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Ariba common stock at $1.50 per share. The option was
exercisable any time after the grant date.
Pursuant to option No. 117 petitioner’s right to own the
Ariba stock was subject to an employment termination restriction
whereby, if petitioner’s employment terminated for any reason
before petitioner’s rights in the stock fully vested, Ariba had
the right to repurchase all the nonvested stock. Petitioner’s
vesting commencement date was February 1, 1998. Upon
petitioner’s completion of 1 year of employment, his rights to 25
percent of the stock under option No. 117 vested, and Ariba’s
right to repurchase those shares lapsed. Petitioner’s rights in
the remaining shares under option No. 117 vested on a monthly
basis (approximately 667 shares per month) ending on February 1,
2002. As petitioner’s rights in the stock vested, the employment
restriction no longer applied, and Ariba’s right to repurchase
the stock lapsed.
In March 1999, April 1999, December 1999, and April 2000,
Ariba’s common stock was subject to a 2-for-1 stock split. As a
result, the number of shares granted under option No. 117
increased from 2,000 to 32,000.
On April 5, 2000, petitioner exercised option No. 117 and
purchased all 32,000 shares of Ariba common stock for $0.0938 per
share, or a total price of $3,002. The shares had a FMV of $102
per share and a total FMV of $3,264,000 at the date of exercise.
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