, as to all or some of the Vested Shares calculated as of the Termination Date
or such other date determined by the Committee, within twelve (12) months after
the Termination Date (or within such shorter time period, not less than six (6)
months, or within such longer time period, not exceeding five (5) years, after the
Termination Date as may be determined by the Committee, with any exercise beyond
(i) three (3) months after the Termination Date when the Termination is for any
reason other than the Participants death or disability, within the meaning of
Section 22(e)(3) of the Code, or (ii) twelve (12) months after the Termination
Date when the Termination is for Participants disability, within the meaning of
Section 22(e)(3) of the Code, deemed to be an NQSO) but in any event no later than
the expiration date of the Options.
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4
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(c)
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If the Participant is terminated for Cause, then Participants
Options shall expire on such Participants Termination Date, or at such later time
and on such conditions as are determined by the Committee.
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5.7
Limitations on Exercise
. The Committee may specify a reasonable minimum number of
Shares that may be purchased on any exercise of an Option, provided that such minimum number will
not prevent Participant from exercising the Option for the full number of Shares for which it is
then exercisable.
5.8
Limitations on ISOs
. The aggregate Fair Market Value (determined as of the date
of grant) of Shares with respect to which ISOs are exercisable for the first time by a Participant
during any calendar year (under this Plan or under any other incentive stock option plan of the
Company or any Parent or Subsidiary of the Company) will not exceed One Hundred Thousand Dollars
($100,000). If the Fair Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds One Hundred
Thousand Dollars ($100,000), then the Options for the first One Hundred Thousand Dollars ($100,000)
worth of Shares to become exercisable in such calendar year will be ISOs and the Options for the
amount in excess of One Hundred Thousand Dollars ($100,000) that become exercisable in that
calendar year will be NQSOs. In the event that the Code or the regulations promulgated thereunder
are amended after the Effective Date (as defined in Section 18 hereof) to provide for a different
limit on the Fair Market Value of Shares permitted to be subject to ISOs, then such different limit
will be automatically incorporated herein and will apply to any Options granted after the effective
date of such amendment.
5.9
Modification, Extension or Renewal
. The Committee may modify, extend or renew
outstanding Options and authorize the grant of new Options in substitution therefor, provided that
any such action may not, without the written consent of a Participant, impair any of such
Participants rights under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with Section 424(h) of the
Code. Subject to Section 5.10 hereof, the Committee may reduce the Exercise Price of outstanding
Options without the consent of Participants by a written notice to them; provided, however, that
the Exercise Price may not be reduced below the minimum Exercise Price that would be permitted
under Section 5.4 hereof for Options granted on the date the action is taken to reduce the Exercise
Price; provided, further, that the Exercise Price will not be reduced below the par value of the
Shares, if any.
5.10
No Disqualification
. Notwithstanding any other provision in this Plan, no term
of this Plan relating to ISOs will be interpreted, amended or altered, nor will any discretion or
authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of
the Code or, without the consent of the Participant, to disqualify any Participants ISO under
Section 422 of the Code. In no event shall the total number of Shares issued (counting each
reissuance of a Share that was previously issued and then forfeited or repurchased by the Company
as a separate issuance) under the Plan upon exercise of ISOs exceed 5,000,000 Shares (adjusted in
proportion to any adjustments under Section 2.2. hereof) over the term of the Plan.
6.
RESTRICTED STOCK
.
A Restricted Stock Award is an offer by the Company to sell to an
eligible person Shares that are subject to certain specified restrictions. The Committee
5
will determine to whom an offer will be made, the number of Shares the person may purchase,
the Purchase Price, the restrictions to which the Shares will be subject, and all other terms and
conditions of the Restricted Stock Award, subject to the following:
6.1
Form of Restricted Stock Award
. All purchases under a Restricted Stock Award made
pursuant to this Plan will be evidenced by an Award Agreement (
Restricted Stock Purchase
Agreement
) that will be in such form (which need not be the same for each Participant) as the
Committee will from time to time approve, and will comply with and be subject to the terms and
conditions of this Plan. The Restricted Stock Award will be accepted by the Participants
execution and delivery of the Restricted Stock Purchase Agreement and full payment for the Shares
to the Company within thirty (30) days from the date the Restricted Stock Purchase Agreement is
delivered to the person. If such person does not execute and deliver the Restricted Stock Purchase
Agreement along with full payment for the Shares to the Company within such thirty (30) days, then
the offer will terminate, unless otherwise determined by the Committee.
6.2
Purchase Price
. The Purchase Price of Shares sold pursuant to a Restricted Stock
Award will be determined by the Committee and will be at least eighty-five percent (85%) of the
Fair Market Value of the Shares on the date the Restricted Stock Award is granted or at the time
the purchase is consummated, except in the case of a sale to a Ten Percent Shareholder, in which
case the Purchase Price will be one hundred percent (100%) of the Fair Market Value on the date the
Restricted Stock Award is granted or at the time the purchase is consummated. Payment of the
Purchase Price must be made in accordance with Section 7 hereof.
6.3
Restrictions
. Restricted Stock Awards may be subject to the restrictions set
forth in Section 11 hereof or such other restrictions not inconsistent with Section 25102(o) of the
California Corporations Code.
7.
PAYMENT FOR SHARE PURCHASES
.
7.1
Payment
. Payment for Shares purchased pursuant to this Plan may be made in cash
(by check) or, where expressly approved for the Participant by the Committee and where permitted by
law:
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(a)
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by cancellation of indebtedness of the Company owed to the
Participant;
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(b)
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by surrender of shares that: (i) either (A) have been owned by
Participant for more than six (6) months and have been paid for within the meaning
of SEC Rule 144 (and, if such shares were purchased from the Company by use of a
promissory note, such note has been fully paid with respect to such shares) or (B)
were obtained by Participant in the public market and (ii) are clear of all liens,
claims, encumbrances or security interests;
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(c)
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by tender of a full recourse promissory note having such terms as may
be approved by the Committee and bearing interest at a rate sufficient to avoid
imputation of income under Sections 483 and 1274 of the Code; provided, however,
that Participants who are not employees or directors of the Company will not be
entitled to purchase Shares with a promissory note unless the note
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6
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is adequately secured by collateral other than the Shares
;
provided, further,
that the portion of the Exercise Price or Purchase Price, as the case may be,
equal to the par value of the Shares must be paid in cash or other legal
consideration permitted by Delaware General Corporation Law;
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(d)
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by waiver of compensation due or accrued to the Participant from the
Company for services rendered;
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(e)
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with respect only to purchases upon exercise of an Option, and
provided that a public market for the Companys stock exists:
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(i)
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through a same day sale commitment from the
Participant and a broker-dealer that is a member of the National
Association of Securities Dealers (an
NASD Dealer
) whereby the
Participant irrevocably elects to exercise the Option and to sell a portion
of the Shares so purchased sufficient to pay the total Exercise Price, and
whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the total Exercise Price directly to the Company; or
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(ii)
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through a margin commitment from the Participant and
an NASD Dealer whereby the Participant irrevocably elects to exercise the
Option and to pledge the Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount of the
total Exercise Price, and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the total Exercise Price directly to the
Company; or
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(f)
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by any combination of the foregoing.
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7.2
Loan Guarantees
. The Committee may, in its sole discretion, elect to assist the
Participant in paying for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
8.
WITHHOLDING TAXES
.
8.1
Withholding Generally
. Whenever Shares are to be issued in satisfaction of Awards
granted under this Plan, the Company may require the Participant to remit to the Company an amount
sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery
of any certificate or certificates for such Shares. Whenever, under this Plan, payments in
satisfaction of Awards are to be made in cash by the Company, such payment will be net of an amount
sufficient to satisfy federal, state, and local withholding tax requirements.
8.2
Stock Withholding
. When, under applicable tax laws, a Participant incurs tax
liability in connection with the exercise or vesting of any Award that is subject to tax
withholding and the Participant is obligated to pay the Company the amount required to be withheld,
the Committee may in its sole discretion allow the Participant to satisfy the minimum withholding
tax obligation by electing to have the Company withhold from the Shares to be issued that minimum
number of Shares having a Fair Market Value equal to the minimum
7
amount required to be withheld, determined on the date that the amount of tax to be withheld
is to be determined; but in no event will the Company withhold Shares if such withholding would
result in adverse accounting consequences to the Company. All elections by a Participant to have
Shares withheld for this purpose will be made in accordance with the requirements established by
the Committee for such elections and be in writing in a form acceptable to the Committee.
9.
PRIVILEGES OF STOCK OWNERSHIP
.
9.1
Voting and Dividends
. No Participant will have any of the rights of a stockholder
with respect to any Shares until the Shares are issued to the Participant. After Shares are issued
to the Participant, the Participant will be a stockholder and have all the rights of a stockholder
with respect to such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that if such Shares are
Restricted Stock, then any new, additional or different securities the Participant may become
entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any
other change in the corporate or capital structure of the Company will be subject to the same
restrictions as the Restricted Stock. The Participant will have no right to retain such stock
dividends or stock distributions with respect to Unvested Shares that are repurchased pursuant to
Section 11 hereof. The Company will comply with Section 260.140.1 of Title 10 of the California
Code of Regulations with respect to the voting rights of Common Stock.
9.2
Financial Statements
. The Company will provide financial statements to each
Participant annually during the period such Participant has Awards outstanding, or as otherwise
required under Section 260.140.46 of Title 10 of the California Code of Regulations.
Notwithstanding the foregoing, the Company will not be required to provide such financial
statements to Participants when issuance is limited to key employees whose services in connection
with the Company assure them access to equivalent information.
10.
TRANSFERABILITY
.
Awards granted under this Plan, and any interest therein, will not
be transferable or assignable by Participant, other than by will or by the laws of descent and
distribution, and may not be made subject to execution, attachment or similar process. During the
lifetime of the Participant an Award will be exercisable only by the Participant or Participants
legal representative and any elections with respect to an Award may be made only by the Participant
or Participants legal representative.
11.
RESTRICTIONS ON SHARES
.
11.1
Right of First Refusal
. At the discretion of the Committee, the Company may
reserve to itself and/or its assignee(s) in the Award Agreement a right of first refusal to
purchase all Shares that a Participant (or a subsequent transferee) may propose to transfer to a
third party, unless otherwise not permitted by Section 25102(o) of the California Corporations
Code, provided that such right of first refusal terminates upon the Companys initial public
offering of Common Stock pursuant to an effective registration statement filed under the
Securities Act.
11.2
Right of Repurchase
. At the discretion of the Committee, the Company may
reserve to itself and/or its assignee(s) in the Award Agreement a right to repurchase Unvested
8
Shares held by a Participant for cash and/or cancellation of purchase money indebtedness owed
to the Company by the Participant following such Participants Termination at any time within the
later of ninety (90) days after the Participants Termination Date and the date the Participant
purchases Shares under the Plan at the Participants Exercise Price or Purchase Price, as the case
may be, provided that, unless the Participant is an officer, director or consultant of the Company
or of a Parent or Subsidiary of the Company, such right of repurchase lapses at the rate of no
less than twenty percent (20%) per year over five (5) years from: (a) the date of grant of the
Option or (b) in the case of Restricted Stock, the date the Participant purchases the Shares.
12.
CERTIFICATES
.
All certificates for Shares or other securities delivered under this
Plan will be subject to such stock transfer orders, legends and other restrictions as the Committee
may deem necessary or advisable, including restrictions under any applicable federal, state or
foreign securities law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or quoted.
13.
ESCROW; PLEDGE OF SHARES
.
To enforce any restrictions on a Participants Shares set
forth in Section 11 hereof, the Committee may require the Participant to deposit all certificates
representing Shares, together with stock powers or other instruments of transfer approved by the
Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company
to hold in escrow until such restrictions have lapsed or terminated. The Committee may cause a
legend or legends referencing such restrictions to be placed on the certificates. Any Participant
who is permitted to execute a promissory note as partial or full consideration for the purchase of
Shares under this Plan will be required to pledge and deposit with the Company all or part of the
Shares so purchased as collateral to secure the payment of Participants obligation to the Company
under the promissory note; provided, however, that the Committee may require or accept other or
additional forms of collateral to secure the payment of such obligation and, in any event, the
Company will have full recourse against the Participant under the promissory note notwithstanding
any pledge of the Participants Shares or other collateral. In connection with any pledge of the
Shares, Participant will be required to execute and deliver a written pledge agreement in such form
as the Committee will from time to time approve.
14.
EXCHANGE AND BUYOUT OF AWARDS
.
The Committee may, at any time or from time to time,
authorize the Company, with the consent of the respective Participants, to issue new Awards in
exchange for the surrender and cancellation of any or all outstanding Awards. The Committee may at
any time buy from a Participant an Award previously granted with payment in cash, shares of Common
Stock of the Company (including Restricted Stock) or other consideration, based on such terms and
conditions as the Committee and the Participant may agree.
15.
SECURITIES LAW AND OTHER REGULATORY COMPLIANCE
.
This Plan is intended to comply with
Section 25102(o) of the California Corporations Code. Any provision of this Plan which is
inconsistent with Section 25102(o) shall, without further act or amendment by the Company or the
Board, be reformed to comply with the requirements of Section 25102(o). An Award will not be
effective unless such Award is in compliance with all applicable federal and state securities laws,
rules and regulations of any governmental body, and
9
the requirements of any stock exchange or automated quotation system upon which the Shares may
then be listed or quoted, as they are in effect on the date of grant of the Award and also on the
date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company
will have no obligation to issue or deliver certificates for Shares under this Plan prior to (i)
obtaining any approvals from governmental agencies that the Company determines are necessary or
advisable, and/or (ii) compliance with any exemption, completion of any registration or other
qualification of such Shares under any state or federal law or ruling of any governmental body that
the Company determines to be necessary or advisable. The Company will be under no obligation to
register the Shares with the SEC or to effect compliance with the exemption, registration,
qualification or listing requirements of any state securities laws, stock exchange or automated
quotation system, and the Company will have no liability for any inability or failure to do so.
16.
NO OBLIGATION TO EMPLOY
.
Nothing in this Plan or any Award granted under this Plan
will confer or be deemed to confer on any Participant any right to continue in the employ of, or to
continue any other relationship with, the Company or any Parent or Subsidiary of the Company or
limit in any way the right of the Company or any Parent or Subsidiary of the Company to terminate
Participants employment or other relationship at any time, with or without Cause.
17.
CORPORATE TRANSACTIONS
.
17.1
Assumption or Replacement of Awards by Successor or Acquiring Company
. In the
event of (i) a dissolution or liquidation of the Company, (ii) a merger or consolidation in which
the Company is not the surviving corporation, (iii) a merger in which the Company is the surviving
corporation but after which the stockholders of the Company immediately prior to such merger (other
than any stockholder which merges with the Company in such merger, or which owns or controls
another corporation which merges with the Company in such merger) cease to own their shares or
other equity interests in the Company, or (iv) the sale of all or substantially all of the assets
of the Company, any or all outstanding Awards may be assumed, converted or replaced by the
successor or acquiring corporation (if any), which assumption, conversion or replacement will be
binding on all Participants. In the alternative, the successor or acquiring corporation may
substitute equivalent Awards or provide substantially similar consideration to Participants as was
provided to stockholders (after taking into account the existing provisions of the Awards). The
successor or acquiring corporation may also substitute by issuing, in place of outstanding Shares
of the Company held by the Participant, substantially similar shares or other property subject to
repurchase restrictions and other provisions no less favorable to the Participant than those which
applied to such outstanding Shares immediately prior to such transaction described in this Section
17.1. In the event such successor or acquiring corporation (if any) refuses to assume, convert,
replace or substitute Awards, as provided above, pursuant to a transaction described in this
Section 17.1, then notwithstanding any other provision in this Plan to the contrary, such Awards
will expire on such transaction at such time and on such conditions as the Board will determine.
17.2
Other Treatment of Awards
. Subject to any greater rights granted to Participants
under the foregoing provisions of this Section 17, in the event of the occurrence of any
transaction described in Section 17.1 hereof, any outstanding Awards will be treated as
10
provided in the applicable agreement or plan of merger, consolidation, dissolution,
liquidation or sale of assets.
17.3
Assumption of Awards by the Company
. The Company, from time to time, also may
substitute or assume outstanding awards granted by another company, whether in connection with an
acquisition of such other company or otherwise, by either (i) granting an Award under this Plan in
substitution of such other companys award or (ii) assuming such award as if it had been granted
under this Plan if the terms of such assumed award could be applied to an Award granted under this
Plan. Such substitution or assumption will be permissible if the holder of the substituted or
assumed award would have been eligible to be granted an Award under this Plan if the other company
had applied the rules of this Plan to such grant. In the event the Company assumes an award
granted by another company, the terms and conditions of such award will remain unchanged (except
that the exercise price and the number and nature of shares issuable upon exercise of any such
option will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the
Company elects to grant a new Option rather than assuming an existing option, such new Option may
be granted with a similarly adjusted Exercise Price.
18.
ADOPTION AND SHAREHOLDER APPROVAL
.
This Plan will become effective on the date that
it is adopted by the Board (the
Effective Date
). This Plan will be approved by the stockholders
of the Company (excluding Shares issued pursuant to this Plan), consistent with applicable laws,
within twelve (12) months before or after the Effective Date. Upon the Effective Date, the Board
may grant Awards pursuant to this Plan; provided, however, that: (i) no Option may be exercised
prior to initial stockholder approval of this Plan; (ii) no Option granted pursuant to an increase
in the number of Shares approved by the Board shall be exercised prior to the time such increase
has been approved by the stockholders of the Company; in the event that initial stockholder
approval is not obtained within the time period provided herein, all Awards granted hereunder shall
be canceled, any Shares issued pursuant to any Award shall be canceled and any purchase of Shares
issued hereunder shall be rescinded; and (iv) Awards granted pursuant to an increase in the number
of Shares approved by the Board which increase is not timely approved by stockholders shall be
canceled, any Shares issued pursuant to any such Awards shall be canceled, and any purchase of
Shares subject to any such Award shall be rescinded.
19.
TERM OF PLAN/GOVERNING LAW
.
Unless earlier terminated as provided herein, this Plan
will terminate ten (10) years from the Effective Date or, if earlier, the date of stockholder
approval. This Plan and all agreements hereunder shall be governed by and construed in accordance
with the laws of the State of California.
20.
AMENDMENT OR TERMINATION OF PLAN
.
Subject to Section 5.9 hereof, the Board may at any
time terminate or amend this Plan in any respect, including without limitation amendment of any
form of Award Agreement or instrument to be executed pursuant to this Plan; provided, however, that
the Board will not, without the approval of the stockholders of the Company, amend this Plan in any
manner that requires such stockholder approval pursuant to Section 25102(o) of the California
Corporations Code or the Code or the regulations promulgated thereunder as such provisions apply to
ISO plans.
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21.
NONEXCLUSIVITY OF THE PLAN
.
Neither the adoption of this Plan by the Board, the
submission of this Plan to the stockholders of the Company for approval, nor any provision of this
Plan will be construed as creating any limitations on the power of the Board to adopt such
additional compensation arrangements as it may deem desirable, including, without limitation, the
granting of stock options and other equity awards otherwise than under this Plan, and such
arrangements may be either generally applicable or applicable only in specific cases.
22.
DEFINITIONS
.
As used in this Plan, the following terms will have the following
meanings:
Award
means any award under this Plan, including any Option or Restricted Stock Award.
Award Agreement
means, with respect to each Award, the signed written agreement between the
Company and the Participant setting forth the terms and conditions of the Award, including the
Stock Option Agreement and Restricted Stock Agreement.
Board
means the Board of Directors of the Company.
Cause
means Termination because of (i) any willful, material violation by the Participant of
any law or regulation applicable to the business of the Company or a Parent or Subsidiary of the
Company, the Participants conviction for, or guilty plea to, a felony or a crime involving moral
turpitude, or any willful perpetration by the Participant of a common law fraud, (ii) the
Participants commission of an act of personal dishonesty which involves personal profit in
connection with the Company or any other entity having a business relationship with the Company,
(iii) any material breach by the Participant of any provision of any agreement or understanding
between the Company or any Parent or Subsidiary of the Company and the Participant regarding the
terms of the Participants service as an employee, officer, director or consultant to the Company
or a Parent or Subsidiary of the Company, including without limitation, the willful and continued
failure or refusal of the Participant to perform the material duties required of such Participant
as an employee, officer, director or consultant of the Company or a Parent or Subsidiary of the
Company, other than as a result of having a Disability, or a breach of any applicable invention
assignment and confidentiality agreement or similar agreement between the Company or a Parent or
Subsidiary of the Company and the Participant, (iv) Participants disregard of the policies of the
Company or any Parent or Subsidiary of the Company so as to cause loss, damage or injury to the
property, reputation or employees of the Company or a Parent or Subsidiary of the Company, or (v)
any other misconduct by the Participant which is materially injurious to the financial condition or
business reputation of, or is otherwise materially injurious to, the Company or a Parent or
Subsidiary of the Company.
Code
means the Internal Revenue Code of 1986, as amended.
Committee
means the committee created and appointed by the Board to administer this Plan, or
if no committee is created and appointed, the Board.
Company
means PayCycle, Inc., or any successor corporation.
12
Disability
means a disability, whether temporary or permanent, partial or total, as
determined by the Committee.
Exercise Price
means the price at which a holder of an Option may purchase the Shares
issuable upon exercise of the Option.
Fair Market Value
means, as of any date, the value of a share of the Companys Common Stock
determined as follows:
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(a)
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if such Common Stock is then quoted on the Nasdaq National
Market, its closing price on the Nasdaq National Market on the date of
determination as reported in
The Wall Street Journal
;
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(b)
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if such Common Stock is publicly traded and is then listed on a
national securities exchange, its closing price on the date of determination on
the principal national securities exchange on which the Common Stock is listed
or admitted to trading as reported in
The Wall Street Journal
;
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(c)
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if such Common Stock is publicly traded but is not quoted on
the Nasdaq National Market nor listed or admitted to trading on a national
securities exchange, the average of the closing bid and asked prices on the
date of determination as reported by
The Wall Street Journal
(or, if
not so reported, as otherwise reported by any newspaper or other source as the
Board may determine); or
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(d)
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if none of the foregoing is applicable, by the Committee in
good faith.
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Option
means an award of an option to purchase Shares pursuant to Section 5 hereof.
Parent
means any corporation (other than the Company) in an unbroken chain of corporations
ending with the Company if each of such corporations other than the Company owns stock representing
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.
Participant
means a person who receives an Award under this Plan.
Plan
means this PayCycle, Inc. 1999 Equity Incentive Plan, as amended from time to time.
Purchase Price
means the price at which a Participant may purchase Restricted Stock.
Restricted Stock
means Shares purchased pursuant to a Restricted Stock Award.
Restricted Stock Award
means an award of Shares pursuant to Section 6 hereof.
13
SEC
means the Securities and Exchange Commission.
Securities Act
means the Securities Act of 1933, as amended.
Shares
means shares of the Companys Common Stock, $0.00001 par value, reserved for issuance
under this Plan, as adjusted pursuant to Sections 2 and 17 hereof, and any successor security.
Subsidiary
means any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company if each of the corporations other than the last corporation
in the unbroken chain owns stock representing 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.
Termination
or
Terminated
means, for purposes of this Plan with respect to a Participant,
that the Participant has for any reason ceased to provide services as an employee, officer,
director or consultant to the Company or a Parent or Subsidiary of the Company. A Participant will
not be deemed to have ceased to provide services in the case of (i) sick leave, (ii) military
leave, or (iii) any other leave of absence approved by the Committee, provided that such leave is
for a period of not more than ninety (90) days (a) unless reinstatement (or, in the case of an
employee with an ISO, reemployment) upon the expiration of such leave is guaranteed by contract or
statute, or (b) unless provided otherwise pursuant to formal policy adopted from time to time by
the Companys Board and issued and promulgated in writing. In the case of any Participant on (i)
sick leave, (ii) military leave or (iii) an approved leave of absence, the Committee may make such
provisions respecting suspension of vesting of the Award while on leave from the Company or a
Parent or Subsidiary of the Company as it may deem appropriate, except that in no event may an
Option be exercised after the expiration of the term set forth in the Stock Option Agreement. The
Committee will have sole discretion to determine whether a Participant has ceased to provide
services and the effective date on which the Participant ceased to provide services (the
Termination Date
).
Unvested Shares
means Unvested Shares as defined in the Award Agreement.
Vested Shares
means Vested Shares as defined in the Award Agreement.
14
Exhibit 4.05
No.
PAYCYCLE, INC.
1999 EQUITY INCENTIVE PLAN
STOCK OPTION AGREEMENT
This Stock Option Agreement (the
Agreement
) is made and entered into as of the date of grant
set forth below (the
Date of Grant
) by and between PayCycle, Inc., a Delaware corporation (the
Company
), and the participant named below (the
Participant
). Capitalized terms not defined
herein shall have the meaning ascribed to them in the Companys 1999 Equity Incentive Plan, as
amended (the
Plan
).
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Participant
:
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Social Security Number
:
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Address
:
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Total Option Shares
:
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Exercise Price Per Share
:
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$
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Date of Grant
:
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First Vesting Date
:
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First Exercisable Date
:
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Expiration Date
:
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(unless earlier terminated under Section 5.6 of the Plan)
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Type of Stock Option
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(Check one)
:
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o
Incentive Stock Option
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o
Nonqualified Stock Option
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1.
Grant of Option
.
The Company hereby grants to Participant an option (this
Option
)
to purchase the total number of shares of Common Stock, $0.00001 par value per share, of the
Company set forth above as Total Option Shares (the
Shares
) at the Exercise Price Per Share set
forth above (the
Exercise Price
), subject to all of the terms and conditions of this Agreement
and the Plan. If designated as an Incentive Stock Option above, the Option is intended to qualify
as an incentive stock option (the
ISO
) within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the
Code
).
1
2.
Exercise Period
.
2.1
Exercise Period of Option
. Provided Participant continues to provide services to the
Company or to any Parent or Subsidiary of the Company, this Option will become vested and
exercisable with respect to one-quarter (1/4th) of the Shares on the First Vesting Date set forth
on the first page of this Agreement (the
First Vesting Date
) and thereafter at the end of each
full succeeding month after the First Vesting Date this Option will become vested and exercisable
with respect to an additional one-forty-eighth (1/48th) of the Shares until this Option is vested
and has become exercisable with respect to one hundred percent (100%) of the Shares. If application
of the vesting percentage causes a fractional share, such share shall be rounded down to the
nearest whole share for each month except for the last month in such vesting period, at the end of
which last month this Option shall become vested for the full remainder of the Shares.
2.2
Expiration
. The Option shall expire on the Expiration Date set forth above or earlier
as provided in Section 3 below or pursuant to Section 5.6 of the Plan.
3.
Termination
.
3.1
Termination for Any Reason Except Death, Disability or Cause
. If Participant is
Terminated for any reason, except death, Disability or for Cause, the Option, to the extent (and
only to the extent) that it would have been exercisable by Participant on the Termination Date, may
be exercised by Participant no later than three (3) months after the Termination Date, but in any
event no later than the Expiration Date.
3.2
Termination Because of Death or Disability
. If Participant is Terminated because of
death or Disability of Participant (or Participant dies within three (3) months of Termination when
Termination is for any reason other than Participants Disability or for Cause), the Option, to the
extent that it is exercisable by Participant on the Termination Date, may be exercised by
Participant (or Participants legal representative) no later than twelve (12) months after the
Termination Date, but in any event no later than the Expiration Date. Any exercise beyond (i)
three (3) months after the Termination Date when the Termination is for any reason other than the
Participants death or disability, within the meaning of Section 22(e)(3) of the Code; or (ii)
twelve (12) months after the Termination Date when the termination is for Participants disability,
within the meaning of Section 22(e)(3) of the Code, is deemed to be an NQSO.
3.3
Termination for Cause
. If Participant is Terminated for Cause, then the Option will
expire on Participants Termination Date, or at such later time and on such conditions as are
determined by the Committee.
3.4
No Obligation to Employ
. Nothing in the Plan or this Agreement shall confer on
Participant any right to continue in the employ of, or other relationship with, the Company or any
Parent or Subsidiary of the Company, or limit in any way the right of the Company or any Parent or
Subsidiary of the Company to terminate Participants employment or other relationship at any time,
with or without Cause.
4.
Manner of Exercise
.
4.1
Stock Option Exercise Agreement
. To exercise this Option, Participant (or in the case
of exercise after Participants death or incapacity, Participants executor, administrator, heir or
legatee, as the case may be) must deliver to the Company an executed stock option exercise
agreement in the form attached hereto as
Exhibit A
, or in such other form as may be
approved by the Committee from time to time (the
Exercise Agreement
), which shall set forth,
inter
alia
, (i) Participants election to exercise the Option, (ii) the number of
Shares being purchased, (iii) any restrictions imposed on the Shares and (iv) any representations,
warranties and agreements regarding Participants investment intent and access to information as
may be required by the Company to comply with applicable securities laws. If someone other than
Participant exercises the Option, then such person must submit documentation reasonably acceptable
to the Company verifying that such person has the legal right to exercise the Option and such
person shall be subject to all of the restrictions contained herein as if such person were the
Participant.
4.2
Limitations on Exercise
. The Option may not be exercised unless such exercise is in
compliance with all applicable federal and state securities laws, as they are in effect on the date
of exercise. The Option may not be exercised as to fewer than one hundred (100) Shares unless it
is exercised as to all Shares as to which the Option is then exercisable.
4.3
Payment
. The Exercise Agreement shall be accompanied by full payment of the Exercise
Price for the shares being purchased in cash (by check), or where permitted by law:
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(a)
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by cancellation of indebtedness of the Company to the
Participant;
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(b)
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by surrender of shares of the Companys Common Stock that (i)
either (A) have been paid for within the meaning of SEC Rule 144 (and, if such
shares were purchased from the Company by use of a promissory note, such note
has been fully paid with respect to such shares); or (B) were obtained by
Participant in the open public market; and (ii) are clear of all liens, claims,
encumbrances or security interests;
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(c)
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by waiver of compensation due or accrued to Participant for
services rendered;
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(d)
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provided that a public market for the Companys stock exists:
(i) through a same day sale commitment from Participant and a
Company-designated broker-dealer (a
Dealer
) whereby Participant irrevocably
elects to exercise the Option and to sell a portion of the Shares so purchased
sufficient to pay for the total Exercise Price and whereby the Dealer
irrevocably commits upon receipt of such Shares to forward the total Exercise
Price directly to the Company, or (ii) through a margin commitment from
Participant and a Dealer whereby Participant irrevocably elects to exercise the
Option and to pledge the Shares so
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purchased to the Dealer in a margin account
as security for a loan from the
Dealer in the amount of the total Exercise Price, and whereby the Dealer
irrevocably commits upon receipt of such Shares to forward the total
Exercise Price directly to the Company; or
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(e)
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any other form of consideration approved by the Committee; or
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(f)
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by any combination of the foregoing.
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4.4
Tax Withholding
. Prior to the issuance of the Shares upon exercise of the Option,
Participant must pay or provide for any applicable federal, state and local withholding obligations
of the Company. If the Committee permits, Participant may provide for payment of withholding taxes
upon exercise of the Option by requesting that the Company retain the minimum number of Shares with
a Fair Market Value equal to the minimum amount of taxes required to be withheld; but in no event
will the Company withhold Shares if such withholding would result in adverse accounting
consequences to the Company. In such case, the Company shall issue the net number of Shares to the
Participant by deducting the Shares retained from the Shares issuable upon exercise.
4.5
Issuance of Shares
. Provided that the Exercise Agreement and payment are in form and
substance satisfactory to counsel for the Company, the Company shall issue the Shares registered in
the name of Participant, Participants authorized assignee, or Participants legal representative,
and shall deliver certificates representing the Shares with the appropriate legends affixed
thereto.
5.
Notice of Disqualifying Disposition of ISO Shares
.
If the Option is an ISO, and if
Participant sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or
before the later of (i) the date two (2) years after the Date of Grant, and (ii) the date one (1)
year after transfer of such Shares to Participant upon exercise of the Option, Participant shall
immediately notify the Company in writing of such disposition. Participant agrees that Participant
may be subject to income tax withholding by the Company on the compensation income recognized by
Participant from the early disposition by payment in cash or out of the current wages or other
compensation payable to Participant.
6.
Compliance with Laws and Regulations
.
The Plan and this Agreement are intended to
comply with Section 25102(o) of the California Corporations Code and any regulations relating
thereto. Any provision of this Agreement which is inconsistent with Section 25102(o) or any
regulations relating thereto shall, without further act or amendment by the Company or the Board,
be reformed to comply with the requirements of Section 25102(o) and any regulations relating
thereto. The exercise of the Option and the issuance and transfer of Shares shall be subject to
compliance by the Company and Participant with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange on which the Companys
Common Stock may be listed at the time of such issuance or transfer. Participant understands that
the Company is under no obligation to register or qualify the Shares with the SEC, any state
securities commission or any stock exchange to effect such compliance.
7.
Nontransferability of Option
.
The Option may not be transferred in any manner other
than by will or by the laws of descent and distribution, and, with respect to NQSOs, by instrument
to an inter vivos or testamentary trust in which the options are to be passed to beneficiaries upon
the death of the trustor (settlor), or by gift to immediate family as that term is defined in 17
C.F.R. 240.16a-1(e), and may be exercised during the lifetime of Participant only by Participant or
in the event of Participants incapacity, by Participants legal representative. The terms of the
Option shall be binding upon the executors, administrators, successors and assigns of Participant.
8.
Companys Right of First Refusal
.
Before any Shares held by Participant or any
transferee of such Shares may be sold or otherwise transferred (including without limitation a
transfer by gift or operation of law), the Company and/or its assignee(s) shall have an assignable
right of first refusal to purchase the Shares to be sold or transferred on the terms and conditions
set forth in the Exercise Agreement (the
Right of First Refusal
). The Companys Right of First
Refusal will terminate when the Companys securities become publicly traded.
9.
Tax Consequences
.
Set forth below is a brief summary as of the Effective Date of the
Plan of some of the federal and California tax consequences of exercise of the Option and
disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE
OPTION OR DISPOSING OF THE SHARES.
9.1
Exercise of ISO
. If the Option qualifies as an ISO, there will be no regular federal
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 a tax preference item for federal alternative minimum tax purposes and may subject the
Participant to the alternative minimum tax in the year of exercise.
9.2
Exercise of Nonqualified Stock Option
. If the Option does not qualify as an ISO,
there may be a regular federal and California income tax liability upon the exercise of the Option.
Participant 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 Participant is a current or former employee of the Company, the
Company may be required to withhold from Participants compensation or collect from Participant and
pay to the applicable taxing authorities an amount equal to a percentage of this compensation
income at the time of exercise.
9.3
Disposition of Shares
. The following tax consequences may apply upon disposition of
the Shares.
(a)
Incentive Stock Options
. If the Shares are held for more than twelve (12) months
after the date of purchase of the Shares pursuant to the exercise of an ISO and are disposed of
more than two (2) years after the Date of Grant, any gain realized on disposition of the Shares
will be treated as long term capital gain for federal and California income tax purposes. If
Shares purchased under an ISO are disposed of within the applicable
one (1) year or two (2) year period, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the excess, if any, of the
Fair Market Value of the Shares on the date of exercise over the Exercise Price.
(b)
Nonqualified Stock Options
. If the Shares are held for more than twelve (12) months
after the date of purchase of the Shares pursuant to the exercise of an NQSO, any gain realized on
disposition of the Shares will be treated as long term capital gain.
(c)
Withholding
. The Company may be required to withhold from the Participants
compensation or collect from the Participant and pay to the applicable taxing authorities an amount
equal to a percentage of this compensation income.
10.
Section 409A Release and Reimbursement Agreement
.
Unless expressly determined
otherwise by the Committee, this Option is intended to be compliant with Section 409A of the Code,
including, without limitation, the Exercise Price per Share underlying this Option being set at not
less than 100% of the Fair Market Value of such Share at the Date of Grant of this Option.
Participant acknowledges that, if the Exercise Price per Share is less than the Fair Market Value
of such Share as of the Date of Grant of this Option, then Participant may have significant tax
liabilities with respect to this Option. Participant further acknowledges that, at any time
hereafter, it may be determined by the Committee, a court of law, the Internal Revenue Service or
other governmental entity that this Option is subject to Section 409A of the Code, including
without limitation because the Exercise Price per Share underlying this Option is less than the
Fair Market Value of such Share as of the Date of Grant of this Option (a
Determination
).
Participant expressly agrees, by accepting this Option and in partial consideration for the grant
of this Option to Participant, as follows:
(a) Participant hereby irrevocably waives and releases any and all claims or causes of action
that Participant may have against the Company, its agents, officers, stockholders, employees,
directors, attorneys, subscribers, subsidiaries, affiliates, successors and assigns, for any
damages, injury or loss arising out of, related to or connected with such a Determination or
otherwise under Section 409A of the Code, including without limitation with respect to taxes,
interest and penalties that may be due from Participant with respect to this Option under Section
409A of the Code; and
(b) Participant agrees to promptly reimburse the Company upon its request, whether by way of a
deduction from wages due (if and to the extent permitted by law) or otherwise, as determined by the
Company in its sole discretion, and regardless of whether or not Participant is then an employee,
for any taxes (together with interest due thereon) paid by the Company on Participants behalf in
connection with such a Determination.
11.
Privileges of Stock Ownership
.
Participant shall not have any of the rights of a
stockholder with respect to any Shares until the Shares are issued to Participant.
12.
Interpretation
.
Any dispute regarding the interpretation of this Agreement shall be
submitted by Participant or the Company to the Committee for review. The resolution of such a
dispute by the Committee shall be final and binding on the Company and Participant.
13.
Entire Agreement
.
The Plan is incorporated herein by reference. This Agreement and
the Plan constitute the entire agreement of the parties and supersede all prior undertakings and
agreements with respect to the subject matter hereof.
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 Corporate Secretary of the Company at
its principal corporate offices. Any notice required to be given or delivered to Participant shall
be in writing and addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All notices shall be
deemed to have been given or delivered upon: (i) personal delivery; (ii) three (3) days after
deposit in the United States mail by certified or registered mail (return receipt requested); (iii)
one (1) business day after deposit with any return receipt express courier (prepaid); or (iv) one
(1) business day after transmission by facsimile, rapifax or telecopier.
15.
Successors and Assigns
.
The Company may assign any of its rights under this
Agreement, including its rights to purchase Shares under the Right of First Refusal. No other
party to this Agreement may assign, whether voluntarily or by operation of law, any of its rights
and obligations under this Agreement, except with the prior written consent of the Company. This
Agreement shall be binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding
upon Participant and Participants heirs, executors, administrators, legal representatives,
successors and assigns.
16.
Governing Law
.
This Agreement shall be governed by and construed in accordance with
the laws of the State of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within California. If any provision of this
Agreement is determined by a court of law to be illegal or unenforceable, then such provision will
be enforced to the maximum extent possible and the other provisions will remain fully effective and
enforceable.
17.
Acceptance
.
Participant hereby acknowledges receipt of a copy of the Plan and this
Agreement. Participant has read and understands the terms and provisions thereof, and accepts the
Option subject to all the terms and conditions of the Plan and this Agreement. Participant
acknowledges that there may be adverse tax consequences upon exercise of the Option or disposition
of the Shares and that Participant should consult a tax adviser prior to such exercise or
disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in triplicate by its
duly authorized representative and Participant has executed this Agreement in triplicate, effective
as of the Date of Grant.
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PAYCYCLE, INC.
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PARTICIPANT
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By:
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James J. Heeger, CEO
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[SIGNATURE PAGE TO STOCK OPTION AGREEMENT]