Exhibit 99.1

 

PROPOSAL II— APPROVAL OF AMENDED AND RESTATED

 

 

2000 EMPLOYEE STOCK PURCHASE PLAN

 

 

     On September 23, 2010, our Board of Directors adopted, subject to stockholder approval, an amendment and restatement of our 2000 Employee Stock Purchase Plan, as amended, or the Current Plan, to (i) increase the number of shares of common stock authorized for issuance under the 2000 Plan from 1,500,000 shares under the Current Plan to 4,000,000 shares under the Amended and Restated 2000 Employee Stock Purchase Plan, which we refer to as the Revised 2000 Plan, and (ii) make certain other changes to the Current Plan that provide greater flexibility to allow participation in the Revised 2000 Plan by the company’s international employees. These changes will allow Bottomline to implement the Revised 2000 Plan in several new geographic locations to enhance our global participation in the Revised 2000 Plan.

 

     The purpose of the Revised 2000 Plan is to provide an opportunity for eligible employees of the company to purchase shares of common stock through accumulated payroll deductions. Our Board of Directors believes that it is in our best interests to encourage stock ownership by our employees and that an employee stock purchase plan is an important benefit for purposes of recruiting and retaining employees, including international employees, who make up approximately 34% of our workforce. As of August 31, 2010, 1,061,412 shares had been purchased by employees as a group under the 2000 Employee Stock Purchase Plan since its inception and 438,588 shares were available for future purchases. If the Revised 2000 Plan is approved by stockholders, an aggregate of 2,938,588 shares will be available for future issuance under the Revised 2000 Plan. If the Revised 2000 Plan is not approved by stockholders, the Current Plan will remain in effect, in which case our Board of Directors believes that we will be unable to provide adequate opportunity for eligible employees to purchase shares of common stock through payroll deductions.

 

     If the stockholders approve the Revised 2000 Plan, then the Board of Directors plans to terminate the 1998 Employee Stock Purchase Plan (the “1998 Plan”). The company has not operated the 1998 Plan since September 2000; however, 687,599 shares of common stock remained available for issuance under the 1998 Plan as of August 31, 2010. If the stockholders do not approve the Revised 2000 Plan, then the Board of Directors will determine whether to terminate the 1998 Plan or to continue it in effect and whether to adopt alternative arrangements based on its assessment of our needs.

 

     The Board of Directors believes that the proposed amendment is in the best interests of Bottomline and its stockholders and recommends that you vote “FOR” this Proposal II.

 

     The following is a brief description of the Revised 2000 Plan. This summary is qualified in its entirety by reference to the Revised 2000 Plan, a copy of which is attached to the proxy statement as “Appendix A”. You may also obtain a copy of the Revised 2000 Plan by accessing the proxy statement as filed with the SEC on the Internet at sec.gov, by accessing the Investor Relations section of the company’s Web site, www.bottomline.com, or by contacting the corporate secretary of Bottomline.

 

Administration

 

     The Revised 2000 Plan is administered by the Board of Directors. The Board of Directors is authorized to make rules and regulations for the administration of the Revised 2000 Plan.

 

Eligibility

 

     All employees of the company are eligible to participate in the Revised 2000 Plan provided that:

 

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they are regularly employed by the company or a designated subsidiary for more than five months in a calendar year and for more than 20 hours a week; and

 

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they are employees of the company or a designated subsidiary on the first day of the applicable offering period.

 

     Employees of the company and its designated domestic and international subsidiaries may participate in the Revised 2000 Plan. However, no person will be eligible to participate in the plan if he or she possesses five percent or more of the voting power of the company’s or any subsidiary’s common stock immediately after the grant of an option to purchase shares at the commencement of an offering period. No employee may purchase shares of stock with an aggregate value of more than $25,000 per calendar year in which the option is outstanding under the plan (and all other employee stock purchase plans of the company and its subsidiaries), determined by the value of such shares as of the date the option is granted. As of August 31, 2010, approximately 480 employees of the company were eligible to participate in the Revised 2000 Plan. Eligible participation will increase significantly if the plan is implemented in additional geographic locations.

 

Offerings; Number and Purchase Price of Shares

 

     The Revised 2000 Plan consists of overlapping twenty-four (24)-month offering periods comprised of four six-month purchase periods. A new offering period commences on the first trading day on or after October 1 and April 1 of each year and terminates on the last trading day in the period ending twenty-four (24)-months later. Each purchase period (i) commences on the day after the date that shares in the preceeding purchase period were purchased, which we refer to as the exercise date and (ii) ends on the trading day closest to the day that is six months after the preceding exercise date, except that the first purchase period in an offering period commences on the enrollment date (i.e., the first day of the offering period) and ends with the trading day that is six months after the enrollment date. The duration of offering periods and purchase periods may be changed in the discretion of the Board of Directors. During each six-month purchase period, payroll deductions will be made and held for the purchase of shares at the end of that period. If the fair market value of the common stock on the enrollment date of the next offering period is lower than that of the current offering period, then all participants in the current offering period will be automatically withdrawn from the current offering period and will be automatically enrolled in the next offering period.

 

     Prior to or on each offering period commencement date, an eligible employee may participate in the offering by completing and forwarding a payroll deduction authorization form to the employee’s appropriate payroll office. The form will authorize a regular payroll deduction from the employee’s compensation during the offering period. Unless an employee files a new form or withdraws from the Revised 2000 Plan, his or her deductions and purchases will continue at the same rate for future offering periods as long as the Revised 2000 Plan remains in effect.

 

     If the amendment is approved by the stockholders, a total of up to 4,000,000 shares may be purchased under the Revised 2000 Plan. An employee may elect to have up to 10% deducted from his or her compensation for the purpose of purchasing stock under the Revised 2000 Plan and the company will maintain payroll deduction accounts for each participant based on his or her election. At the beginning of each offering period, each participant will be granted an option to purchase, at the applicable purchase price, up to the whole number of shares of common stock determined by dividing $50,000 by the fair market value of a share of stock on the enrollment date, subject to the limitations described above. The option shall be exercisable as to 25% of the number of shares subject to the option on each exercise date during the offering period (i.e., at the end of each six-month purchase period). The purchase price is an amount equal to 85% of the closing price of the common stock on the enrollment date or the applicable exercise date, whichever is lower. On August 31, 2010, the closing sale price of the common stock on the NASDAQ Global Market was $14.01.

 

     Each participant’s option will automatically be exercised on the exercise date using his or her payroll contributions, subject to the maximum share limit described above. Any payroll deductions accumulated in a participant’s account at the end of a purchase period which are not sufficient to purchase a full share of common stock shall be retained in the participant’s account and will be carried over to the next purchase period. If the company receives requests from participants to purchase more than the number of shares available on an exercise date, the available shares will be allocated on a pro rata basis to participants.

 

     A participant may increase or decrease his or her payroll deduction during an offering period by completing and filing with the company a new payroll deduction authorization form. The board may, in its discretion, limit the number of times per offering period that a participant may change his or her payroll deduction percentage. A participant may withdraw from the plan at any time. Upon such withdrawal, the participant’s accumulated payroll deductions will be refunded to him or her. Partial withdrawals are not permitted. An employee may participate in any subsequent offering in accordance with the terms and conditions established by the Board of Directors.

 

Termination of Employment or Death

 

     If a participant’s employment terminates, including by death, prior to the last business day of an offering period, no payroll deduction will be taken from any pay due to the participant and the balance of the participant’s account shall be paid to the participant or, in the event of the participant’s death, (a) to a beneficiary designated by the participant, (b) in the absence of a designated beneficiary, to the executor or administrator of the participant’s estate, or (c) if no executor or administrator have been appointed, to the spouse or dependents of the participant or if no such person is known to the company, then to such person as the company may designate.

 

Adjustments for Changes in Capitalization

 

     In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, or any increase or decrease in the number of shares of common stock effected without the receipt of consideration by the company, (i) the number of shares of common stock available under the 2000 Plan, (ii) the share purchase limitations, (iii) the number of shares covered by each option under the plan and (iv) the purchase price will be proportionately adjusted to the extent determined by the Board of Directors.

 

Grants to Employees in Foreign Jurisdictions; Subplans

 

     The Revised 2000 Plan provides greater flexibility than the Current Plan to allow participation in the Revised 2000 Plan by the company’s international employees. Under the Revised 2000 Plan, the company may, in order to comply with the laws of a foreign jurisdiction, grant options to employees of the company or a designated subsidiary who are citizens or residents of such jurisdiction with terms that are less favorable (but not more favorable) than the terms of options granted under the Revised 2000 Plan to employees of the company or a designated subsidiary who are residents of the United States. Notwithstanding the foregoing, employees of the company or a designated subsidiary who are citizens or residents of a foreign jurisdiction may be excluded from eligibility under the Revised 2000 Plan if (a) the grant of an option under the plan is prohibited by law in such employees jurisdiction of residence or citizenship or (b) compliance with the laws of the foreign jurisdiction would cause the Revised 2000 Plan to violate the requirements of Section 423 of the Internal Revenue Code.

 

     The company may from time to time establish one or more subplans under the Revised 2000 Plan with respect to one or more designated subsidiaries, provided such subplans comply with Section 423 of the Code.

 

Adjustments Upon Reorganization Event

 

     The Revised 2000 Plan defines a “reorganization event” as: (a) any merger or consolidation of the company with or into another entity as a result of which all of the common stock converts into or is exchanged for the right to receive cash, securities or other property, (b) any exchange of all the company’s common stock for cash, securities or other property pursuant to a share exchange transaction, or (c) any sale of all or substantially all of the assets of the company. If a reorganization event occurs, or the company executes an agreement with respect to a reorganization event, the Board of Directors shall provide that all outstanding options will be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof). For purposes of the Revised 2000 Plan, an option will be considered to be assumed if, following the consummation of the reorganization event, the option confers the right to purchase, for each share of common stock subject to the option immediately prior to the reorganization event, the consideration (whether cash, securities or other property) received as a result of the reorganization event by the holders of common stock for each share of common stock held immediately prior to the consummation of the reorganization event by holders of a majority of the outstanding shares of common stock; provided that if the consideration received as a result of the reorganization event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon exercise of the options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair market value to the per share consideration received by holders of outstanding shares of company common stock as a result of the reorganization event.

 

     Notwithstanding the foregoing, in the event that the acquiring or succeeding corporation refuses to assume, or substitute for, the options, then any offering periods then in progress will be shortened by setting a new exercise date, determined by the Board of Directors. The new exercise date shall be before the closing date of the proposed reorganization event. The Board of Directors shall notify each participant in writing at least ten (10) days prior to the new exercise date that the exercise date for the participant’s option has been changed to the new exercise date and that the participant’s option shall be automatically exercised on the new exercise date unless prior to such date the participant has withdrawn from the offering period.

 

Termination and Amendment of Plan

 

     The board may at any time terminate or amend the Revised 2000 Plan. Except with respect to reorganization events, (i) no termination of the Revised 2000 Plan may affect options previously granted, provided that an offering period may be terminated by the Board of Directors on any exercise date if the board determines that the termination of the plan is in the best interests of the company and its stockholders and (ii) no amendment of the Revised 2000 Plan may make any change in any option previously granted that adversely affects the rights of any participant. To the extent required by Section 423 of the Internal Revenue Code, the company shall obtain stockholder approval in such a manner and to such a degree as required.

 

     Notwithstanding the foregoing, without stockholder approval and without regard to whether any participant rights may be considered to have been “adversely affected”, the board shall be entitled to change the offering periods, limit the frequency and/ or number of changes in the amount withheld during an offering period, establish an exchange ratio applicable to amounts withheld in a currency other than the U.S. dollar, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/ or accounting and crediting procedures to ensure that amounts applied toward the purchase of common stock for each participant properly correspond to amounts withheld from the participant’s compensation and establish such other limits or procedures that Board of Directors determines in its sole discretion are advisable and which are consistent with the Revised 2000 Plan.

 

Federal Income Tax Consequences

 

     The following generally summarizes the United States federal income tax consequences that will arise with respect to participation in the Revised 2000 Plan and with respect to the sale of common stock acquired under the Revised 2000 Plan. This summary is based on the tax laws in effect as of the date of this proxy statement. Changes to these laws could alter the tax consequences described below.

 

Tax Consequences to Participants

 

     A participant will not have income upon enrolling in the Revised 2000 Plan or upon purchasing shares at the end of an offering.

 

     A participant may have both compensation income and capital gain income or both compensation income and a capital loss upon the sale of shares that were acquired under the Revised 2000 Plan. The amount of each type of income and loss will depend on when the participant sells the shares.

 

     If the participant sells the shares more than two years after the commencement of the offering period during which the shares were purchased and more than one year after the date that the participant purchased the shares, then the participant will have compensation income equal to the lesser of:

 

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15% of the value of the shares on the day the offering period commenced; and

 

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the participant’s profit (the excess of the sales proceeds over the purchase price).

 

     Any excess profit will be long-term capital gain. If the participant sells the shares at a loss (if sales proceeds are less than the purchase price) after satisfying these waiting periods, then the loss will be a long-term capital loss.

 

     If the participant sells the shares prior to satisfying these waiting periods, then he or she will have engaged in a disqualifying disposition. Upon a disqualifying disposition, the participant will have compensation income equal to the value of the shares on the day he or she purchased the shares less the purchase price. If the participant’s profit exceeds the compensation income, then the excess profit will be capital gain. If the participant’s profit is less than the compensation income, then the participant will have a capital loss equal to the value of the shares on the day he or she purchased the shares less the sales proceeds. This capital gain or loss will be long-term if the participant has held the shares for more than one year and otherwise will be short-term.

 

Tax Consequences to the Company

 

     There will be no tax consequences to the company except that we will be entitled to a deduction when a participant has compensation income arising from a disqualifying disposition. Any such deduction will be subject to the limitations of Section 162(m) of the Internal Revenue Code.

 

New Plan Benefits

 

     Because participation under the Revised 2000 Plan is a voluntary election by our employees, we are not able to determine the benefits that will be available in the future to particular individuals. During fiscal year 2010, 3,199 shares and 3,066 shares were purchased by Mr. Eberle and Mr. Donovan, respectively, under the Current Plan at a price of $6.00 per share. There were no purchases made by non-executive directors under the Current Plan during fiscal year 2010. In total, our employees purchased 156,324 shares of common stock under the Current Plan during fiscal year 2010.

 

Recommendation of the Board of Directors

 

     The Board of Directors recommends that you vote FOR the proposal to approve the Revised 2000 Plan.

 

Exhibit 99.2

 

 

BOTTOMLINE TECHNOLOGIES (de), INC.

 

 

AMENDED AND RESTATED 2000 EMPLOYEE STOCK PURCHASE PLAN

 

 

The following constitute the provisions of the 2000 Employee Stock Purchase Plan of Bottomline Technologies (de), Inc.

 

1.     Purpose.

 

     The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated payroll deductions. It is the intention of the Company to have the Plan qualify as an “Employee Stock Purchase Plan” under Section 423 of the Code. The provisions of the Plan, accordingly, shall be construed so as to extend and limit participation in a manner consistent with the requirements of that section of the Code.

 

2.     Definitions.

 

     (a) “ Board ” shall mean the Board of Directors of the Company.

 

 

     (b) “ Code ” shall mean the Internal Revenue Code of 1986, as amended.

 

 

     (c) “ Common Stock ” shall mean the Common Stock of the Company.

 

 

     (d) “ Company ” shall mean Bottomline Technologies (de), Inc. and any Designated Subsidiary of the Company.

 

 

     (e) “ Compensation ” shall mean the amount of money reportable on an Employee’s Federal income Tax Withholding Statement (Form W-2) (or analogous similar statement issued to non-U.S. employees) before any withholdings for health insurance or under a Section 401(k), 125, 129 or similar plan, including without limitation, salary, wages, and sales commissions, but excluding overtime, shift premium, bonuses and incentive compensation other than sales commissions, third party sick or disability pay, allowances or reimbursements for expenses such as relocation allowances or travel expenses, whether specifically designated as such or designated as signing bonuses, income or gains attributable to restricted stock, stock options, stock appreciation rights or other similar equity-based compensation, imputed income or non-cash items, such as life insurance premiums, and similar items, whether or not specifically itemized on the Form W-2 (or analogous statement).

 

   

     (f) “ Designated Subsidiaries ” shall mean the Subsidiaries which have been designated by the Board from time to time in its sole discretion as eligible to participate in the Plan.

 

 

     (g) “ Employee ” shall mean any individual who is an Employee of the Company for tax purposes whose customary employment with the Company is at least twenty (20) hours per week and more than five (5) months in any calendar year.

 

 

     (h) “ Enrollment Date ” shall mean the first day of each Offering Period.

 

 

     (i) “ Exercise Date ” shall mean the last day of each Purchase Period.

 

 

     (j) “ Fair Market Value ” shall mean, as of any date, the value of Common Stock determined as follows:

 

 

         (1) If the Common Stock is listed on any national securities exchange, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on such exchange for the last market trading day prior to the time of determination, as reported in The Wall Street Journal or such other source as the Board deems reliable, or;

 

 

         (2) If the Common Stock does not trade on any such exchange, the average of the closing bid and asked prices as reported by an authorized OTCBB market data vendor on the OTCBB website (otcbb.com) on the date of such determination, or;

 

 

         (3) In the absence of an established market for the Common Stock, the Fair Market Value thereof shall be determined in good faith by the Board.

 

 

     (k) “ Offering Periods ” shall mean the periods of approximately twenty-four (24) months during which an option granted pursuant to the Plan may be exercised, commencing on the first Trading Day on or after October 1 and April 1 of each year and terminating on the last Trading Day in the periods ending twenty-four months later. The duration and timing of Offering Periods may be changed pursuant to Section 4 of this Plan.

 

 

     (l) “ Plan ” shall mean this Amended and Restated 2000 Employee Stock Purchase Plan.

 

 

     (m) “ Purchase Period ” shall mean the period commencing the day after an Exercise Date and ending on the Trading Day closest to the day that is six months after the preceding Exercise Date, except that the first Purchase Period of any Offering Period shall commence on the Enrollment Date and end with the Trading Day that is six months after the Enrollment Date. The duration and timing of Purchase Periods may be changed pursuant to Section 4 of the Plan.

 

 

     (n) “ Purchase Price ” shall mean an amount equal to 85% of the Fair Market Value of a share of Common Stock on the Enrollment Date or on the Exercise Date, whichever is lower.

 

 

     (o) “ Reserves ” shall mean the number of shares of Common Stock covered by each option under the Plan which have not yet been exercised and the number of shares of Common Stock which have been authorized for issuance under the Plan but not yet placed under option.

 

 

     (p) “ Subsidiary ” shall mean any present or future subsidiary corporation as defined in Section 424(f) of the Code.

 

 

     (q) “ Trading Day ” shall mean a day on which national securities exchanges are open for trading.

 

3.     Eligibility.

 

     (a) Any Employee (as defined in Section 2(g)), who shall be employed by the Company on a given Enrollment Date shall be eligible to participate in the Plan; provided, however, that an Employee may not participate in more than one Offering Period at the same time.

 

   

     (b) Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) to the extent that, immediately after the grant, such Employee (or any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own capital stock of the Company or of any Subsidiary and/or hold outstanding options to purchase such stock possessing five percent (5%) or more of the total combined voting power or value of all classes of the capital stock of the Company or of any Subsidiary, or (ii) to the extent that his or her rights to purchase stock under all employee stock purchase plans of the Company and its Subsidiaries accrues at a rate which exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the Fair Market Value of the shares at the time such option is granted) for each calendar year in which such option is outstanding at any time. In the event that an Employee may not be granted an option under the Plan because of the foregoing restrictions, the Employee shall be granted an option to purchase the maximum number of shares that would not violate the foregoing restrictions.

 

     (c) The Company retains the discretion to determine which Employees may participate in an offering pursuant to and consistent with Treasury Regulation Sections 1.423-2(e) and (f).

 

4.     Offering Periods.

 

     The Plan shall be implemented by consecutive, overlapping Offering Periods with a new Offering Period commencing on the first Trading Day on or after October 1 and April 1 each year, or on such other date as the Board shall determine, and continuing thereafter until terminated in accordance with Section 19 hereof. The Board shall have the power to change the duration of Offering Periods and Purchase Periods (including the commencement dates thereof) with respect to future offerings without stockholder approval.

 

5.     Participation.

 

     (a) An eligible Employee may become a participant in the Plan by completing a subscription agreement authorizing payroll deductions in the form of Exhibit A to this Plan and filing it on or prior to the applicable Enrollment Date with the Company’s payroll office or such other office as the Company may direct.

 

 

     (b) Payroll deductions for a participant shall commence on the first payroll following the Enrollment Date and shall end on the last payroll in the Offering Period to which such authorization is applicable, unless sooner terminated by the participant as provided in Section 10 hereof.

 

6.     Payroll Deductions.

 

     (a) At the time a participant files his or her subscription agreement, he or she shall elect to have payroll deductions made on each pay day during the Offering Period in an amount not exceeding ten percent (10%) of the Compensation which he or she receives on each pay day during the Offering Period. Such payroll deductions shall be in whole percentages only.

 

 

     (b) All payroll deductions made for a participant shall be credited to his or her account under the Plan. A participant may not make any additional payments into such account.

 

 

     (c) A participant may discontinue his or her participation in the Plan as provided in Section 10 hereof, or may increase or decrease the rate of his or her payroll deductions during the Offering Period by completing and filing with the Company a new subscription agreement authorizing a change in payroll deduction rate. The Board may, in its discretion, limit the number of participation rate changes during any Offering Period. The change in payroll deduction rate shall be effective with the first full payroll period following ten (10) business days after the Company’s receipt of the new subscription agreement. A participant’s subscription agreement shall remain in effect for successive Offering Periods unless terminated as provided in Section 10 hereof.

 

 

     (d) At the time the option is exercised, in whole or in part, or at the time any of the Company’s Common Stock issued under the Plan is disposed of, the participant must make adequate provision for the Company’s federal, state, or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any time, the Company may, but shall not be obligated to, withhold from the participant’s compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefits attributable to sale or other disposition of Common Stock by the Employee.

 

7.     Grant of Option.

 

     On the Enrollment Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase (at the applicable Purchase Price) up to a whole number of shares of the Company’s Common Stock the (“Option Shares”) determined by dividing $50,000 by the Fair Market Value of a share of Common Stock on the Enrollment Date (subject to any adjustment pursuant to Section 18), and provided that such purchase shall be subject to the limitations set forth in Sections 3(b) and 12 hereof. The option shall be exercisable as to 25% of the Option Shares on each Exercise Date during the Offering Period. Exercise of the option shall occur as provided in Section 8 hereof, unless the participant has withdrawn pursuant to Section 10 hereof. The option shall expire on the last day of the Offering Period.

 

8.     Exercise of Option.

 

     Unless a participant withdraws from the Plan as provided in Section 10 hereof, his or her option for the purchase of shares shall be exercised automatically on each Exercise Date during the Offering Period, and a number of full shares not exceeding the number of shares as to which such participant’s option is exercisable on such Exercise Date shall be purchased for such participant at the applicable Purchase Price with the accumulated payroll deductions in his or her account. No fractional shares shall be purchased. Any payroll deductions accumulated in a participant’s account which are not sufficient to purchase a full share of Common Stock shall be retained in the participant’s account for the subsequent Purchase Period or Offering Period, subject to earlier withdrawal by the participant as provided in Section 10 hereof. Any other monies left over in a participant’s account after the Exercise Date shall be returned to the participant. During a participant’s lifetime, a participant’s option to purchase shares hereunder is exercisable only by him or her.

 

9.     Delivery.

 

     As promptly as practicable after each Exercise Date on which a purchase of shares occurs, the Company shall arrange the delivery to each participant or to his or her designee, as appropriate, of a certificate representing the shares purchased upon exercise of his or her option. The Company may, in its sole discretion and in compliance with applicable laws, authorize the use of book entry registration of shares in lieu of issuing certificates.

 

10.     Withdrawal; Termination of Employment.

 

     (a) A participant may withdraw all but not less than all the payroll deductions credited to his or her account and not yet used to exercise his or her option under the Plan at any time by giving written notice to the Company in the form of Exhibit B to this Plan. All of the participant’s payroll deductions credited to his or her account shall be paid to such participant promptly after receipt of notice of withdrawal and such participant’s option for the Offering Period shall be automatically terminated, and no further payroll deductions for the purchase of shares shall be made for such Offering Period. If a participant withdraws from an Offering Period, payroll deductions shall not resume at the beginning of the succeeding Offering Period unless the participant delivers to the Company a new subscription agreement.

 

 

     (b) Upon a participant’s ceasing to be an Employee (as defined in Section 2(g) hereof), for any reason, he or she shall be deemed to have elected to withdraw from the Plan and the payroll deductions credited to such participant’s account during the Offering Period but not yet used to exercise the option shall be returned to such participant or, in the case of his or her death, to the person or persons entitled thereto under Section 14 hereof, and such participant’s option shall be automatically terminated. If, prior to the last day of the Offering Period, the Designated Subsidiary by which the Employee is employed shall cease to be a Subsidiary of the Company, or if the Employee is transferred to a Subsidiary of the Company that is not a Designated Subsidiary, the Employee shall be deemed to have terminated employment for purposes of this Plan.

 

 

     (c) A participant’s withdrawal from an Offering Period shall not have any effect upon his or her eligibility to participate in any similar plan which may hereafter be adopted by the Company or in succeeding Offering Periods.

 

11.     Interest.

 

     No interest shall accrue on the payroll deductions of a participant in the Plan.

 

12.     Stock.

 

     (a) The maximum number of shares of the Company’s Common Stock which shall be made available for sale under the Plan shall be 4,000,000 shares, subject to adjustment as provided in Section 18(a) hereof. If, on a given Exercise Date, the number of shares with respect to which options are to be exercised exceeds the number of shares then available under the Plan, the Company shall make a pro rata allocation of the shares remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable.

 

 

     (b) The participant shall have no interest or voting right in shares covered by his option until such option has been exercised.

 

 

     (c) Shares to be delivered to a participant under the Plan shall be registered in the name of the participant or in the name of the participant and his or her spouse.

 

13.     Administration.

 

     The Plan shall be administered by the Board or a committee of members of the Board appointed by the Board. The Board or its committee shall have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims filed under the Plan. Every finding, decision and determination made by the Board or its committee shall, to the full extent permitted by law, be final and binding upon all parties.

 

14.     Designation of Beneficiary.

 

     (a) A participant may file a written designation of a beneficiary who is to receive any shares and cash, if any, from the participant’s account under the Plan in the event of such participant’s death subsequent to an Exercise Date on which the option is exercised but prior to delivery to such participant of such shares and cash. In addition, a participant may file a written designation of a beneficiary who is to receive any cash from the participant’s account under the Plan in the event of such participant’s death prior to exercise of the option. If a participant is married and the designated beneficiary is not the spouse, spousal consent shall be required for such designation to be effective.

 

 

     (b) Such designation of beneficiary may be changed by the participant at any time by written notice. In the event of the death of a participant and in the absence of a beneficiary validly designated under the Plan who is living at the time of such participant’s death, the Company shall deliver such shares and/or cash to the executor or administrator of the estate of the participant, or if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion, may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the participant, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.

 

15.     Transferability .

 

     Neither payroll deductions credited to a participant’s account nor any rights with regard to the exercise of an option or to receive shares under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided in Section 14 hereof) by the participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 10 hereof.

 

 

16.     Use of Funds.

 

     All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such payroll deductions.

 

17.     Reports.

 

     Individual accounts shall be maintained for each participant in the Plan. Statements of account shall be given to participating Employees at least annually, which statements shall set forth the amounts of payroll deductions, the Purchase Price, the number of shares purchased and the remaining cash balance, if any.

 

18.     Adjustments Upon Changes in Capitalization, Dissolution, Liquidation, Merger or Asset Sale.

 

     (a) Changes in Capitalization . The maximum number of shares of Common Stock available for sale under the Plan, the Reserves, the maximum number of shares each participant may purchase during each Purchase Period (pursuant to Section 7), as well as the Purchase Price per share and the number of shares of Common Stock covered by each option under the Plan which has not yet been exercised, shall be proportionately adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration”. The Board may make any determinations with respect to the effect of any such adjustments, which determinations shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option granted hereunder.

 

 

     (b) Dissolution or Liquidation . In the event of the proposed dissolution or liquidation of the Company, the Offering Periods shall terminate immediately prior to the consummation of such proposed action, unless otherwise provided by the Board.

 

 

     (c) Reorganization Events .

 

 

         (1) Definition . A “Reorganization Event” shall mean: (a) any merger or consolidation of the Company with or into another entity as a result of which the Common Stock is converted into or exchanged for the right to receive cash, securities or other property, (b) any exchange of shares of the Company for cash, securities or other property pursuant to a share exchange transaction, or (c) any sale of all or substantially all of the assets of the Company, each while unexercised options remain outstanding under the Plan.

 

         (2) Consequences of a Reorganization Event on Options . Upon the occurrence of a Reorganization Event, or the execution by the Company of any agreement with respect to a Reorganization Event, the Board shall provide that all outstanding options shall be assumed, or equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof). For purposes hereof, an option shall be considered to be assumed if, following consummation of the Reorganization Event, the option confers the right to purchase, for each share of Common Stock subject to the option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of options to consist solely of common stock of the acquiring or succeeding corporation (or an affiliate thereof) equivalent in fair market value to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.

 

 

         Notwithstanding the foregoing, in the event that the acquiring or succeeding corporation refuses to assume, or substitute for, the options, any Offering Periods then in progress shall be shortened by setting a new Exercise Date (the “New Exercise Date”), determined by the Board. The New Exercise Date shall be before the date of the proposed Reorganization Event. The Board shall notify each participant in writing at least ten (10) business days prior to the New Exercise Date that the Exercise Date for the participant’s option has been changed to the New Exercise Date and that the participant’s option shall be exercised automatically on the New Exercise Date, unless prior to such date the participant has withdrawn from the Offering Period as provided in Section 10 hereof.

 

19.     Amendment or Termination.

 

     (a) The Board of Directors of the Company may at any time and for any reason terminate or amend the Plan. Except as provided in Section 18 hereof, no such termination can affect options previously granted, provided that an Offering Period may be terminated by the Board on any Exercise Date if the Board determines that the termination of the Plan is in the best interests of the Company and its stockholders. Except as provided in Section 18 hereof, no amendment may make any change in any option theretofore granted which adversely affects the rights of any participant. To the extent necessary to comply with Section 423 of the Code (or any successor rule or provision or any other applicable law or regulation), the Company shall obtain stockholder approval in such a manner and to such a degree as required.

 

 

     (b) Without stockholder consent and without regard to whether any participant rights may be considered to have been “adversely affected,” the Board (or its committee) shall be entitled to change the Offering Periods, limit the frequency and/or number of changes in the amount withheld during an Offering Period, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant’s Compensation and establish such other limitations or procedures as the Board (or its committee) determines in its sole discretion advisable which are consistent with the Plan.

 

20.     Notices.

 

     All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.

 

21.     Conditions Upon Issuance of Shares.

 

     Shares shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance.

 

 

     As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.

 

22.     Grants to Employees in Foreign Jurisdictions.

 

     The Company may, in order to comply with the laws of a foreign jurisdiction, grant options to employees of the Company or a Designated Subsidiary who are citizens or residents of such foreign jurisdiction (without regard to whether they are also citizens of the United States or resident aliens (within the meaning of Section 7701(b)(1)(A) of the Code)) with terms that are less favorable (but not more favorable) than the terms of options granted under the Plan to employees of the Company or a Designated Subsidiary who are resident in the United States. Notwithstanding the preceding provisions of this Plan, employees of the Company or a Designated Subsidiary who are citizens or residents of a foreign jurisdiction (without regard to whether they are also citizens of the United States or resident aliens (within the meaning of Section 7701(b)(1)(A) of the Code)) may be excluded from eligibility under the Plan if (a) the grant of an option under the Plan to a citizen or resident of the foreign jurisdiction is prohibited under the laws of such jurisdiction or (b) compliance with the laws of the foreign jurisdiction would cause the Plan to violate the requirements of Section 423 of the Code. The Company may add one or more appendices to this Plan describing the operation of the Plan in those foreign jurisdictions in which employees are excluded from participation or granted less favorable options.

 

23.     Authorization of Sub-Plans.

 

     The Board may from time to time establish one or more sub-plans under the Plan with respect to one or more Designated Subsidiaries, provided that such sub-plan complies with Section 423 of the Code.

 

24.     Effective Date.

 

     The Plan shall become effective upon the earlier to occur of its adoption by the Board of Directors or its approval by the stockholders of the Company.

 

25.     Automatic Transfer to Low Price Offering Period.

 

     To the extent permitted by any applicable laws, regulations, or rules of the national securities exchange or over-the-counter market on which the Common Stock trades, if the Fair Market Value of the Common Stock on the Enrollment Date of the next Offering Period is lower than the Fair Market Value of the Common Stock on the Enrollment Date of any current Offering Period, then all participants in such current Offering Period shall be automatically withdrawn from such Offering Period immediately after the exercise of their option on the Exercise Date and shall be automatically re-enrolled in the next Offering Period as of the first day thereof.

 

26.     Governmental Regulations.

 

     The Company’s obligation to sell and deliver Common Stock under this Plan is subject to listing on a national securities exchange or an over the counter market (to the extent the Common Stock is then so listed or quoted) and the approval of all governmental authorities required in connection with the authorization, issuance, or sale of such stock.

 

27.     Governing Law.

 

     The Plan shall be governed by Delaware law except to the extent that such law is preempted by federal law.

 

28.     Source of Shares.

 

     Shares may be issued upon exercise of an option from authorized but unissued Common Stock, from shares held in the treasury of the Company, or from any other proper source.

 

29.     Notification Upon Sale of Shares.

 

     Each employee agrees, by participating in the Plan, to promptly give notice to the Company of any disposition of shares purchased under the Plan where such disposition occurs within two years after the date of the grant of the option pursuant to which such shares were purchased or within one year of the date of exercise of such option pursuant to which such shares were purchased.