Exhibit 10.19

 

TARANTELLA, INC.

EMPLOYEE STOCK PURCHASE PLAN

 

The following constitute the provisions of the Employee Stock Purchase Plan of
Tarantella, 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 Internal Revenue Code of 1986, as amended. 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 Tarantella, Inc., a California corporation.

 

  e)   “Compensation” shall include all base pay, overtime pay, bonus and
commissions and shall exclude all other amounts.

 

  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 a regular employee of the
Company for purposes of tax withholding under the Code whose customary
employment with the Company or any Designated Subsidiary regardless of the
number of hours worked. For purposes of the Plan, the employment relationship
shall be treated as continuing intact while the individual is on sick leave or
other leave of absence approved by the Company. Where the period of leave
exceeds ninety (90) days and the individual’s right to employment is not
guaranteed either by statute or by contract, the employment relationship will be
deemed to have terminated on the 91st day of such leave.

 

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

 

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

 

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

 

  i)   If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the National Market System
of the National Association of Securities Dealers, Inc. Automated Quotation
(“Nasdaq”) System, its Fair Market Value shall be the closing sale price for the
Common Stock (or the mean of the closing bid and asked prices, if no sales were
reported), as quoted on such exchange (or the exchange with the greatest volume
of trading in Common Stock) or system on the date of such determination, as
reported in The Wall Street Journal or such other source as the Board deems
reliable, or;

 

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  ii)   If the Common Stock is quoted on the Nasdaq system (but not on the
National Market System thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean of the closing bid and asked prices for the Common Stock on
the date of such determination, as reported in The Wall Street Journal or such
other source as the Board deems reliable, or;

 

  iii)   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.

 

  iv)   For purposes of the Enrollment Date under the first Offering Period
under the Plan, the Fair Market Value of the Common Stock shall be the Price to
Public as set forth in the final prospectus filed with the Securities and
Exchange commission pursuant to Rule 424 under the Securities Act of 1933, as
amended.

 

  k)   “Offering Period” shall mean a period of approximately six (6) months,
commencing on the first Trading Day on or after February 1 and terminating on
the last Trading Day in the period ending the following July 31, or commencing
on the first Trading Day on or after August 1 and terminating on the last
Trading Day in the period ending the following January 31, during which an
option granted pursuant to the Plan may be exercised. The duration, commencement
and termination of Offering Periods may be changed pursuant to Section 4 of this
Plan.

 

  l)   “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.

 

  m)   “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.

 

  n)   “Subsidiary” shall mean a corporation, domestic or foreign, of which not
less than 50% of the voting shares are held by the Company or a Subsidiary,
whether or not such corporation now exists or is hereafter organized or acquired
by the Company or a Subsidiary.

 

  o)   “Trading Day” shall mean a day on which national stock exchanges and the
National Association of Securities Dealers Automated Quotation (Nasdaq) System
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.

 

  b)   Any provisions of the Plan to the contrary notwithstanding, no Employee
shall be granted an option under the Plan

 

  i)   to the extent, 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 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 his or her rights to purchase stock under all employee
stock purchase plans of the Company and its subsidiaries to accrue 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.

 

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4.   Offering Periods.

 

The Plan shall be implemented by consecutive Offering Periods with a new
Offering Period commencing on the first Trading Day on or after February 1 and
August 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, commencement and termination
of Offering Periods with respect to future offerings without shareholder
approval if such change is announced at least five (5) days prior to the
scheduled beginning of the first Offering Period to be affected thereafter.

 

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 with the Company’s payroll office at least ten
business days prior to the applicable Enrollment Date, however, a later date,
prior to the applicable Enrollment Date may be established for all eligible
Employees to enroll in a given Offering Period.

 

  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 of at least one percent (1%) and not exceeding ten
percent (10%) of the Compensation which he or she receives on each pay day
during the Offering Period, and the aggregate of such payroll deductions during
the Offering Period shall not exceed ten percent (10%) of the participant’s
Compensation during said Offering Period.

 

  b)   All payroll deductions made for a participant shall be credited to his or
her account under the Plan and will be withheld in whole percentages only. 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 or 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 rate shall
be effective with the first full payroll period following five (5) business days
after the Company’s receipt of the new subscription agreement unless the Company
elects to process a given change in participation more quickly. A participant’s
subscription agreement shall remain in effect for successive Offering Periods
unless terminated as provided in Section 10 hereof.

 

  d)   Notwithstanding the foregoing, to the extent necessary to comply with
Section 423(b)(8) of the Code and Section 3(b) hereof, a participant’s payroll
deductions may be decreased to 0% at such time during any Offering Period which
is scheduled to end during the current calendar year (the “Current Offering
Period”) that the aggregate of all payroll deductions which were previously used
to purchase stock under the Plan in a prior Offering Period which ended during
that calendar year plus all payroll deductions accumulated with respect to the
Current Offering Period equal $21,250. Payroll deductions shall recommence at
the rate provided in such participant’ s subscription agreement at the beginning
of the first Offering Period which is scheduled to end in the following calendar
year, unless terminated by the participant as provided in Section 10 hereof.

 

  e)  

At the time the option is exercised, in whole or in part, or at the time some or
all 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
will not be obligated

 

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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 early 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 on
the Exercise Date of such Offering Period (at the applicable Purchase Price) up
to a number of shares of the Company’s Common Stock determined by dividing such
Employee’s payroll deductions accumulated prior to such Exercise Date and
retained in the Participant’s account as of the Exercise Date by the applicable
Purchase Price; provided that in no event shall an Employee be permitted to
purchase during each Offering Period more than a number of Shares determined by
dividing $12,500 by the Fair Market Value of a share of the Company’s Common
Stock on the Enrollment Date (the “Number”), except that for purposes of the
first Offering period under the Plan, the Number shall be calculated by dividing
$25,000 by the Fair Market Value of a share of the Company’s Common Stock on the
Enrollment Date, and provided further that all such purchases shall be subject
to the limitations set forth in Sections 3(b) and 12 hereof. Exercise of the
option shall occur as provided in Section 8 hereof, unless the participant has
withdrawn pursuant to Section 10 hereof, and 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 will be exercised automatically on
the Exercise Date, and the maximum number of full shares subject to option shall
be purchased for such participant at the applicable Purchase Price with the
accumulated payroll deductions in his or her account. No fractional shares will
be purchased; any payroll deductions accumulated in a participant’s account
which are not sufficient to purchase a full share shall be retained in the
participant’ s account for the subsequent Offering Period, subject to earlier
withdrawal by the participant as provided in Section 10 hereof. Any other moneys
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, as
appropriate, of a certificate representing the shares purchased upon exercise of
his or her option.

 

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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 will be paid to such participant promptly after
receipt of notice of withdrawal and such participant’s option for the Offering
Period will be automatically terminated, and no further payroll deductions for
the purchase of shares will be made during the Offering Period. If a participant
withdraws from an Offering Period, payroll deductions will 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 will 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
will 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 will be automatically terminated.

 

  c)   A participant’s withdrawal from an Offering Period will 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 which
commence after the termination of the Offering Period from which the participant
withdraws.

 

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 5,250,000 shares, subject to
adjustment upon changes in capitalization of the Company as provided in Section
18 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.

 

Notwithstanding the foregoing, at any such time as the offer and sale of
securities pursuant to the Plan is subject to compliance with Section 260.140.45
of Title 10 of the California Code of Regulations (“Section 260.140.45”), the
total number of shares of Common Stock issuable upon the exercise of all
outstanding options (together with options or stock purchase rights outstanding
under any other stock option plan of the Company) and the total number of shares
provided for under any stock bonus or similar plan of the Company shall not
exceed thirty percent (30%) (or such other higher percentage limitation as may
be approved by the shareholders of the Company pursuant to Section 260.140.45)
of the then outstanding shares of the Company as calculated in accordance with
the conditions and exclusions of Section 260.140.45

 

  b)   The participant will 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 will be registered
in the name of the participant or in the name of the participant and his or her
spouse.

 

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13.   Administration.

 

  a)   Administrative Body. 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.

 

  b)   Members of the Board who are eligible Employees are permitted to
participate in the Plan, provided that:

 

  i)   Members of the Board who are eligible to participate in the Plan may not
vote on any matter affecting the administration of the Plan or the grant of any
option pursuant to the Plan.

 

  ii)   If a Committee is established to administer the Plan, no member of the
Board who is eligible to participate in the Plan may be a member of the
Committee.

 

  c)   Rule 16b-3 Limitations. Notwithstanding the provisions of Subsection (a)
of this Section 13, in the event that Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), or any
successor provision (“Rule 16b-3”) provides specific requirements for the
administrators of plans of this type, the Plan shall be only administered by
such a body and in such a manner as shall comply with the applicable
requirements of Rule 16b-3.

 

14.   Designation of Beneficiary.

 

  a)   The beneficiary(ies) designated by the participant to take under the life
insurance program of the Company, or a beneficiary chosen by a participant is
written designation to the Company of a beneficiary shall 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, the same beneficiary(ies) shall 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.

 

  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.

 

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17.   Reports.

 

Individual accounts will be maintained for each participant in the Plan.
Statements of account will be given to participating Employees at least
annually, which statements will 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.

 

  a)   Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves as well as the price per share 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 in the event of a stock split, reverse
stock split, stock dividend, recapitalization, combination, reclassification or
other distribution of the Common Stock without the 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”. Such adjustment shall be made by the Board, whose determination
in that respect 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.

 

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

 

  c)   Merger or Asset Sale. In the event of a proposed sale of all or
substantially all of the assets of the Company, or the merger of the Company
with or into another corporation, each option under the Plan shall be assumed or
an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Offering Period then in progress by setting a new
Exercise Date (the “New Exercise Date”) or to cancel each outstanding right to
purchase and refund all sums collected from participants during the Offering
Period then in progress. If the Board shortens the Offering Period then in
progress in lieu of assumption or substitution in the event of a merger or sale
of assets, 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 his
option has been changed to the New Exercise Date and that his option will be
exercised automatically on the New Exercise Date, unless prior to such date he
has withdrawn from the Offering Period as provided in Section 10 hereof. For
purposes of this paragraph, an option granted under the Plan shall be deemed to
be assumed if, following the sale of assets or merger, the option confers the
right to purchase, for each share of option stock subject to the option
immediately prior to the sale of assets or merger, the consideration (whether
stock, cash or other securities or property) received in the sale of assets or
merger by holders of Common Stock for each share of Common Stock held on the
effective date of the transaction (and if such 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 such
consideration received in the sale of assets or merger was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Board may, with the consent of the successor corporation and
the participant, provide for the consideration to be received upon exercise of
the option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock and the sale of assets or merger.

 

  d)   The Board may, if it so determines in the exercise of its sole
discretion, also make provision for adjusting the Reserves, as well as the price
per share of Common Stock covered by each outstanding option, in the event the
Company effects one or more reorganizations, recapitalization, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.

 

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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 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 shareholders. 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
Rule 16b-3 or under Section 423 of the Code (or any successor rule or provision
or any other applicable law or regulation), the Company shall obtain shareholder
approval in such a manner and to such a degree as required.

 

  b)   Without shareholder 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.

 

  c)   The Plan shall be approved by the shareholders of the Company within
twelve (12) months of the date of adoption thereof by the Board. In addition, an
amendment to the Plan must be approved by the shareholders of the Company within
twelve (12) months of the adoption of such amendment if such amendment would
authorize the sale of more shares than are then authorized for issuance under
the Plan pursuant to Section 12 or would change the definition of the
corporations that may be designated by the Board as Designated Subsidiaries.

 

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.   Term of Plan.

 

The Plan shall become effective upon the earlier to occur of its adoption by the
Board of Directors or its approval by the shareholders of the Company. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 19 hereof.

 

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23.   Additional Restrictions of Rule 16b-3.

 

The terms and conditions of options granted hereunder to, and the purchase of
shares by, persons subject to Section 16 of the Exchange Act shall comply with
the applicable provisions of Rule 16b-3. This Plan shall be deemed to contain,
and such options shall contain, and the shares issued upon exercise thereof
shall be subject to, such additional conditions and restrictions as may be
required by Rule 16b-3 to qualify for the maximum exemption from Section 16 of
the Exchange Act with respect to Plan transactions.

 

24.   Provision of Information.

 

At least annually, copies of the Company’s balance sheet and income statement
for the just completed fiscal year shall be made available to each participant
in the Plan. The Company shall not be required to provide such information to
key employees whose duties in connection with the Company assure them access to
equivalent information.