Document:

Exhibit
4.6

 

WARRANT
TO PURCHASE STOCK

 

THIS WARRANT AND THE
SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF ANY STATE AND, EXCEPT
AND PURSUANT TO THE PROVISIONS OF ARTICLE 5 BELOW, MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL
REGISTERED UNDER SAID ACT AND APPLICABLE STATE SECURITIES LAW OR, IN THE
OPINION OF LEGAL COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER
OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS
EXEMPT FROM REGISTRATION.

 

	
  Company:

  	
   

  	
  GameFly, Inc.

  
	
  Number of Shares:

  	
   

  	
  48,077

  
	
  Class of Stock:

  	
   

  	
  Common

  
	
  Warrant Price:

  	
   

  	
  $0.78 per share

  
	
  Issue Date:

  	
   

  	
  March 1, 2007

  
	
  Expiration Date:

  	
   

  	
  The 10th anniversary
  after the Issue Date.

  
	
  Credit Facility:

  	
   

  	
  This Warrant is issued
  in connection with the Overline Facility referenced in the Loan and Security
  Agreement between Company and Silicon Valley Bank dated January 21, 2003
  (as amended from time to time).

  

 

THIS WARRANT CERTIFIES
THAT, for good and valuable consideration, SILICON VALLEY BANK (Silicon Valley
Bank, together with any registered holder from time to time of this Warrant or
any holder of the shares issuable or issued upon exercise of this Warrant,
“Holder”) is entitled to purchase the number of fully paid and nonassessable
shares of the class of securities (the “Shares”) of the Company at the Warrant
Price, all as set forth above and as adjusted pursuant to Article 2 of
this Warrant, subject to the provisions and upon the terms and conditions set
forth in this Warrant.

 

ARTICLE 1.          EXERCISE.

 

1.1           Method of Exercise. Holder may exercise this Warrant by delivering a
duly executed Notice of Exercise in substantially the form attached as Appendix
1 to the principal office of the Company. Unless Holder is exercising the
conversion right set forth in Article 1.2, Holder shall also deliver to
the Company a check, wire transfer (to an account designated by the Company),
or other from of payment acceptable to the Company for the aggregate Warrant
Price for the Shares being purchased.

 

1.2           Conversion Right. In lieu of exercising this Warrant as specified in
Article 1.1, Holder may from time to time convert this Warrant, in whole
or in part, into a number of Shares determined by dividing (a) the
aggregate fair market value of the Shares or other securities otherwise
issuable upon exercise of this Warrant minus the aggregate Warrant Price of
such Shares by (b) the fair market value of one Share. The fair market
value of the Shares shall be determined pursuant to Article 1.3.

 

1.3           Fair Market Value. If the Company’s common stock is traded in a public
market and the shares are common stock, the fair market value of each Share
shall be the closing price of a Share reported for the business day immediately
before Holder delivers its Notice of Exercise to the Company (or in the
instance where the Warrant is exercised immediately prior to the effectiveness
of the Company’s initial public offering, the “price to public” per share price
specified in the final prospectus relating to such offering). If the Company’s
common stock is

 

 

traded in a public market
and the Shares are preferred stock, the fair market value of a Share shall be
the closing price of a share of the Company’s common stock reported for the
business day immediately before Holder delivers its Notice of Exercise to the
Company (or, in the instance where the Warrant is exercised immediately prior
to the effectiveness of the Company’s initial public offering, the initial
“price to public” per share price specified in the final prospectus relating to
such offering), in both cases, multiplied by the number of shares of the
Company’s common stock into which a Share is convertible. If the Company’s common
stock is not traded in a public market, the Board of Directors of the Company
shall determine fair market value in its reasonable good faith judgment.

 

1.4           Delivery of Certificate and New Warrant. Promptly after Holder exercises or
converts this Warrant and, if applicable, the Company receives payment of the
aggregate Warrant Price, the Company shall deliver to Holder certificates for
the Shares acquired and, if this Warrant has not been fully exercised or
converted and has not expired, a new Warrant representing the Shares not so
acquired.

 

1.5           Replacement of Warrants. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant and,
in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of mutilation, or surrender and cancellation of this Warrant, the Company
shall execute and deliver, in lieu of this Warrant, a new warrant of like
tenor.

 

1.6           Treatment of Warrant Upon Acquisition of Company.

 

1.6.1        “Acquisition”. For the purpose of this Warrant,
“Acquisition” means any sale, license, or other disposition of all or
substantially all of the assets of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company’s
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.

 

1.6.2        Treatment of Warrant at Acquisition.

 

A)           Upon the written request of the Company, Holder agrees
that, in the event of an Acquisition in which the sole consideration is cash,
either (a) Holder shall exercise its conversion or purchase right under
this Warrant and such exercise will be deemed effective immediately prior to
the consummation of such Acquisition or (b) if Holder elects not to
exercise the Warrant, this Warrant will expire upon the consummation of such
Acquisition. The Company shall provide the Holder with written notice of its request
relating to the foregoing (together with such reasonable information as the
Holder may request in connection with such contemplated Acquisition giving rise
to such notice), which is to be delivered to Holder not less than ten
(10) days prior to the closing of the proposed Acquisition.

 

B)            Upon the written request of the Company, Holder agrees
that, in the event of an Acquisition that is an “arms length” sale of all or
substantially all of the Company’s assets (and only its assets) to a third
party that is not an Affiliate (as defined below) of the Company (a “True Asset
Sale”), either (a) Holder shall exercise its conversion or purchase right
under this Warrant and such exercise will be deemed effective immediately prior
to the consummation of such Acquisition or (b) if Holder elects not to
exercise the Warrant, this Warrant will continue until the Expiration Date if
the Company continues as a going concern following the closing of any such True
Asset Sale. The Company shall provide the Holder with written notice of its
request relating to the foregoing (together with such reasonable information as
the Holder may request in connection with such contemplated Acquisition giving
rise to such notice), which is to

 

2

 

be delivered to Holder
not less than ten (10) days prior to the closing of the proposed
Acquisition.

 

C)            Upon the closing of any Acquisition other than those
particularly described in subsections (A) and (B) above, the
successor entity shall assume the obligations of this Warrant, and this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of
this Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price and/or number of Shares
shall be adjusted accordingly.

 

As used herein “Affiliate”
shall mean any person or entity that owns or controls directly or indirectly
ten (10) percent or more of the stock of Company, any person or entity
that controls or is controlled by or is under common control with such persons
or entities, and each of such person’s or entity’s officers, directors, joint
venturers or partners, as applicable.

 

ARTICLE 2.          ADJUSTMENTS TO THE SHARES.

 

2.1           Stock Dividends, Splits, Etc. If the Company declares or pays a
dividend on the Shares payable in common stock, or other securities, then upon
exercise of this Warrant, for each Share acquired, Holder shall receive, without
cost to Holder, the total number and kind of securities to which Holder would
have been entitled had Holder owned the Shares of record as of the date the
dividend occurred. If the Company subdivides the Shares by reclassification or
otherwise into a greater number of shares or takes any other action which
increase the amount of stock into which the Shares are convertible, the number
of shares purchasable hereunder shall be proportionately increased and the
Warrant Price shall be proportionately decreased. If the outstanding shares are
combined or consolidated, by reclassification or otherwise, into a lesser
number of shares, the Warrant Price shall be proportionately increased and the
number of Shares shall be proportionately decreased.

 

2.2           Reclassification, Exchange, Combinations or
Substitution.
Upon any reclassification, exchange, substitution, or other event that results
in a change of the number and/or class of the securities issuable upon exercise
or conversion of this Warrant, Holder shall be entitled to receive, upon
exercise or conversion of this Warrant, the number and kind of securities and
property that Holder would have received for the Shares if this Warrant had
been exercised immediately before such reclassification, exchange, substitution,
or other event. Such an event shall include any automatic conversion of the
outstanding or issuable securities of the Company of the same class or series
as the Shares to common stock pursuant to the terms of the Company’s
Certificate of Incorporation upon the closing of a registered public offering
of the Company’s common stock. The Company or its successor shall promptly
issue to Holder an amendment to this Warrant setting forth the number and kind
of such new securities or other property issuable upon exercise or conversion
of this Warrant as a result of such reclassification, exchange, substitution or
other event that results in a change of the number and/or class of securities
issuable upon exercise or conversion of this Warrant. The amendment to this
Warrant shall provide for adjustments which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Article 2
including, without limitation, adjustments to the Warrant Price and to the
number of securities or property issuable upon exercise of the new Warrant. The
provisions of this Article 2.2 shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events.

 

2.3           Adjustments for Diluting Issuances. The Warrant Price and the number of
Shares issuable upon exercise of this Warrant or, if the Shares are Preferred
Stock, the number of shares of common stock issuable upon conversion of the
Shares, shall be subject to adjustment, from time to time in the manner set
forth in the Company’s Certificate of

 

3

 

Incorporation as if the
Shares were issued and outstanding on and as of the date of any such required
adjustment. The provisions set forth for the Shares in the Company’s
Certificate of Incorporation relating to the above in effect as of the Issue
Date may not be amended, modified or waived, without the prior written consent
of Holder unless such amendment, modification or waiver affects the rights
associated with the Shares in the same manner as such amendment, modification
or waiver affects the rights associated with all other shares of the same
series and class as the Shares granted to the Holder.

 

2.4           No Impairment. The Company shall not, by amendment of its
Certificate of Incorporation or through a reorganization, transfer of assets,
consolidation, merger, dissolution, issue, or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed under this Warrant by the Company, but
shall at all times in good faith assist in carrying out of all the provisions
of this Article 2 and in taking all such action as may be necessary or
appropriate to protect Holder’s rights under this Article against impairment.

 

2.5           Fractional Shares. No fractional Shares shall be issuable upon exercise
or conversion of the Warrant and the number of Shares to be issued shall be
rounded down to the nearest whole Share. If a fractional share interest arises
upon any exercise or conversion of the Warrant, the Company shall eliminate
such fractional share interest by paying Holder the amount computed by
multiplying the fractional interest by the fair market value of a full Share.

 

2.6           Certificate as to Adjustments. Upon each adjustment of the Warrant
Price, the Company shall promptly notify Holder in writing, and, at the
Company’s expense, promptly compute such adjustment, and furnish Holder with a
certificate of its Chief Financial Officer setting forth such adjustment and
the facts upon which such adjustment is based. The Company shall, upon written
request, furnish Holder a certificate setting forth the Warrant Price in effect
upon the date thereof and the series of adjustments leading to such Warrant
Price.

 

ARTICLE 3.          REPRESENTATIONS AND COVENANTS OF THE COMPANY.

 

3.1           Representations and Warranties. The Company represents and warrants to
the Holder as follows:

 

(a)        The initial Warrant Price referenced on the first
page of this Warrant is not greater than (i) the price per share at
which the Shares were last issued in an arms-length transaction in which at
least $500,000 of the Shares were sold and (ii) the fair market value of
the Shares as of the date of this Warrant, as determined by the Company’s Board
of Directors.

 

(b)        All Shares which may be issued upon the exercise of
the purchase right represented by this Warrant, and all securities, if any,
issuable upon conversion of the Shares, shall, upon issuance, be duly
authorized, validly issued, fully paid and nonassessable, and free of any liens
and encumbrances except for restrictions on transfer provided for herein or
under applicable federal and state securities laws.

 

(c)        The Company’s capitalization table attached hereto as
Schedule 1 is true and complete as of the Issue Date.

 

3.2           Notice of Certain Events. If the Company proposes at any time
(a) to declare any dividend or distribution upon any of its stock, whether
in cash, property, stock, or other securities and whether or not a regular cash
dividend; (b) to offer for sale additional shares of any class or series
of the Company’s stock; (c) to effect any reclassification or
recapitalization

 

4

 

of any of its stock;
(d) to merge or consolidate with or into any other corporation, or sell,
lease, license, or convey all or substantially all of its assets, or to
liquidate, dissolve or wind up; or (e) offer holders of registration
rights the opportunity to participate in an underwritten public offering of the
company’s securities for cash, then, in connection with each such event, the
Company shall give Holder: (1) at least 10 days prior written notice of
the date on which a record will be taken for such dividend, distribution, or
subscription rights (and specifying the date on which the holders of common
stock will be entitled thereto) or the consummation date of the matters
referred to in (c) and (d) above; (2) in the case of the matters
referred to in (c) and (d) above at least 10 days prior written
notice of the date when the same will take place (and specifying the date on
which the holders of common stock will be entitled to exchange their common
stock for securities or other property deliverable upon the occurrence of such
event); and (3) in the case of the matter referred to in (e) above,
the same notice as is given to the holders of such registration rights.

 

3.3           Registration Under Securities Act of 1933, as amended. The Company shall, within 30 days of
the Issue Date, amend the Company’s Third Amended and Restated Investors’
Rights Agreement dated November 15, 2004 (the “Rights Agreement”) to
provide that the Shares shall have certain “Piggyback” registration rights
pursuant to and as set forth in Section 1.3 of the Rights Agreement;
provided that, if the Company should fail timely to so amend the Rights
Agreement, the Rights Agreement shall be deemed to be amended to provide such
registration rights. The provisions set forth therein relating to the above in
effect as of the Issue Date may not be amended, modified or waived without the
prior written consent of Holder unless such amendment, modification or waiver
affects the rights associated with the Shares in the same manner as such
amendment, modification, or waiver affects the rights associated with all other
shares of the same series and class as the Shares granted to the Holder.

 

3.4           No Shareholder Rights. Except as provided in this Warrant, the Holder will
not have any rights as a shareholder of the Company until the exercise of this
Warrant.

 

ARTICLE 4.         REPRESENTATIONS, WARRANTIES OF THE HOLDER. The Holder represents and warrants to
the Company as follows:

 

4.1           Purchase for Own Account. This Warrant and the securities to be
acquired upon exercise of this Warrant by the Holder will be acquired for
investment for the Holder’s account, not as a nominee or agent, and not with a
view to the public resale or distribution within the meaning of the Act. Holder
also represents that the Holder has not been formed for the specific purpose of
acquiring this Warrant or the Shares.

 

4.2           Disclosure of Information. The Holder has received or has had full
access to all the information it considers necessary or appropriate to make an
informed investment decision with respect to the acquisition of this Warrant
and its underlying securities. The Holder further has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of this Warrant and its underlying securities and to
obtain additional information (to the extent the Company possessed such information
or could acquire it without unreasonable effort or expense) necessary to verify
any information furnished to the Holder or to which the Holder has access.

 

4.3           Investment Experience. The Holder understands that the purchase of this
Warrant and its underlying securities involves substantial risk. The Holder has
experience as an investor in securities of companies in the development stage
and acknowledges that the Holder can bear the economic risk of such Holder’s
investment in this Warrant and its underlying securities and has such knowledge
and experience in financial or business matters that the Holder is capable of
evaluating the merits and risks of its investment in this Warrant and its
underlying

 

5

 

securities and/or has a
preexisting personal or business relationship with the Company and certain of
its officers, directors or controlling persons of a nature and duration that
enables the Holder to be aware of the character, business acumen and financial
circumstances of such persons.

 

4.4           Accredited Investor Status. The Holder is an “accredited investor”
within the meaning of Regulation D promulgated under the Act.

 

4.5           The Act. The Holder understands that this Warrant and the
Shares issuable upon exercise or conversion hereof have not been registered
under the Act in reliance upon a specific exemption therefrom, which exemption
depends upon, among other things, the bona fide nature of the Holder’s
investment intent as expressed herein. The Holder understands that this Warrant
and the Shares issued upon any exercise or conversion hereof must be held
indefinitely unless subsequently registered under the 1933 Act and qualified
under applicable state securities laws, or unless exemption from such registration
and qualification are otherwise available.

 

ARTICLE 5.          MISCELLANEOUS.

 

5.1           Term: This Warrant is exercisable in whole or in part at
any time and from time to time on or before the Expiration Date.

 

5.2           Legends. This Warrant and the Shares (and the securities
issuable, directly or indirectly, upon conversion of the Shares, if any) shall
be imprinted with a legend in substantially the following form:

 

THIS WARRANT AND THE
SHARES ISSUABLE HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE ACT, OR THE
SECURITIES LAWS OF ANY STATE AND, EXCEPT AND PURSUANT TO THE PROVISIONS OF
ARTICLE 5 BELOW, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAW OR, IN THE OPINION OF LEGAL COUNSEL IN
FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH
OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS EXEMPT FROM REGISTRATION.

 

5.3           Compliance with Securities Laws on Transfer. This Warrant and the Shares issuable
upon exercise of this Warrant (and the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws by the transferor and the transferee (including, without
limitation, the delivery of investment representation letters and legal
opinions reasonably satisfactory to the Company, as reasonably requested by the
Company). The Company shall not require Holder to provide an opinion of counsel
if the transfer is to Silicon Valley Bancshares (Holder’s parent company) or
any other affiliate of Holder. Additionally, the Company shall also not require
an opinion of counsel if there is no material question as to the availability
of current information as referenced in Rule 144(c), Holder represents
that it has complied with Rule 144(d) and (e) in reasonable
detail, the selling broker represents that it has complied with
Rule 144(f), and the Company is provided with a copy of Holder’s notice of
proposed sale.

 

6

 

5.4           Transfer Procedure. Upon receipt by Holder of the executed
Warrant, Holder will transfer all of this Warrant to Silicon Valley Bancshares,
Holder’s parent company, by execution of an Assignment substantially in the
form of Appendix 2. Subject to the provisions of Article 5.3 and upon
providing Company with written notice, Silicon Valley Bancshares and any
subsequent Holder may transfer all or part of this Warrant or the Shares
issuable upon exercise of this Warrant (or the Shares issuable directly or
indirectly, upon conversion of the Shares, if any) to any transferee, provided,
however, in connection with any such transfer, Silicon Valley Bancshares or any
subsequent Holder will give the Company notice of the portion of the Warrant
being transferred with the name, address and taxpayer identification number of
the transferee and Holder will
surrender this Warrant to the Company for reissuance to the
transferee(s) (and Holder if applicable). The Company may refuse to
transfer this Warrant or the Shares to any person who directly competes with
the Company, unless, in either case, the stock of the Company is publicly
traded.

 

5.5           Notices. All notices and other communications from the
Company to the Holder, or vice versa, shall be deemed delivered and effective
when given personally or mailed by first-class registered or certified mail,
postage prepaid, at such address as may have been furnished to the Company or
the Holder, as the case may (or on the first business day after transmission by
facsimile) be, in writing by the Company or such holder from time to time.
Effective upon receipt of the fully executed Warrant and the initial transfer
described in Article 5.4 above, all notices to the Holder shall be
addressed as follows until the Company receives notice of a change of address
in connection with a transfer or otherwise:

 

Silicon Valley Bancshares

Attn: Treasury Department

3003 Tasman Drive, HA 200

Santa Clara, CA 95054

Telephone: 408-654-7400

Facsimile: 408-496-2405

 

Notice to the Company
shall be addressed as follows until the Holder receives notice of a change in
address:

 

GameFly, Inc.

Attn: Vice
President-Finance

5870 Jefferson Blvd.,
Suite J

Los Angeles, California
90016-3109 

Telephone: 310-237-7032

Facsimile: 310-664-6788

 

5.6           Waiver. This Warrant and any term hereof may be changed,
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought.

 

5.7           Attorney’s Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs incurred
in such dispute, including reasonable attorney’s fees.

 

5.8           Automatic Conversion upon Expiration. In the event that, upon the Expiration
Date, the fair market value of one Share (or other security issuable upon the
exercise hereof) as determined in accordance with Section 1.3 above is
greater than the Exercise Price in effect on such date, then this Warrant shall
automatically be deemed on and as of such date to be converted pursuant to
Section 1.2 above as to all Shares (or such other securities) for which it

 

7

 

shall not previously have
been exercised or converted, and the Company shall promptly deliver a
certificate representing the Shares (or such other securities) issued upon such
conversion to the Holder.

 

5.9           Counterparts. This Warrant may be executed in counterparts, all of
which together shall constitute one and the same agreement.

 

5.10         Governing Law. This Warrant shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
its principles regarding conflicts of law.

 

[Signature page
follows.]

 

8

 

	
  “COMPANY”

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GAMEFLY, INC.

  	
   

  	
  GAMEFLY, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ David A. Hodess

  	
   

  	
  By:

  	
  /s/ Glen Van Ligten

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  David A. Hodess

  	
   

  	
  Name:

  	
  Glen Van Ligten

  
	
                  (Print)

  	
   

  	
                 (Print)

  
	
  Title: Chairman of the Board, President or Vice
  President

  	
   

  	
  Title:

  	
  Chief Financial Officer, Secretary, Assistant
  Treasurer or Assistant Secretary

  
	
   

  	
   

  	
   

  
	
  “HOLDER”

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SILICON VALLEY BANK

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Jack Garza

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Jack Garza

  	
   

  	
   

  
	
                  (Print)

  	
   

  	
   

  
	
  Title:

  	
  Relationship Manager

  	
   

  	
   

  

 

 

SCHEDULE 1

 

CAPITALIZATION TABLE

 

 

APPENDIX 1

 

NOTICE OF EXERCISE

 

1.            Holder elects
to purchase
               
shares of the Common Stock of GameFly, Inc. pursuant to the terms of the
attached Warrant, and tenders payment of the purchase price of the shares in
full.

 

[or]

 

1.            Holder elects
to convert the attached Warrant into Shares/cash [strike one] in the manner
specified in the Warrant. This conversion is exercised for
                             
of the Shares covered by the Warrant.

 

[Strike paragraph that does not apply.]

 

2.             Please issue a
certificate or certificates representing the shares in the name specified
below:

 

	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Holders Name

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Address)

  	
   

  	
   

  

 

3.       By its execution below and
for the benefit of the Company, Holder hereby restates each of the representations
and warranties in Article 4 of the Warrant as the date hereof.

 

	
   

  	
  HOLDER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
  (Date):Exhibit
10.1

 

GAMEFLY,
INC.

 

2002
STOCK PLAN

(as
amended)

 

1.             Purposes of the Plan.  The purposes
of this 2002  Stock Plan, as amended and
restated October 28, 2009, are to attract and retain the best available
personnel for positions of substantial responsibility, to provide additional
incentive to Employees and Consultants and to promote the success of the
Company’s business.  Options granted
under the Plan may be Incentive Stock Options or Nonstatutory Stock Options, as
determined by the Administrator at the time of grant of an option and subject
to the applicable provisions of Section 422 of the Code and the
regulations and interpretations promulgated thereunder.  Stock purchase rights may also be granted
under the Plan.

 

2.             Definitions.  As used
herein, the following definitions shall apply:

 

(a)           “Administrator” means the Board or its Committee appointed pursuant
to Section 4 of the Plan.

 

(b)           “Affiliate” means an entity other than a Subsidiary (as defined
below) which, together with the Company, is under common control of a third
person or entity.

 

(c)           “Applicable Laws” means the legal requirements relating to the
administration of stock option and restricted stock purchase plans under
applicable U.S. state corporate laws, U.S. federal and applicable state
securities laws, the Code, any Stock Exchange rules or regulations and the
applicable laws of any other country or jurisdiction where Options or Stock
Purchase Rights are granted under the Plan, as such laws, rules, regulations
and requirements shall be in place from time to time.

 

(d)           “Board” means the Board of Directors of the Company.

 

(e)           “Change of Control” means a sale of all or substantially all of the
Company’s assets, or any merger, consolidation or other transaction of the
Company with or into another corporation, entity or person, other than a
transaction in which the holders of at least a majority of the voting
securities of the Company outstanding immediately prior to such transaction
continue to hold (either by the voting securities remaining outstanding or by
their being converted into voting securities of the surviving entity) a
majority of the total voting power represented by the voting securities of the
Company, or such surviving entity, outstanding immediately after such
transaction.

 

(f)            “Code” means the Internal Revenue Code of 1986, as amended.

 

(g)           “Committee” means one or more committees or subcommittees of the
Board appointed by the Board to administer the Plan in accordance with Section 4
below.

 

(h)           “Common Stock” means the Common Stock of the Company.

 

 

(i)            “Company” means GameFly, Inc., a Delaware corporation.

 

(j)            “Consultant” means any person, including an advisor, who is
engaged by the Company or any Parent, Subsidiary or Affiliate to render
services and is compensated for such services, and any director of the Company
whether compensated for such services or not.

 

(k)           “Continuous Service Status” means the absence of any interruption or termination
of service as an Employee or Consultant. 
Continuous Service Status as an Employee or Consultant shall not be
considered interrupted in the case of:  (i) sick
leave; (ii) military leave; (iii) any other leave of absence approved
by the Administrator, provided that such leave is for a period of not more than
ninety (90) days, unless reemployment upon the expiration of such leave is
guaranteed by contract or statute, or unless provided otherwise pursuant to
Company policy adopted from time to time; or (iv) in the case of transfers
between locations of the Company or between the Company, its Parents,
Subsidiaries, Affiliates or their respective successors.  A change in status from an Employee to a
Consultant or from a Consultant to an Employee will not constitute an
interruption of Continuous Service Status.

 

(l)            “Corporate Transaction” means a sale of all or substantially all of the
Company’s assets, or a merger, consolidation or other capital reorganization of
the Company with or into another corporation, entity or person, and includes a
Change of Control.

 

(m)          “Director” means a member of the Board.

 

(n)           “Employee” means any person employed by the Company or any Parent, Subsidiary or
Affiliate, with the status of employment determined based upon such factors as
are deemed appropriate by the Administrator in its discretion, subject to any
requirements of the Code or the Applicable Laws.  The payment by the Company of a director’s
fee to a Director shall not be sufficient to constitute “employment” of such
Director by the Company.

 

(o)           “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

 

(p)           “Fair Market Value” means, as of any date, the fair market value of the
Common Stock, as determined by the Administrator in good faith on such basis as
it deems appropriate and applied consistently with respect to
Participants.  Whenever possible, the
determination of Fair Market Value shall be based upon the closing price for
the Shares as reported in the Wall Street Journal for the applicable
date.

 

(q)           “Incentive Stock Option” means an Option intended to qualify as an incentive
stock option within the meaning of Section 422 of the Code, as designated
in the applicable Option Agreement.

 

(r)            “Listed Security”
means any security of the Company that is listed or approved for listing on a
national securities exchange or designated or approved for designation as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc.

 

2

 

(s)           “Named Executive” means any individual who, on the last day of the
Company’s fiscal year, is the chief executive officer of the Company (or is
acting in such capacity) or among the four most highly compensated officers of
the Company (other than the chief executive officer).  Such officer status shall be determined
pursuant to the executive compensation disclosure rules under the Exchange
Act.

 

(t)            “Nonstatutory Stock Option” means an Option not intended to qualify as an
Incentive Stock Option, as designated in the applicable Option Agreement.

 

(u)           “Option” means a stock option granted pursuant to the Plan.

 

(v)           “Option Agreement” means a written document, the form(s) of which
shall be approved from time to time by the Administrator, reflecting the terms
of an Option granted under the Plan and includes any documents attached to or
incorporated into such Option Agreement, including, but not limited to, a
notice of stock option grant and a form of exercise notice.

 

(w)          “Option Exchange Program” means a program approved by the Administrator whereby
outstanding Options are exchanged for Options with a lower exercise price or
are amended to decrease the exercise price as a result of a decline in the Fair
Market Value of the Common Stock.

 

(x)            “Optioned Stock” means the Common Stock subject to an Option.

 

(y)           “Optionee” means an Employee or Consultant who receives an Option.

 

(z)            “Parent” means a “parent corporation,” whether now or hereafter existing, as
defined in Section 424(e) of the Code, or any successor provision.

 

(aa)         “Participant” means any holder of one or more Options or Stock
Purchase Rights, or the Shares issuable or issued upon exercise of such awards,
under the Plan.

 

(bb)         “Plan” means this 2002 Stock Plan.

 

(cc)         “Reporting Person” means an officer, Director, or greater than ten
percent stockholder of the Company within the meaning of Rule 16a-2 under
the Exchange Act, who is required to file reports pursuant to Rule 16a-3
under the Exchange Act.

 

(dd)         “Restricted Stock” means Shares of Common Stock acquired pursuant to a
grant of a Stock Purchase Right under Section 11 below.

 

(ee)         “Restricted Stock Purchase Agreement” means a written document, the form(s) of
which shall be approved from time to time by the Administrator, reflecting the
terms of a Stock Purchase Right granted under the Plan and includes any
documents attached to such agreement.

 

3

 

(ff)           “Rule 16b-3” means Rule 16b-3 promulgated under the Exchange
Act, as amended from time to time, or any successor provision.

 

(gg)         “Share” means a share of the Common Stock, as adjusted in accordance with Section 14
of the Plan.

 

(hh)         “Stock Exchange” means any stock exchange or consolidated stock price
reporting system on which prices for the Common Stock are quoted at any given
time.

 

(ii)           “Stock Purchase Right” means the right to purchase Common Stock pursuant to Section 11
below.

 

(jj)           “Subsidiary” means a “subsidiary corporation,” whether now or
hereafter existing, as defined in Section 424(f) of the Code, or any
successor provision.

 

(kk)         “Ten Percent Holder” means a person who owns stock representing more than
ten percent (10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary.

 

3.             Stock Subject to the Plan.  Subject to the
provisions of Section 14 of the Plan, the maximum aggregate number of
Shares that may be sold under the Plan is 5,637,382 Shares of Common
Stock.  The Shares may be authorized, but
unissued, or reacquired Common Stock.  If
an award should expire or become unexercisable for any reason without having
been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased Shares that were subject thereto shall, unless the
Plan shall have been terminated, become available for future grant under the
Plan.  In addition, any Shares of Common
Stock which are retained by the Company upon exercise of an award in order to
satisfy the exercise or purchase price for such award or any withholding taxes
due with respect to such exercise or purchase shall be treated as not issued
and shall continue to be available under the Plan.  Shares issued under the Plan and later
repurchased by the Company pursuant to any repurchase right which the Company
may have shall not be available for future grant under the Plan.

 

4.             Administration of the Plan.

 

(a)           General.  The Plan shall be administered by the Board
or a Committee, or a combination thereof, as determined by the Board.  The Plan may be administered by different
administrative bodies with respect to different classes of Participants and, if
permitted by the Applicable Laws, the Board may authorize one or more officers
to make awards under the Plan.

 

(b)           Committee Composition. 
If a
Committee has been appointed pursuant to this Section 4, such Committee
shall continue to serve in its designated capacity until otherwise directed by
the Board.  From time to time the Board
may increase the size of any Committee and appoint additional members thereof,
remove members (with or without cause) and appoint new members in substitution
therefor, fill vacancies (however caused) and remove all members of a Committee
and thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws and, in the case of a Committee administering the Plan in
accordance with the 

 

4

 

requirements of Rule 16b-3 or Section 162(m) of the
Code, to the extent permitted or required by such provisions.

 

(c)           Powers of the Administrator.  Subject to the
provisions of the Plan and in the case of a Committee, the specific duties
delegated by the Board to such Committee, the Administrator shall have the
authority, in its discretion:

 

(i)            to determine the Fair Market Value of the Common
Stock, in accordance with Section 2(p) of the Plan, provided that
such determination shall be applied consistently with respect to Participants
under the Plan;

 

(ii)           to select the Employees and Consultants to whom Plan
awards may from time to time be granted;

 

(iii)          to determine whether and to what extent Plan awards
are granted;

 

(iv)          to determine the number of Shares of Common Stock to
be covered by each award granted;

 

(v)           to approve the form(s) of agreement(s) used
under the Plan;

 

(vi)          to determine the terms and conditions, not
inconsistent with the terms of the Plan, of any award granted hereunder, which
terms and conditions include but are not limited to the exercise or purchase
price, the time or times when awards may be exercised (which may be based on
performance criteria), any vesting acceleration or waiver of forfeiture restrictions,
any pro rata adjustments to vesting as a result of a Participant’s
transitioning from full- to part-time service (or vice versa), and any
restriction or limitation regarding any Option, Optioned Stock, Stock Purchase
Right or Restricted Stock, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;

 

(vii)         to determine whether and under what circumstances an
Option may be settled in cash under Section 10(c) instead of Common
Stock;

 

(viii)        to implement an Option Exchange Program on such terms
and conditions as the Administrator in its discretion deems appropriate,
provided that no amendment or adjustment to an Option that would materially and
adversely affect the rights of any Optionee shall be made without the prior
written consent of the Optionee;

 

(ix)           to adjust the vesting of an Option held by an Employee
or Consultant as a result of a change in the terms or conditions under which
such person is providing services to the Company;

 

(x)            to construe and interpret the terms of the Plan and
awards granted under the Plan, which constructions, interpretations and
decisions shall be final and binding on all Participants; and

 

(xi)           in order to fulfill the purposes of the Plan and
without amending the Plan, to modify grants of Options or Stock Purchase Rights
to Participants who are foreign 

 

5

 

nationals or employed outside of the United States in
order to recognize differences in local law, tax policies or customs.

 

5.             Eligibility.

 

(a)           Recipients of Grants.  Nonstatutory
Stock Options and Stock Purchase Rights may be granted to Employees and
Consultants.  Incentive Stock Options may
be granted only to Employees, provided that Employees of Affiliates shall not
be eligible to receive Incentive Stock Options.

 

(b)           Type of Option.  Each Option
shall be designated in the Option Agreement as either an Incentive Stock Option
or a Nonstatutory Stock Option.

 

(c)           ISO $100,000 Limitation.  Notwithstanding
any designation under Section 5(b), to the extent that the aggregate Fair
Market Value of Shares with respect to which Options designated as Incentive
Stock Options are exercisable for the first time by any Optionee during any
calendar year (under all plans of the Company or any Parent or Subsidiary)
exceeds $100,000, such excess Options shall be treated as Nonstatutory Stock
Options.  For purposes of this Section 5(c),
Incentive Stock Options shall be taken into account in the order in which they
were granted, and the Fair Market Value of the Shares subject to an Incentive
Stock Option shall be determined as of the date of the grant of such Option.

 

(d)           No Employment Rights. 
The Plan
shall not confer upon any Participant any right with respect to continuation of
an employment or consulting relationship with the Company, nor shall it
interfere in any way with such Participant’s right or the Company’s right to
terminate the employment or consulting relationship at any time for any reason.

 

6.             Term of Plan.  The Plan shall
become effective upon its adoption by the Board of Directors.  It shall continue in effect for a term of ten
(10) years unless sooner terminated under Section 16 of the Plan.

 

7.             Term of Option.  The term of
each Option shall be the term stated in the Option Agreement; provided that the
term shall be no more than ten years from the date of grant thereof or
such shorter term as may be provided in the Option Agreement and provided
further that, in the case of an Incentive Stock Option granted to a person who
at the time of such grant is a Ten Percent Holder, the term of the Option shall
be five years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.

 

8.             [Reserved.]

 

9.             Option Exercise Price and
Consideration.

 

(a)           Exercise Price.  The per Share
exercise price for the Shares to be issued pursuant to exercise of an Option
shall be such price as is determined by the Administrator and set forth in the
Option Agreement, but shall be subject to the following:

 

(i)            In the case of an Incentive Stock Option

 

6

 

(A)          granted to an Employee who at the time of grant is a
Ten Percent Holder, the per Share exercise price shall be no less than 110% of
the Fair Market Value per Share on the date of grant; or

 

(B)           granted to any other Employee, the per Share exercise
price shall be no less than 100% of the Fair Market Value per Share on the date
of grant.

 

(ii)           In the case of a Nonstatutory Stock Option

 

(A)          granted on any date on which the Common Stock is not a
Listed Security to a person who is at the time of grant is a Ten Percent
Holder, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant if required by the Applicable Laws
and, if not so required, shall be such price as is determined by the
Administrator;

 

(B)           granted on any date on which the Common Stock is not a
Listed Security to any other eligible person, the per Share exercise price
shall be no less than 85% of the Fair Market Value per Share on the date of
grant if required by the Applicable Laws and, if not so required, shall be such
price as is determined by the Administrator; or

 

(C)           granted on any date on which the Common Stock is a
Listed Security to any eligible person, the per share Exercise Price shall be
such price as determined by the Administrator provided that if such eligible
person is, at the time of the grant of such Option, a Named Executive of the
Company, the per share Exercise Price shall be no less than 100% of the Fair
Market Value on the date of grant if such Option is intended to qualify as
performance-based compensation under Section 162(m) of the Code.

 

(iii)          Notwithstanding the foregoing, Options may be granted
with a per Share exercise price other than as required above pursuant to a
merger or other corporate transaction.

 

(b)           Permissible Consideration. 
The
consideration to be paid for the Shares to be issued upon exercise of an
Option, including the method of payment, shall be determined by the
Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash; (2) check;
(3) delivery of Optionee’s promissory note having such recourse, interest,
security and redemption provisions as the Administrator determines to be
appropriate (subject to the provisions of Section 153 of the Delaware
General Corporation Law); (4) cancellation of indebtedness; (5) other
Shares that have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which the Option is exercised,
provided that in the case of Shares acquired, directly or indirectly, from the
Company, such Shares must have been owned by the Optionee for more than six
months on the date of surrender (or such other period as may be required to
avoid the Company’s incurring an adverse accounting charge); (6) delivery
of a properly executed exercise notice together with such other documentation
as the Administrator and a securities broker approved by the Company shall
require to effect exercise of the Option and prompt delivery to the Company of
the sale or loan proceeds required to pay the exercise price and any applicable
withholding taxes; or (7) any combination of the foregoing methods of
payment.  In making its 

 

7

 

determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company and the Administrator may, in its
sole discretion, refuse to accept a particular form of consideration at the
time of any Option exercise.

 

10.           Exercise of Option.

 

(a)           General.

 

(i)            Exercisability. 
Any Option
granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, consistent with the term of the Plan and
reflected in the Option Agreement, including vesting requirements and/or
performance criteria with respect to the Company and/or the Optionee; provided
however that, if required by the Applicable Laws, any Option granted on a date
on which the Common Stock is not a Listed Security shall become exercisable at
the rate of at least 20% per year over five years from the date the Option
is granted.  In the event that any of the
Shares issued upon exercise of an Option (which exercise occurs on a date on
which the Common Stock is not a Listed Security) should be subject to a right
of repurchase in the Company’s favor, such repurchase right shall, if required
by the Applicable Laws, lapse at the rate of at least 20% per year over five
years from the date the Option is granted. 
Notwithstanding the above, in the case of an Option granted to an
officer, Director or Consultant of the Company or any Parent, Subsidiary or
Affiliate of the Company, the Option may become fully exercisable, or a
repurchase right, if any, in favor of the Company shall lapse, at any time or
during any period established by the Administrator.

 

(ii)           Leave of Absence. The Administrator shall have the discretion to
determine whether and to what extent the vesting of Options shall be tolled
during any unpaid leave of absence; provided, however, that in the absence of
such determination, vesting of Options shall be tolled during any such unpaid
leave (unless otherwise required by the Applicable Laws).  In the event of military leave, vesting shall
toll during any unpaid portion of such leave, provided that, upon a Participant’s
returning from military leave (under conditions that would entitle him or her
to protection upon such return under the Uniform Services Employment and
Reemployment Rights Act), he or she shall be given vesting credit with respect
to Options to the same extent as would have applied had the Participant
continued to provide services to the Company throughout the leave on the same
terms as he or she was providing services immediately prior to such leave.

 

(iii)          Minimum Exercise Requirements. 
An Option
may not be exercised for a fraction of a Share. 
The Administrator may require that an Option be exercised as to a
minimum number of Shares, provided that such requirement shall not prevent an
Optionee from exercising the full number of Shares as to which the Option is
then exercisable.

 

(iv)          Procedures for and Results of Exercise. 
An Option
shall be deemed exercised when written notice of such exercise has been given
to the Company in accordance with the terms of the Option by the person
entitled to exercise the Option and the Company has received full payment for
the Shares with respect to which the Option is exercised.  Full payment may, as authorized by the
Administrator, consist of any consideration and method 

 

8

 

of payment allowable under Section 9(b) of
the Plan, provided that the Administrator may, in its sole discretion, refuse
to accept any form of consideration at the time of any Option exercise.

 

Exercise
of an Option in any manner shall result in a decrease in the number of Shares
that thereafter may be available, both for purposes of the Plan and for sale
under the Option, by the number of Shares as to which the Option is exercised.

 

(v)           Rights as Stockholder. 
Until the
issuance of the Shares (as evidenced by the appropriate entry on the books of
the Company or of a duly authorized transfer agent of the Company), no right to
vote or receive dividends or any other rights as a stockholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option.  No adjustment will be made for a dividend or
other right for which the record date is prior to the date the stock
certificate is issued, except as provided in Section 14 of the Plan.

 

(b)           Termination of Employment or Consulting
Relationship.  Except as otherwise set forth in this Section 10(b),
the Administrator shall establish and set forth in the applicable Option
Agreement the terms and conditions upon which an Option shall remain
exercisable, if at all, following termination of an Optionee’s Continuous
Service Status, which provisions may be waived or modified by the Administrator
at any time.  Unless the Administrator
otherwise provides in the Option Agreement, to the extent that the Optionee is
not vested in Optioned Stock at the date of termination of his or her Continuous
Service Status, or if the Optionee (or other person entitled to exercise the
Option) does not exercise the Option to the extent so entitled within the time
specified in the Option Agreement or below (as applicable), the Option shall
terminate and the Optioned Stock underlying the unexercised portion of the
Option shall revert to the Plan.  In no
event may any Option be exercised after the expiration of the Option term as
set forth in the Option Agreement (and subject to Section 7).

 

The
following provisions (1) shall apply to the extent an Option Agreement
does not specify the terms and conditions upon which an Option shall terminate
upon termination of an Optionee’s Continuous Service Status, and (2) establish
the minimum post-termination exercise periods that may be set forth in an
Option Agreement:

 

(i)            Termination other than Upon Disability or Death. 
In the
event of termination of an Optionee’s Continuous Service Status, such Optionee
may exercise an Option for 30 days following such termination to the extent the
Optionee was vested in the Optioned Stock as of the date of such
termination.  No termination shall be
deemed to occur and this Section 10(b)(i) shall not apply if (i) the
Optionee is a Consultant who becomes an Employee, or (ii) the Optionee is
an Employee who becomes a Consultant.

 

(ii)           Disability of Optionee. 
In the
event of termination of an Optionee’s Continuous Service Status as a result of
his or her disability (including a disability within the meaning of Section 22(e)(3) of
the Code), such Optionee may exercise an Option at any time within six months
following such termination to the extent the Optionee was vested in the
Optioned Stock as of the date of such termination.

 

(iii)          Death of Optionee.  In the event
of the death of an Optionee during the period of Continuous Service Status
since the date of grant of the Option, or within 

 

9

 

thirty days following termination of Optionee’s
Continuous Service Status, the Option may be exercised by Optionee’s estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance at any time within twelve months following the date of death, but
only to the extent the Optionee was vested in the Optioned Stock as of the date
of death or, if earlier, the date the Optionee’s Continuous Service Status
terminated.

 

(c)           Buyout Provisions.  The
Administrator may at any time offer to buy out for a payment in cash or Shares
an Option previously granted under the Plan based on such terms and conditions
as the Administrator shall establish and communicate to the Optionee at the
time that such offer is made.

 

11.           Stock Purchase Rights.

 

(a)           Rights to Purchase.  When the
Administrator determines that it will offer Stock Purchase Rights under the
Plan, it shall advise the offeree in writing of the terms, conditions and
restrictions related to the offer, including the number of Shares that such
person shall be entitled to purchase, the price to be paid, and the time within
which such person must accept such offer. 
In the case of a Stock Purchase Right granted prior to the date, if any,
on which the Common Stock becomes a Listed Security and if required by the
Applicable Laws at that time, the purchase price of Shares subject to such
Stock Purchase Rights shall not be less than 85% of the Fair Market Value of
the Shares as of the date of the offer, or, in the case of a Ten Percent
Holder, the price shall not be less than 100% of the Fair Market Value of the
Shares as of the date of the offer.  If the
Applicable Laws do not impose the requirements set forth in the preceding
sentence and with respect to any Stock Purchase Rights granted after the date,
if any, on which the Common Stock becomes a Listed Security, the purchase price
of Shares subject to Stock Purchase Rights shall be as determined by the
Administrator.  The offer to purchase
Shares subject to Stock Purchase Rights shall be accepted by execution of a
Restricted Stock Purchase Agreement in the form determined by the
Administrator.

 

(b)           Repurchase Option.

 

(i)            General. Unless
the Administrator determines otherwise, the Restricted Stock Purchase Agreement
shall grant the Company a repurchase option exercisable upon the voluntary or
involuntary termination of the purchaser’s employment with the Company for any
reason (including death or disability). 
The purchase price for Shares repurchased pursuant to the Restricted
Stock Purchase Agreement shall be the original purchase price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option shall lapse at such rate as the
Administrator may determine, provided that with respect to a Stock Purchase
Right granted prior to the date, if any, on which the Common Stock becomes a
Listed Security to a purchaser who is not an officer, Director or Consultant of
the Company or of any Parent or Subsidiary of the Company, it shall lapse at a
minimum rate of 20% per year if required by the Applicable Laws.

 

(ii)           Leave of Absence. The Administrator shall have the discretion to
determine whether and to what extent the lapsing of Company repurchase rights
shall be tolled during any unpaid leave of absence; provided, however, that in
the absence of such determination, such lapsing shall be tolled during any such
unpaid leave (unless otherwise

 

10

 

required by the Applicable Laws).  In the event of military leave, the lapsing
of Company repurchase rights shall toll during any unpaid portion of such
leave, provided that, upon a Participant’s returning from military leave (under
conditions that would entitle him or her to protection upon such return under
the Uniform Services Employment and Reemployment Rights Act), he or she shall
be given “vesting” credit with respect to Shares purchased pursuant to the
Restricted Stock Purchase Agreement to the same extent as would have applied
had the Participant continued to provide services to the Company throughout the
leave on the same terms as he or she was providing services immediately prior
to such leave.

 

(c)           Other Provisions.  The Restricted
Stock Purchase Agreement shall contain such other terms, provisions and
conditions not inconsistent with the Plan as may be determined by the
Administrator in its sole discretion.  In
addition, the provisions of Restricted Stock Purchase Agreements need not be
the same with respect to each purchaser.

 

(d)           Rights as a Stockholder.  Once the Stock
Purchase Right is exercised, the purchaser shall have the rights equivalent to
those of a stockholder, and shall be a stockholder when his or her purchase is
entered upon the records of the duly authorized transfer agent of the
Company.  No adjustment will be made for
a dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 14 of the
Plan.

 

12.           Taxes.

 

(a)           As a condition of the exercise of an Option or Stock
Purchase Right granted under the Plan, the Participant (or in the case of the
Participant’s death, the person exercising the Option or Stock Purchase Right)
shall make such arrangements as the Administrator may require for the
satisfaction of any applicable federal, state, local or foreign withholding tax
obligations that may arise in connection with the exercise of the Option or
Stock Purchase Right and the issuance of Shares.  The Company shall not be required to issue
any Shares under the Plan until such obligations are satisfied.  If the Administrator allows the withholding
or surrender of Shares to satisfy a Participant’s tax withholding obligations
under this Section 12 (whether pursuant to Section 12(c), (d) or
(e), or otherwise), the Administrator shall not allow Shares to be withheld in
an amount that exceeds the minimum statutory withholding rates for federal and
state tax purposes, including payroll taxes.

 

(b)           In the case of an Employee and in the absence of any
other arrangement, the Employee shall be deemed to have directed the Company to
withhold or collect from his or her compensation an amount sufficient to
satisfy such tax obligations from the next payroll payment otherwise payable
after the date of an exercise of the Option or Stock Purchase Right.

 

(c)           This Section 12(c) shall apply only after
the date, if any, upon which the Common Stock becomes a Listed Security.  In the case of Participant other than an
Employee (or in the case of an Employee where the next payroll payment is not
sufficient to satisfy such tax obligations, with respect to any remaining tax
obligations), in the absence of any other arrangement and to the extent
permitted under the Applicable Laws, the Participant shall be deemed to have
elected to have the Company withhold from the Shares to be issued upon exercise
of the Option or Stock Purchase Right that number of Shares having a Fair
Market 

 

11

 

Value determined as of the applicable Tax Date (as defined below) equal
to the amount required to be withheld. 
For purposes of this Section 12, the Fair Market Value of the
Shares to be withheld shall be determined on the date that the amount of tax to
be withheld is to be determined under the Applicable Laws (the “Tax Date”).

 

(d)           If permitted by the Administrator, in its discretion,
a Participant may satisfy his or her tax withholding obligations upon exercise
of an Option or Stock Purchase Right by surrendering to the Company Shares that
have a Fair Market Value determined as of the applicable Tax Date equal to the
amount required to be withheld.  In the
case of shares previously acquired from the Company that are surrendered under
this Section 12(d), such Shares must have been owned by the Participant
for more than six (6) months on the date of surrender (or such other
period of time as is required for the Company to avoid adverse accounting
charges).

 

(e)           Any election or deemed election by a Participant to
have Shares withheld to satisfy tax withholding obligations under Section 12(c) or
(d) above shall be irrevocable as to the particular Shares as to which the
election is made and shall be subject to the consent or disapproval of the
Administrator.  Any election by a
Participant under Section 12(d) above must be made on or prior to the
applicable Tax Date.

 

(f)            In the event an election to have Shares withheld is
made by a Participant and the Tax Date is deferred under Section 83 of the
Code because no election is filed under Section 83(b) of the Code,
the Participant shall receive the full number of Shares with respect to which
the Option or Stock Purchase Right is exercised but such Participant shall be
unconditionally obligated to tender back to the Company the proper number of
Shares on the Tax Date.

 

13.           Non-Transferability of
Options and Stock Purchase Rights.

 

(a)           General.  Except as set
forth in this Section 13, Options and Stock Purchase Rights may not be
sold, pledged, assigned, hypothecated, transferred or disposed of in any manner
other than by will or by the laws of descent or distribution.  The designation of a beneficiary by an
Optionee will not constitute a transfer. 
An Option or Stock Purchase Right may be exercised, during the lifetime
of the holder of an Option or Stock Purchase Right, only by such holder or a
transferee permitted by this Section 13.

 

(b)           Limited Transferability Rights. 
Notwithstanding
anything else in this Section 13, prior to the date, if any, on which the
Common Stock becomes a Listed Security, the Administrator may in its discretion
grant Nonstatutory Stock Options that may be transferred 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 defined below), on such terms and conditions as the Administrator
deems appropriate.  Following the date,
if any, on which the Common Stock becomes a Listed Security, the Administrator
may in its discretion grant transferable Nonstatutory Stock Options pursuant to
Option Agreements specifying the manner in which such Nonstatutory Stock
Options are transferable.  “Immediate
Family” means any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law,
daughter-in-law, 

 

12

 

brother-in-law, or sister-in-law and shall include adoptive
relationships.

 

14.           Adjustments Upon Changes
in Capitalization, Merger or Certain Other Transactions.

 

(a)           Changes in Capitalization.  Subject to any
action required under Applicable Laws by the stockholders of the Company, the
number of Shares of Common Stock covered by each outstanding award, the numbers
of Shares set forth in Sections 3(a) and 8 above, and the number of Shares
of Common Stock that have been authorized for issuance under the Plan but as to
which no awards have yet been granted or that have been returned to the Plan
upon cancellation or expiration of an award, as well as the price per Share of
Common Stock covered by each such outstanding award, 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, recapitalization or reclassification of the Common Stock, or any
other increase or decrease in the number of issued 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.”  Such adjustment shall be made by the
Administrator, 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 award.

 

(b)           Dissolution or Liquidation.  In the event
of the dissolution or liquidation of the Company, each Option and Stock
Purchase Right will terminate immediately prior to the consummation of such
action, unless otherwise determined by the Administrator.

 

(c)           Corporate Transaction.  In the event
of a Corporate Transaction, each outstanding Option or Stock Purchase Right
shall be assumed or an equivalent option or right shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation
(the “Successor Corporation”), unless the Successor Corporation does not
agree to assume the award or to substitute an equivalent option or right, in
which case such Option or Stock Purchase Right shall terminate upon the
consummation of the transaction.

 

For
purposes of this Section 14(c), an Option or a Stock Purchase Right shall
be considered assumed, without limitation, if, at the time of issuance of the
stock or other consideration upon a Corporate Transaction or a Change of
Control, as the case may be, each holder of an Option or Stock Purchase Right
would be entitled to receive upon exercise of the award the same number and
kind of shares of stock or the same amount of property, cash or securities as
such holder would have been entitled to receive upon the occurrence of the
transaction if the holder had been, immediately prior to such transaction, the
holder of the 

 

13

 

number of Shares of Common Stock covered by the award at such time
(after giving effect to any adjustments in the number of Shares covered by the
Option or Stock Purchase Right as provided for in this Section 14);
provided that if such consideration received in the transaction is not solely
common stock of the Successor Corporation, the Administrator may, with the
consent of the Successor Corporation, provide for the consideration to be
received upon exercise of the award to be solely common stock of the Successor
Corporation equal to the Fair Market Value of the per Share consideration
received by holders of Common Stock in the transaction.

 

(d)           Certain Distributions.  In the event
of any distribution to the Company’s stockholders of securities of any other
entity or other assets (other than dividends payable in cash or stock of the
Company) without receipt of consideration by the Company, the Administrator
may, in its discretion, appropriately adjust the price per Share of Common
Stock covered by each outstanding Option or Stock Purchase Right to reflect the
effect of such distribution.

 

15.           Time of Granting Options
and Stock Purchase Rights.  The date of grant of an Option or Stock
Purchase Right shall, for all purposes, be the date on which the Administrator
makes the determination granting such Option or Stock Purchase Right, or such
other date as is determined by the Administrator, provided that in the case of
any Incentive Stock Option, the grant date shall be the later of the date on
which the Administrator makes the determination granting such Incentive Stock
Option or the date of commencement of the Optionee’s employment relationship
with the Company.  Notice of the
determination shall be given to each Employee or Consultant to whom an Option
or Stock Purchase Right is so granted within a reasonable time after the date
of such grant.

 

16.           Amendment and Termination
of the Plan.

 

(a)           Authority to Amend or
Terminate.  The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or discontinuation
(other than an adjustment pursuant to Section 14 above) shall be made that
would materially and adversely affect the rights of any Optionee or holder of
Stock Purchase Rights under any outstanding grant, without his or her
consent.  In addition, to the extent
necessary and desirable to comply with the Applicable Laws, the Company shall
obtain stockholder approval of any Plan amendment in such a manner and to such
a degree as required.

 

(b)           Effect of Amendment or Termination.  Except as to
amendments which the Administrator has the authority under the Plan to make
unilaterally, no amendment or termination of the Plan shall materially and
adversely affect Options or Stock Purchase Rights already granted, unless
mutually agreed otherwise between the Optionee or holder of the Stock Purchase
Rights and the Administrator, which agreement must be in writing and signed by
the Optionee or holder and the Company.

 

17.           Conditions Upon Issuance
of Shares.  Notwithstanding any other provision of the
Plan or any agreement entered into by the Company pursuant to the Plan, the
Company shall not be obligated, and shall have no liability for failure, to
issue or deliver any Shares under the Plan unless such issuance or delivery
would comply with the Applicable Laws, with such compliance determined by the
Company in consultation with its legal counsel. 
As a condition to the exercise of an Option or Stock Purchase Right, the
Company may require the person 

 

14

 

exercising the award 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 law.

 

18.           Reservation of Shares.  The Company,
during the term of this Plan, will at all times reserve and keep available such
number of Shares as shall be sufficient to satisfy the requirements of the
Plan.

 

19.           Agreements.  Options and
Stock Purchase Rights shall be evidenced by Option Agreements and Restricted
Stock Purchase Agreements, respectively, in such form(s) as the
Administrator shall from time to time approve.

 

20.           Stockholder Approval.  If required by
the Applicable Laws, continuance of the Plan shall be subject to approval by
the stockholders of the Company within twelve (12) months before or after the
date the Plan is adopted.  Such
stockholder approval shall be obtained in the manner and to the degree required
under the Applicable Laws.

 

21.           Information and Documents
to Optionees and Purchasers. Prior
to the date, if any, upon which the Common Stock becomes a Listed Security and
if required by the Applicable Laws, the Company shall provide financial
statements at least annually to each Optionee and to each individual who
acquired Shares pursuant to the Plan, during the period such Optionee or
purchaser has one or more Options or Stock Purchase Rights outstanding, and in
the case of an individual who acquired Shares pursuant to the Plan, during the
period such individual owns such Shares. 
The Company shall not be required to provide such information if the
issuance of Options or Stock Purchase Rights under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.

 

15

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