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SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c) of the Securities Exchange
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ENTRADA NETWORKS, INC.
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(Name of Registrant As Specified In Its Charter)
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INFORMATION STATEMENT
ENTRADA NETWORKS, INC.
APPROVAL OF 2000 STOCK INCENTIVE PLAN
To Our Stockholders:
We are pleased to advise you of the adoption of the Entrada Networks,
Inc. 2000 Stock Incentive Plan. Our Board of Directors approved the plan on
September 29, 2000, and rather than incur the expense of a special meeting of
stockholders to approve the plan, solicited the consents of two stockholders who
own a majority of our outstanding common stock. Those two stockholders, Osicom
Technologies, Inc. and Vision Eventures, Inc., collectively own 5,569,876 shares
of our common stock. As of October 12, 2000, the record date for the consent, we
had 10,997,075 shares outstanding, so those two stockholders hold 50.64% of our
outstanding common stock. We are incorporated in Delaware, and the Delaware
General Corporation Law permits stockholder approval to be obtained without a
meeting provided that consents are given by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
approve the action at a meeting at which all shares eligible to be voted were
present and voted. A majority of our outstanding shares would be sufficient to
approve the plan; thus, the consents we obtained are sufficient to satisfy the
requirement for stockholder approval.
We are sending this information statement to you to advise you of this
development, which is vital to our continuing efforts to expand and strengthen
our employee base, and to comply with the Delaware General Corporation Law and
Section 14(c) of the Securities Exchange Act of 1934, as amended. WE ARE NOT
ASKING FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY. The approximate
date on which this information Statement is first being sent to our stockholders
is November 10, 2000. It is being sent to our stockholders of record as of
October 12, 2000, the record date for consent.
Entrada Networks, Inc. has its principal executive office at 10070 Mesa
Rim Road, San Diego, California 92121.
The following is a description of the 2000 Stock Incentive Plan, a copy
of which is included as Exhibit A to this Information Statement.
<PAGE>
2000 STOCK INCENTIVE PLAN
Shares Reserved. Four million (4,000,000) shares of common stock have
been authorized for issuance under our 2000 incentive plan. The number of shares
of common stock reserved for issuance under our 2000 incentive plan will
automatically increase on the first trading day in January each calendar year,
beginning in calendar year 2002, by an amount equal to 5% of the total number of
shares of common stock outstanding on the last trading day in December of the
preceding calendar year, but in no event will any such annual increase exceed
650,000 shares. In addition, no participant in our 2000 incentive plan may be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances for more than shares of common stock per calendar year.
Equity Incentive Programs. Our 2000 incentive plan is divided into five
separate components:
- the discretionary option grant program, under which eligible
individuals in our employ or service may be granted options to
purchase shares of common stock at an exercise price not less
than 100% of the fair market value of those shares on the
grant date except for options granted pursuant to our Merger
Agreement dated as of August 2, 2000 for which the exercise
price is $3.19 per share;
- the stock issuance program, under which such individuals may
be issued shares of common stock directly, through the
purchase of such shares at a price not less than 100% of their
fair market value at the time of issuance or as a bonus tied
to the attainment of performance milestones or the completion
of a specified period of service;
- the salary investment option grant program, under which our
executive officers and other highly compensated employees may
be given the opportunity to apply a portion of their base
salary to the acquisition of special below-market stock option
grants; and
- the automatic option grant program, under which option grants
will automatically be made at periodic intervals to our
non-employee board members to purchase shares of common stock
at an exercise price equal to 100% of the fair market value of
those shares on the grant date.
Eligibility. The individuals eligible to participate in our 2000 incentive
plan include our officers and other employees, our non-employee board members
and any consultants we hire.
Administration. The discretionary option grant program and the stock
issuance program will be administered by the compensation committee. This
committee will determine which eligible individuals are to receive option grants
or stock issuances under those programs, the time or times when such option
grants or stock issuances are to be made, the number of shares subject to each
such grant or issuance, the status of any granted option as either an incentive
stock option or a non-statutory stock option under the federal tax laws, the
vesting schedule to be in effect for the option grant or stock issuance and the
maximum term for which any granted option is to remain outstanding. The
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compensation committee will also have the exclusive authority to select the
executive officers and other highly compensated employees who may participate in
the salary investment option grant program in the event that program is
activated for one or more calendar years.
Plan Features. Our 2000 incentive plan will include the following
features:
- The exercise price for the shares of common stock subject to
option grants made under our 2000 incentive plan may be paid
in cash or in shares of common stock valued at fair market
value on the exercise date. The option may also be exercised
through a same-day sale program without any cash outlay by the
optionee. In addition, the plan administrator may provide
financial assistance to one or more optionees in the exercise
of their outstanding options or the purchase of their unvested
shares by allowing such individuals to deliver a
full-recourse, interest-bearing promissory note in payment of
the exercise price and any associated withholding taxes
incurred in connection with such exercise or purchase.
- The compensation committee will have the authority to cancel
outstanding options under the discretionary option grant
program, including options transferred from the predecessor
plan, in return for the grant of new options for the same or a
different number of option shares with an exercise price per
share based upon the fair market value of our common stock on
the new grant date.
- Stock appreciation rights are authorized for issuance under
the discretionary option grant program. Such rights will
provide the holders with the election to surrender their
outstanding options for an appreciation distribution from us
equal to the fair market value of the vested shares of common
stock subject to the surrendered option, less the aggregate
exercise price payable for those shares. Such appreciation
distribution may be made in cash or in shares of common stock.
None of the outstanding options under our predecessor plan
contain any stock appreciation rights.
The 2000 incentive plan will include the following change in control
provisions which may result in the accelerated vesting of outstanding option
grants and stock issuances:
- In the event that we are acquired by merger or asset sale,
each outstanding option under the discretionary option grant
program which is not to be assumed by the successor
corporation will automatically accelerate in full, and all
unvested shares under the discretionary option grant and stock
issuance programs will immediately vest, except to the extent
our repurchase rights with respect to those shares are to be
assigned to the successor corporation.
- The compensation committee will have complete discretion to
structure one or more options under the discretionary option
grant program so those options will vest as to all the option
shares in the event those options are assumed in the
acquisition but the optionee's service with us or the
acquiring entity is subsequently terminated. The vesting of
outstanding shares under the stock issuance program may be
accelerated upon similar terms and conditions.
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- The compensation committee will also have the authority to
grant options which will immediately vest in the event we are
acquired, whether or not those options are assumed by the
successor corporation.
- The compensation committee may grant options and structure
repurchase rights so that the shares subject to those options
or repurchase rights will immediately vest in connection with
a successful tender offer for more than 50% of our outstanding
voting stock or a change in the majority of our board through
one or more contested elections for board membership. Such
accelerated vesting may occur either at the time of such
transaction or upon the subsequent termination of the
individual's service.
- The options currently outstanding under our predecessor plan
will immediately vest in the event we are acquired by merger
or sale of substantially all our assets, unless those options
are assumed by the acquiring entity or our repurchase rights
with respect to any unvested shares subject to those options
are assigned to such entity. However, a number of those
options also contain a special acceleration provision pursuant
to which the shares subject to those options will immediately
vest upon an involuntary termination of the optionee's
employment within 18 months following an acquisition in which
the repurchase rights with respect to those shares are
assigned to the acquiring entity.
Salary Investment Option Grant Program. In the event the compensation
committee elects to activate the salary investment option grant program for one
or more calendar years, each of our executive officers and other highly
compensated employees selected for participation may elect, prior to the start
of the calendar year, to reduce his or her base salary for that calendar year by
a specified dollar amount not less than $10,000 nor more than $50,000. Each
selected individual who files such a timely election will automatically be
granted, on the first trading day in January of the calendar year for which his
or her salary reduction is to be in effect, an option to purchase that number of
shares of common stock determined by dividing the salary reduction amount by
two-thirds of the fair market value per share of our common stock on the grant
date. The option will be exercisable at a price per share equal to one-third of
the fair market value of the option shares on the grant date. As a result, the
option will be structured so that the fair market value of the option shares on
the grant date less the exercise price payable for those shares will be equal to
the amount by which the optionee's salary is reduced under the program. The
option will become exercisable in a series of 12 equal monthly installments over
the calendar year for which the salary reduction is to be in effect.
Automatic Option Grant Program. Under the automatic option grant
program, each individual who first becomes a non-employee board member at any
time after the completion of this offering will automatically receive an option
grant for shares on the date such individual joins the board, provided such
individual has not been in our prior employ. In addition, on the date of each
annual stockholders meeting held after the completion of this offering, each
non-employee board member who is to continue to serve as a non-employee board
member, including each of our current non-employee board members, will
automatically be granted an option to purchase shares of common stock, provided
such individual has served on our board for at least six months.
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Each automatic grant will have an exercise price per share equal to the
fair market value per share of our common stock on the grant date and will have
a term of 10 years, subject to earlier termination following the optionee's
cessation of board service. The option will be immediately exercisable for all
of the option shares; however, we may repurchase, at the exercise price paid per
share, any shares purchased under the option which are not vested at the time of
the optionee's cessation of board service. The shares subject to each initial
share automatic option grant will vest in a series of 4 successive annual
installments upon the optionee's completion of each year of board service over
the 4-year period measured from the grant date. The shares subject to each
annual share automatic option grant will vest upon the optionee's completion of
one year of board service measured from the grant date. However, the shares will
immediately vest in full upon certain changes in control or ownership or upon
the optionee's death or disability while a board member.
Our 2000 incentive plan will also have the following features:
- Outstanding options under the salary investment and director
fee option grant programs will immediately vest if we are
acquired by a merger or asset sale or if there is a successful
tender offer for more than 50% of our outstanding voting stock
or a change in the majority of our board through one or more
contested elections.
- Limited stock appreciation rights will automatically be
included as part of each grant made under the salary
investment option grant program and the automatic and director
fee option grant programs, and these rights may also be
granted to one or more officers as part of their option grants
under the discretionary option grant program. Options with
this feature may be surrendered to us upon the successful
completion of a hostile tender offer for more than 50% of our
outstanding voting stock. In return for the surrendered
option, the optionee will be entitled to a cash distribution
from us in an amount per surrendered option share based upon
the highest price per share of our common stock paid in that
tender offer.
- The board may amend or modify the 2000 incentive plan at any
time, subject to any required stockholder approval. The 2000
incentive plan will terminate no later than October 12, 2010.
Outstanding Options. The following information relates to options which we
have agreed to grant as of the date of this Information Statement to our Chief
Executive Officer and four other most highly compensated officers, all current
executive officers as a group, all non-executive directors as a group and all
others as a group. Each is subject to four-year vesting and expires in 2010. The
exercise prices have not been established and will be determined by our Board of
Directors or the compensation committee.
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Name Title No. of
Options
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Dr. Kanwar J.S. Chadha President and CEO 500,000
Anand Metha Vice President, 280,000
Engineering & CTO
Richard L. Jacobson General Counsel 250,000
Lana Nino Vice President 175,000
and CFO
Arthur Trakas Senior Vice President 150,000
Sales
All Executive Officers 1,605,000
as a group (7 persons)
All Non-Executive Directors 300,000
as a group (3 persons)
All other employees and 901,500
consultants ---------
2,806,500
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EXHIBIT A
ENTRADA NETWORKS, INC.
2000 STOCK INCENTIVE PLAN
ARTICLE ONE
GENERAL PROVISIONS
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I. PURPOSE OF THE PLAN
This 2000 Stock Incentive Plan is intended to promote the
interests of Entrada Networks, Inc., a Delaware corporation, by providing
eligible persons in the Corporation's service with the opportunity to acquire a
proprietary interest, or otherwise increase their proprietary interest, in the
Corporation as an incentive for them to remain in such service.
Capitalized terms shall have the meanings assigned to such
terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate equity incentives programs:
(i) the Discretionary Option Grant Program under which eligible persons
may, at the discretion of the Plan Administrator, be granted options to purchase
shares of Common Stock,
(ii) the Salary Investment Option Grant Program under which eligible
employees may elect to have a portion of their base salary invested each year in
special option grants,
(iii) the Stock Issuance Program under which eligible persons may, at the
discretion of the Plan Administrator, be issued shares of Common Stock directly,
either through the immediate purchase of such shares or as a bonus for services
rendered the Corporation (or any Parent or Subsidiary), and
(iv) the Automatic Option Grant Program under which eligible non-employee
Board members shall automatically receive option grants at designated intervals
over their period of continued Board service.
B. The provisions of Articles One and Six shall apply to all equity programs
under the Plan and shall govern the interests of all persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to administer
the Discretionary Option Grant and Stock Issuance Programs with respect to
Section 16 Insiders. Administration of the Discretionary Option Grant and Stock
<PAGE>
Issuance Programs with respect to all other persons eligible to participate in
those programs may, at the Boards discretion, be vested in the Primary Committee
or a Secondary Committee, or the Board may retain the power to administer those
programs with respect to all such persons. However, any discretionary option
grants or stock issuances for members of the Primary Committee must be
authorized by a disinterested majority of the Board.
B. Members of the Primary Committee or any Secondary Committee shall serve for
such period of time as the Board may determine and may be removed by the Board
at any time. The Board may also at any time terminate the functions of any
Secondary Committee and reassume all powers and authority previously delegated
to such committee.
C. Each Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority (subject to the
provisions of the Plan) to establish such rules and regulations as it may deem
appropriate for proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of those programs and any outstanding options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any stock option or stock issuance thereunder.
D. The Primary Committee shall have the sole and exclusive authority to
determine which Section 16 Insiders and other highly compensated Employees shall
be eligible for participation in the Salary Investment Option Grant Program for
one or more calendar years. However, all option grants under the Salary
Investment Option Grant Program shall be made in accordance with the express
terms of that program, and the Primary Committee shall not exercise any
discretionary functions with respect to the option grants made under that
program.
E. Service on the Primary Committee or the Secondary Committee shall constitute
service as a Board member, and members of each such committee shall accordingly
be entitled to full indemnification and reimbursement as Board members for their
service on such committee. No member of the Primary Committee or the Secondary
Committee shall be liable for any act or omission made in good faith with
respect to the Plan or any option grants or stock issuances under the Plan.
F. Administration of the Automatic Option Grant Program shall be self-executing
in accordance with the terms of those programs, and no Plan Administrator shall
exercise any discretionary functions with respect to any option grants or stock
issuances made under that program.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option Grant
and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board or the board of directors of any
Parent or Subsidiary, and
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(iii) consultants and other independent advisors who provide services to
the Corporation (or any Parent or Subsidiary).
B. Only Employees who are Section 16 Insiders or other highly compensated
individuals shall be eligible to participate in the Salary Investment Option
Grant Program.
C. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority to determine, (i) with respect
to the option grants under the Discretionary Option Grant Program, which
eligible persons are to receive such grants, the time or times when those grants
are to be made, the number of shares to be covered by each such grant, the
status of the granted option as either an Incentive Option or a Non-Statutory
Option, the time or times when each option is to become exercisable, the vesting
schedule (if any) applicable to the option shares and the maximum term for which
the option is to remain outstanding and (ii) with respect to stock issuances
under the Stock Issuance Program, which eligible persons are to receive such
issuances, the time or times when the issuances are to be made, the number of
shares to be issued to each Participant, the vesting schedule (if any)
applicable to the issued shares and the consideration for such shares.
D. The Plan Administrator shall have the absolute discretion either to grant
options in accordance with the Discretionary Option Grant Program or to effect
stock issuances in accordance with the Stock Issuance Program.
E. The individuals who shall be eligible to participate in the Automatic Option
Grant Program shall be limited to (i) those individuals who first become
non-employee Board members on or after August 31, 2000, whether through
appointment by the Board or election by the Corporations shareholders, and (ii)
those individuals who continue to serve as non-employee Board members at one or
more Annual Shareholders Meetings held after August 31, 2000. A non-employee
Board member who has previously been in the employ of the Corporation (or any
Parent or Subsidiary) shall not be eligible to receive an option grant under the
Automatic Option Grant Program at the time he or she first becomes a
non-employee Board member, but shall be eligible to receive periodic option
grants under the Automatic Option Grant Program while he or she continues to
serve as a non-employee Board member.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but unissued
or reacquired Common Stock, including shares repurchased by the Corporation on
the open market. The number of shares of Common Stock initially reserved for
issuance over the term of the Plan shall not exceed 4,000,000 shares. Such
reserve be approved by the Corporations shareholders.
B. The number of shares of Common Stock available for issuance under the Plan
shall automatically increase on the first trading day of January each calendar
year during the term of the Plan, beginning with calendar year 2002, by an
amount equal to five percent (5%) of the total number of shares of Common Stock
outstanding on the last trading day in December of the immediately preceding
calendar year, but in no event shall any such annual increase exceed 650,000.
C. No one person participating in the Plan may receive stock options, separately
exercisable stock appreciation rights and direct stock issuances for more than
1,000,000 shares of Common Stock in the aggregate per calendar year.
D. Shares of Common Stock subject to outstanding shall be available for
subsequent issuance under the Plan to the extent (i) those options expire or
terminate for any reason prior to exercise in full or (ii) the options are
canceled in accordance with the cancellation provisions of Article Two. Unvested
shares issued under the Plan and subsequently canceled or repurchased by the
Corporation, at the original issue price paid per share, pursuant to the
Corporation's repurchase rights under the Plan shall be added back to the number
of shares of Common Stock reserved for issuance under the Plan and shall
accordingly be available for reissuance through one or more subsequent option
grants or direct stock issuances under the Plan. However, should the exercise
price of an option under the Plan be paid with shares of Common Stock or should
shares of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection with
the exercise of an option or the vesting of a stock issuance under the Plan,
then the number of shares of Common Stock available for issuance under the Plan
shall be reduced by the gross number of shares for which the option is exercised
or which vest under the stock issuance, and not by the net number of shares of
Common Stock issued to the holder of such option or stock issuance. Shares of
Common Stock underlying one or more stock appreciation rights exercised under
Section IV of Article Two, Section III of Article Three or Section II of Article
Five of the Plan shall not be available for subsequent issuance under the Plan.
E. If any change is made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made by
the Plan Administrator to (i) the maximum number and/or class of securities
issuable under the Plan, (ii) the maximum number and/or class of securities for
which any one person may be granted stock options, separately exercisable stock
appreciation rights and direct stock issuances under the Plan per calendar year,
(iii) the number and/or class of securities for which grants are subsequently to
be made under the Automatic Option Grant Program to new and continuing
non-employee Board members, (iv) the number and/or class of securities and the
exercise price per share in effect under each outstanding option under the Plan,
(v) the number and/or class of securities and exercise price per share in effect
under each outstanding option transferred to this Plan from the Predecessor Plan
and (vi) the maximum number and/or class of securities by which the share
reserve is to increase automatically each calendar year pursuant to the
provisions of Section V.B of this Article One. Such adjustments to the
outstanding options are to be effected in a manner which shall preclude the
enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
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I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form approved by
the Plan Administrator; provided, however, that each such document shall comply
with the terms specified below. Each document evidencing an Incentive Option
<PAGE>
shall, in addition, be subject to the provisions of the Plan applicable to such
options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan Administrator
but shall not be less than one hundred percent (100%) of the Fair Market Value
per share of Common Stock on the option grant date except for options which the
Corporation is required to grant pursuant to that certain Amended and Restated
Agreement and Plan of Merger between the Corporation and Osicom Technologies,
Inc., a New Jersey corporation, dated as of August 2, 2000, which options shall
have an exercise price of Three Dollars and Nineteen Cents ($3.19) per share.
2. The exercise price shall become immediately due upon exercise of the option
and shall, subject to the provisions of Section I of Six and the
documents evidencing the option, be payable in one or more of the forms
specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period necessary to avoid a
charge to the Corporation's earnings for financial reporting purposes and valued
at Fair Market Value on the Exercise Date, or
(iii) to the extent the option is exercised for vested shares, through a special
sale and remittance procedure pursuant to which the Optionee shall concurrently
provide irrevocable instructions to (a) a Corporation-designated brokerage firm
to effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for the purchased
shares plus all applicable Federal, state and local income and employment taxes
required to be withheld by the Corporation by reason of such exercise and (b)
the Corporation to deliver the certificates for the purchased shares directly to
such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.
B. Exercise and Term of Options. Each option shall be exercisable at such time
or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the exercise of any options held
by the Optionee at the time of cessation of Service or death:
(i) Expect as provided in (iii) below, any option outstanding at the time of the
Optionee's cessation of Service for any reason shall remain exercisable for such
period of time thereafter as shall be determined by the Plan Administrator and
set forth in the documents evidencing the option, but no such option shall be
exercisable after the expiration of the option term.
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(ii) Any option held by the Optionee at the time of death and exercisable in
whole or in part at that time may be subsequently exercised by the personal
representative of the Optionee's estate or by the person or persons to whom the
option is transferred pursuant to the Optionee's will or the laws of inheritance
or by the Optionee's designated beneficiary or beneficiaries of that option.
(iii) Should the Optionee's Service be terminated for Misconduct or should the
Optionee otherwise engage in Misconduct while holding one or more outstanding
options under this Article Two, then all those options shall terminate
immediately and cease to be outstanding.
(iv) During the applicable post-Service exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares for which
the option is exercisable on the date of the Optionee's cessation of Service.
Upon the expiration of the applicable exercise period or (if earlier) upon the
expiration of the option term, the option shall terminate and cease to be
outstanding for any vested shares for which the option has not been exercised.
However, the option shall, immediately upon the Optionee's cessation of Service,
terminate and cease to be outstanding to the extent the option is not otherwise
at that time exercisable for vested shares.
2. The Plan Administrator shall have complete discretion, exercisable either at
the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to remain exercisable
following the Optionee's cessation of Service from the limited exercise period
otherwise in effect for that option to such greater period of time as the Plan
Administrator shall deem appropriate, but in no event beyond the expiration of
the option term, and/or
(ii) permit the option to be exercised, during the applicable post-Service
exercise period, not only with respect to the number of vested shares of Common
Stock for which such option is exercisable at the time of the Optionee's
cessation of Service but also with respect to one or more additional
installments in which the Optionee would have vested had the Optionee continued
in Service.
D. Shareholder Rights. The holder of an option shall have no shareholder
rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of record
of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the discretion to grant
options which are exercisable for unvested shares of Common Stock. Should the
Optionee cease Service while holding such unvested shares, the Corporation shall
have the right to repurchase, at the exercise price paid per share, any or all
of those unvested shares. The terms upon which such repurchase right shall be
exercisable (including the period and procedure for exercise and the appropriate
vesting schedule for the purchased shares) shall be established by the Plan
Administrator and set forth in the document evidencing such repurchase right.
F. Limited Transferability of Options. During the lifetime of the Optionee,
Incentive Options shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or the laws of inheritance
following the Optionee's death. Non-Statutory Options shall be subject to the
same restriction, except that a Non-Statutory Option may be assigned in whole or
<PAGE>
in part during the Optionee's lifetime to one or more members of the Optionee's
family or to a trust established exclusively for one or more such family members
or to Optionee's former spouse, to the extent such assignment is in connection
with the Optionee's estate plan or pursuant to a domestic relations order. The
assigned portion may only be exercised by the person or persons who acquire a
proprietary interest in the option pursuant to the assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Plan Administrator may deem appropriate.
Notwithstanding the foregoing, the Optionee may also designate one or more
persons as the beneficiary or beneficiaries of his or her outstanding options
under this Article Two, and those options shall, in accordance with such
designation, automatically be transferred to such beneficiary or beneficiaries
upon the Optionee's death while holding those options. Such beneficiary or
beneficiaries shall take the transferred options subject to all the terms and
conditions of the applicable agreement evidencing each such transferred option,
including (without limitation) the limited time period during which the option
may be exercised following the Optionee's death.
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Six shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory Options when issued under the
Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to Employees.
B. Dollar Limitation. The aggregate Fair Market Value of the shares of Common
Stock (determined as of the respective date or dates of grant) for which one or
more options granted to any Employee under the Plan (or any other option plan of
the Corporation or any Parent or Subsidiary) may for the first time become
exercisable as Incentive Options during any one calendar year shall not exceed
the sum of One Hundred Thousand Dollars ($100,000). To the extent the Employee
holds two (2) or more such options which become exercisable for the first time
in the same calendar year, the foregoing limitation on the exercisability of
such options as Incentive Options shall be applied on the basis of the order in
which such options are granted.
C. 10% Shareholder. If any Employee to whom an Incentive Option is granted is
a 10% Shareholder, then the exercise price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the option grant date, and the option term shall not exceed five (5)
years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding option under the
Discretionary Option Grant Program shall automatically accelerate so that each
such option shall, immediately prior to the effective date of the Corporate
Transaction, become exercisable for all the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. However, an outstanding option shall not
become exercisable on such an accelerated basis if and to the extent: (i) such
option is, in connection with the Corporate Transaction, to be assumed by the
successor corporation (or parent thereof) or (ii) such option is to be replaced
with a cash incentive program of the successor corporation which preserves the
spread existing at the time of the Corporate Transaction on any shares for which
the option is not otherwise at that time exercisable and provides for subsequent
payout in accordance with the same exercise/vesting schedule applicable to those
<PAGE>
option shares or (iii) the acceleration of such option is subject to other
limitations imposed by the Plan Administrator at the time of the option grant.
B. All outstanding repurchase rights under the Discretionary Option Grant
Program shall automatically terminate, and the shares of Common Stock subject to
those terminated rights shall immediately vest in full, in the event of any
Corporate Transaction, except to the extent: (i) those repurchase rights are to
be assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase
right is issued.
C. Immediately following the consummation of the Corporate Transaction, all
outstanding options under the Discretionary Option Grant Program shall terminate
and cease to be outstanding, except to the extent assumed by the successor
corporation (or parent thereof).
D. Each option which is assumed in connection with a Corporate Transaction shall
be appropriately adjusted, immediately after such Corporate Transaction, to
apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments to reflect such Corporate Transaction shall also be made to (i) the
exercise price payable per share under each outstanding option, provided the
aggregate exercise price payable for such securities shall remain the same, (ii)
the maximum number and/or class of securities available for issuance over the
remaining term of the Plan and (iii) the maximum number and/or class of
securities for which any one person may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances under the Plan
per calendar year and (iv) the maximum number and/or class of securities by
which the share reserve is to increase automatically each calendar year. To the
extent the actual holders of the Corporation's outstanding Common Stock receive
cash consideration for their Common Stock in consummation of the Corporate
Transaction, the successor corporation may, in connection with the assumption of
the outstanding options under the Discretionary Option Grant Program, substitute
one or more shares of its own common stock with a fair market value equivalent
to the cash consideration paid per share of Common Stock in such Corporate
Transaction.
E. The Plan Administrator shall have the discretionary authority to structure
one or more outstanding options under the Discretionary Option Grant Program so
that those options shall, immediately prior to the effective date of such
Corporate Transaction, become exercisable for all the shares of Common Stock at
the time subject to those options and may be exercised for any or all of those
shares as fully vested shares of Common Stock, whether or not those options are
to be assumed in the Corporate Transaction. In addition, the Plan Administrator
shall have the discretionary authority to structure one or more of the
Corporation's repurchase rights under the Discretionary Option Grant Program so
that those rights shall not be assignable in connection with such Corporate
Transaction and shall accordingly terminate upon the consummation of such
Corporate Transaction, and the shares subject to those terminated rights shall
thereupon vest in full.
F. The Plan Administrator shall have full power and authority to structure one
or more outstanding options under the Discretionary Option Grant Program so that
those options shall become exercisable for all the shares of Common Stock at the
time subject to those options in the event the Optionee's Service is
subsequently terminated by reason of an Involuntary Termination within a
<PAGE>
designated period (not to exceed eighteen (18) months) following the effective
date of any Corporate Transaction in which those options are assumed and do not
otherwise accelerate. In addition, the Plan Administrator may structure one or
more of the Corporation's repurchase rights so that those rights shall
immediately terminate with respect to any shares held by the Optionee at the
time of his or her Involuntary Termination, and the shares subject to those
terminated repurchase rights shall accordingly vest in full at that time.
G. The Plan Administrator shall have the discretionary authority to structure
one or more outstanding options under the Discretionary Option Grant Program so
that those options shall, immediately prior to the effective date of a Change in
Control, become exercisable for all the shares of Common Stock at the time
subject to those options and may be exercised for any or all of those shares as
fully vested shares of Common Stock. In addition, the Plan Administrator shall
have the discretionary authority to structure one or more of the Corporation's
repurchase rights under the Discretionary Option Grant Program so that those
rights shall terminate automatically upon the consummation of such Change in
Control, and the shares subject to those terminated rights shall thereupon vest
in full. Alternatively, the Plan Administrator may condition the automatic
acceleration of one or more outstanding options under the Discretionary Option
Grant Program and the termination of one or more of the Corporation's
outstanding repurchase rights under such program upon the subsequent termination
of the Optionee's Service by reason of an Involuntary Termination within a
designated period (not to exceed eighteen (18) months) following the effective
date of such Change in Control.
H. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
($100,000) limitation is not exceeded. To the extent such dollar limitation is
exceeded, the accelerated portion of such option shall be exercisable as a
Nonstatutory Option under the Federal tax laws.
I. The outstanding options shall in no way affect the right of the Corporation
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time and from
time to time, with the consent of the affected option holders, the cancellation
of any or all outstanding options under the Discretionary Option Grant Program
(including outstanding options incorporated from the Predecessor Plan) and to
grant in substitution new options covering the same or a different number of
shares of Common Stock but with an exercise price per share based on the Fair
Market Value per share of Common Stock on the new grant date.
V. STOCK APPRECIATION RIGHTS
A. The Plan Administrator shall have full power and authority to grant to
selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.
B. The following terms shall govern the grant and exercise of tandem stock
appreciation rights:
<PAGE>
(i) One or more Optionees may be granted the right, exercisable upon such terms
as the Plan Administrator may establish, to elect between the exercise of the
underlying option for shares of Common Stock and the surrender of that option in
exchange for a distribution from the Corporation in an amount equal to the
excess of (a) the Fair Market Value (on the option surrender date) of the number
of shares in which the Optionee is at the time vested under the surrendered
option (or surrendered portion thereof) over (b) the aggregate exercise price
payable for such shares.
(ii) No such option surrender shall be effective unless it is approved by the
Plan Administrator, either at the time of the actual option surrender or at any
earlier time. If the surrender is so approved, then the distribution to which
the Optionee shall be entitled may be made in shares of Common Stock valued at
Fair Market Value on the option surrender date, in cash, or partly in shares and
partly in cash, as the Plan Administrator shall in its sole discretion deem
appropriate.
(iii) If the surrender of an option is not approved by the Plan Administrator,
then the Optionee shall retain whatever rights the Optionee had under the
surrendered option (or surrendered portion thereof) on the option surrender date
and may exercise such rights at any time prior to the later of (a) five (5)
business days after the receipt of the rejection notice or (b) the last day on
which the option is otherwise exercisable in accordance with the terms of the
documents evidencing such option, but in no event may such rights be exercised
more than ten (10) years after the option grant date.
C. The following terms shall govern the grant and exercise of limited stock
appreciation rights:
(i) One or more Section 16 Insiders may be granted limited stock appreciation
rights with respect to their outstanding options.
(ii) Upon the occurrence of a Hostile Take-Over, each individual holding one or
more options with such a limited stock appreciation right shall have the
unconditional right (exercisable for a thirty (30)-day period following such
Hostile Take-Over) to surrender each such option to the Corporation. In return
for the surrendered option, the Optionee shall receive a cash distribution from
the Corporation in an amount equal to the excess of (A) the Take-Over Price of
the shares of Common Stock at the time subject to such option (whether or not
the option is otherwise at that time vested and exercisable for those shares)
over (B) the aggregate exercise price payable for those shares. Such cash
distribution shall be paid within five (5) days following the option surrender
date.
(iii) At the time such limited stock appreciation right is granted, the Plan
Administrator shall pre-approve any subsequent exercise of that right in
accordance with the terms of this Paragraph C. Accordingly, no further approval
of the Plan Administrator or the Board shall be required at the time of the
actual option surrender and cash distribution.
<PAGE>
ARTICLE THREE
SALARY INVESTMENT OPTION GRANT PROGRAM
--------------------------------------
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to determine
the calendar year or years (if any) for which the Salary Investment Option Grant
Program is to be in effect and to select the Section 16 Insiders and other
highly compensated Employees eligible to participate in the Salary Investment
Option Grant Program for such calendar year or years. Each selected individual
who elects to participate in the Salary Investment Option Grant Program must,
prior to the start of each calendar year of participation, file with the Plan
Administrator (or its designate) an irrevocable authorization directing the
Corporation to reduce his or her base salary for that calendar year by an amount
not less than Ten Thousand Dollars ($10,000.00) nor more than Fifty Thousand
Dollars ($50,000.00). Each individual who files such a timely authorization
shall automatically be granted an option under the Salary Investment Option
Grant Program on the first trading day in January of the calendar year for which
the salary reduction is to be in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or more documents
in the form approved by the Plan Administrator; provided, however, that each
such document shall comply with the terms specified below.
A. Exercise Price.
1. The exercise price per share shall be not less than thirty-three and
one-third percent (33-1/3%) of the Fair Market Value per share of Common Stock
on the option grant date.
2. The exercise price shall become immediately due upon exercise of the option
and shall be payable in one or more of the alternative forms authorized under
the Discretionary Option Grant Program. Except to the extent the sale and
remittance procedure specified thereunder is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.
B. Number of Option Shares. The number of shares of Common Stock subject to
the option shall be determined pursuant to the following formula (rounded down
to the nearest whole number):
X = A / (B x [100% less the exercise price per share expressed as a percentage
of the Fair Market Value per share of Common Stock on the option grant date]),
where
X is the number of option shares,
A is the dollar amount by which the Optionee's base salary is to be reduced for
the calendar year pursuant to his or her election under the Salary Investment
Option Grant Program, and
<PAGE>
B is the Fair Market Value per share of Common Stock on the option grant date.
C. Exercise and Term of Options. The option shall become exercisable in a series
of twelve (12) successive equal monthly installments upon the Optionee's
completion of each calendar month of Service in the calendar year for which the
salary reduction is in effect. Each option shall have a maximum term of ten (10)
years measured from the option grant date.
D. Effect of Termination of Service. Should the Optionee cease Service for any
reason while holding one or more options under this Article Three, then each
such option shall remain exercisable, for any or all of the shares for which the
option is exercisable at the time of such cessation of Service, until the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the
expiration of the three (3)-year period measured from the date of such cessation
of Service. Should the Optionee die while holding one or more options under this
Article Three, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the Optionee's
cessation of Service (less any shares subsequently purchased by Optionee prior
to death), by the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to the Optionee's
will or the laws of inheritance or by the designated beneficiary or
beneficiaries of the option. Such right of exercise shall lapse, and the option
shall terminate, upon the earlier of (i) the expiration of the ten (10)-year
option term or (ii) the three (3)-year period measured from the date of the
Optionee's cessation of Service. However, the option shall, immediately upon the
Optionee's cessation of Service for any reason, terminate and cease to remain
outstanding with respect to any and all shares of Common Stock for which the
option is not otherwise at that time exercisable.
III. CORPORATE TRANSACTION/ CHANGE IN CONTROL/ HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Corporate
Transaction, become exercisable for all the shares of Common Stock at the time
subject to such option and may be exercised for any or all of those shares as
fully vested shares of Common Stock. Each such outstanding option shall
terminate immediately following the Corporate Transaction, except to the extent
assumed by the successor corporation (or parent thereof) in such Corporate
Transaction. Any option so assumed shall remain exercisable for the fully vested
shares until the earlier of (i) the expiration of the ten (10)-year option term
or (ii) the expiration of the three (3)-year period measured from the date of
the Optionee's cessation of Service.
B. In the event of a Change in Control while the Optionee remains in Service,
each outstanding option held by such Optionee under this Salary Investment
Option Grant Program shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Change in Control, become
exercisable for all the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully vested
shares of Common Stock. The option shall remain so exercisable until the
earliest to occur of (i) the expiration of the ten (10)-year option term, (ii)
the expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Service, (iii) the termination of the option in
connection with a Corporate Transaction or (iv) the surrender of the option in
connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over while the Optionee remains in
Service, such Optionee shall have a thirty (30)-day period in which to surrender
to the Corporation each outstanding option held by him or her under the Salary
Investment Option Grant Program. The Optionee shall in return be entitled to a
cash distribution from the Corporation in an amount equal to the excess of (i)
the Take-Over Price of the shares of Common Stock at the time subject to the
surrendered option (whether or not the option is otherwise at the time
exercisable for those shares) over (ii) the aggregate exercise price payable for
such shares. Such cash distribution shall be paid within five (5) days following
the surrender of the option to the Corporation. The Primary Committee shall, at
the time the option with such limited stock appreciation right is granted under
the Salary Investment Option Grant Program, pre-approve any subsequent exercise
of that right in accordance with the terms of this Paragraph C. Accordingly, no
further approval of the Primary Committee or the Board shall be required at the
time of the actual option surrender and cash distribution.
D. Each option which is assumed in connection with a Corporate Transaction shall
be appropriately adjusted, immediately after such Corporate Transaction, to
apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same. To the extent the actual holders of the
Corporation's outstanding Common Stock receive cash consideration for their
Common Stock in consummation of the Corporate Transaction, the successor
corporation may, in connection with the assumption of the outstanding options
under the Salary Investment Option Grant Program, substitute one or more shares
of its own common stock with a fair market value equivalent to the cash
consideration paid per share of Common Stock in such Corporate Transaction.
E. The grant of options under the Salary Investment Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
IV. REMAINING TERMS
The remaining terms of each option granted under the Salary Investment Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
ARTICLE FOUR
STOCK ISSUANCE PROGRAM
----------------------
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program through
direct and immediate issuances without any intervening option grants. Each such
stock issuance shall be evidenced by a Stock Issuance Agreement which complies
with the terms specified below. Shares of Common Stock may also be issued under
the Stock Issuance Program pursuant to share right awards which entitle the
recipients to receive those shares upon the attainment of designated performance
goals.
A. Purchase Price.
1. The purchase price per share shall be fixed by the Plan Administrator, but
shall not be less than one hundred percent (100%) of the Fair Market Value per
share of Common Stock on the issuance date.
2. Subject to the provisions of Section I of Article Six, shares of Common Stock
may be issued under the Stock Issuance Program for any of the following items of
consideration which the Plan Administrator may deem appropriate in each
individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent or Subsidiary).
B. Vesting Provisions.
1. Shares of Common Stock issued under the Stock Issuance Program may, in the
discretion of the Plan Administrator, be fully and immediately vested upon
issuance or may vest in one or more installments over the Participant's period
of Service or upon attainment of specified performance objectives. The elements
of the vesting schedule applicable to any unvested shares of Common Stock issued
under the Stock Issuance Program shall be determined by the Plan Administrator
and incorporated into the Stock Issuance Agreement. Shares of Common Stock may
also be issued under the Stock Issuance Program pursuant to share right awards
which entitle the recipients to receive those shares upon the attainment of
designated performance goals.
2. Any new, substituted or additional securities or other property (including
money paid other than as a regular cash dividend) which the Participant may have
the right to receive with respect to the Participant's unvested shares of Common
Stock by reason of any stock dividend, stock split, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration shall be issued subject to (i) the same vesting requirements
applicable to the Participant's unvested shares of Common Stock and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full shareholder rights with respect to any shares
of Common Stock issued to the Participant under the Stock Issuance Program,
whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while holding one or more
unvested shares of Common Stock issued under the Stock Issuance Program or
should the performance objectives not be attained with respect to one or more
such unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further shareholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for consideration
paid in cash or cash equivalent (including the Participant's purchase-money
indebtedness), the Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to the surrendered shares.
5. The Plan Administrator may in its discretion waive the surrender and
cancellation of one or more unvested shares of Common Stock which would
otherwise occur upon the cessation of the Participant's Service or the
non-attainment of the performance objectives applicable to those shares. Such
waiver shall result in the immediate vesting of the Participant's interest in
the shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
6. Outstanding share right awards under the Stock Issuance Program shall
automatically terminate, and no shares of Common Stock shall actually be issued
in satisfaction of those awards, if the performance goals established for such
awards are not attained. The Plan Administrator, however, shall have the
discretionary authority to issue shares of Common Stock under one or more
outstanding share right awards as to which the designated performance goals have
not been attained.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under the Stock
Issuance Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the
event of any Corporate Transaction, except to the extent (i) those repurchase
rights are to be assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed in the Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority to structure
one or more of the Corporation's repurchase rights under the Stock Issuance
Program so that those rights shall automatically terminate in whole or in part,
and the shares of Common Stock subject to those terminated rights shall
immediately vest, in the event the Participant's Service should subsequently
terminate by reason of an Involuntary Termination within a designated period
(not to exceed eighteen (18) months) following the effective date of any
Corporate Transaction in which those repurchase rights are assigned to the
successor corporation (or parent thereof).
C. The Plan Administrator shall also have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program so that those rights shall automatically terminate in whole or
in part, and the shares of Common Stock subject to those terminated rights shall
immediately vest, either upon the occurrence of a Change in Control or upon the
subsequent termination of the Participant's Service by reason of an Involuntary
Termination within a designated period (not to exceed eighteen (18) months)
following the effective date of that Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates specified below:
1. Each individual who is first elected or appointed as a non-employee Board
member at any time on or after Plan Effective Date shall automatically be
granted, on the date of such initial election or appointment, a Non-Statutory
Option to purchase 100,000 shares of Common Stock, provided that individual has
not previously been in the employ of the Corporation or any Parent or Subsidiary
nor has that individual received a prior option grant from the Corporation.
2. On the date of each Annual Shareholders Meeting held after Plan Effective
Date, each individual who is to continue to serve as a non-employee Board
member, whether or not that individual is standing for re-election to the Board
at that particular Annual Meeting, shall automatically be granted a
Non-Statutory Option to purchase 50,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6)
months. There shall be no limit on the number of such 50,000 share option grants
any one non-employee Board member may receive over his or her period of Board
service, and non-employee Board members who have previously been in the employ
of the Corporation (or any Parent or Subsidiary) or who have otherwise received
one or more stock option grants from the Corporation prior to the Underwriting
Date shall be eligible to receive one or more such annual option grants over
their period of continued Board service.
B. Exercise Price.
1. The exercise price per share shall be equal to one hundred percent (100%) of
the Fair Market Value per share of Common Stock on the option grant date.
2. The exercise price shall be payable in one or more of the alternative forms
authorized under the Discretionary Option Grant Program. Except to the extent
the sale and remittance procedure specified thereunder is utilized, payment of
the exercise price for the purchased shares must be made on the Exercise Date.
C. Option Term. Each option shall have a term of ten (10) years measured
from the option grant date.
D. Exercise and Vesting of Options. Each option shall be immediately exercisable
for any or all of the option shares. However, any unvested shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. The shares subject to each initial 100,000
share grant shall vest, and the Corporation's repurchase right shall lapse, in a
series of three (3) successive equal annual installments upon the Optionee's
completion of each year of service as a Board member over the three (3) year
period measured from the option grant date. The shares subject to each annual
50,000 share option grant shall vest in one installment upon the Optionee's
completion of the one (1)-year period of service measured from the grant date.
E. Limited Transferability of Options. Each option under this Article Five may
be assigned in whole or in part during the Optionee's lifetime to one or more
members of the Optionee's family or to a trust established exclusively for one
or more such family members or to Optionee's former spouse, to the extent such
assignment is in connection with the Optionee's estate plan or pursuant to a
domestic relations order. The assigned portion may only be exercised by the
person or persons who acquire a proprietary interest in the option pursuant to
the assignment. The terms applicable to the assigned portion shall be the same
as those in effect for the option immediately prior to such assignment and shall
be set forth in such documents issued to the assignee as the Plan Administrator
may deem appropriate. The Optionee may also designate one or more persons as the
beneficiary or beneficiaries of his or her outstanding options under this
Article Five, and those options shall, in accordance with such designation,
automatically be transferred to such beneficiary or beneficiaries upon the
Optionee's death while holding those options. Such beneficiary or beneficiaries
shall take the transferred options subject to all the terms and conditions of
the applicable agreement evidencing each such transferred option, including
(without limitation) the limited time period during which the option may be
exercised following the Optionee's death.
F. Termination of Board Service. The following provisions shall govern the
exercise of any options held by the Optionee at the time the Optionee ceases to
serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death, the personal
representative of the Optionee's estate or the person or persons to whom the
option is transferred pursuant to the Optionee's will or the laws of inheritance
or the designated beneficiary or beneficiaries of such option) shall have a
twelve (12)-month period following the date of such cessation of Board service
in which to exercise each such option.
(ii) During the twelve (12)-month exercise period, the option may not be
exercised in the aggregate for more than the number of vested shares of Common
Stock for which the option is exercisable at the time of the Optionee's
cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member by reason of death or
Permanent Disability, then all shares at the time subject to the option shall
immediately vest so that such option may, during the twelve (12)-month exercise
period following such cessation of Board service, be exercised for any or all of
those shares as fully vested shares of Common Stock.
(iv) In no event shall the option remain exercisable after the expiration of the
option term. Upon the expiration of the twelve (12)-month exercise period or (if
earlier) upon the expiration of the option term, the option shall terminate and
cease to be outstanding for any vested shares for which the option has not been
exercised. However, the option shall, immediately upon the Optionee's cessation
of Board service for any reason other than death or Permanent Disability,
terminate and cease to be outstanding to the extent the option is not otherwise
at that time exercisable for vested shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of a Corporate Transaction while the Optionee remains a Board
member, the shares of Common Stock at the time subject to each outstanding
option held by such Optionee under this Automatic Option Grant Program but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become exercisable for all the option shares as fully vested shares of Common
Stock and may be exercised for any or all of those vested shares. Immediately
following the consummation of the Corporate Transaction, each automatic option
grant shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof).
B. In the event of a Change in Control while the Optionee remains a Board
member, the shares of Common Stock at the time subject to each outstanding
option held by such Optionee under this Automatic Option Grant Program but not
otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the effective date of the Change in Control, become
exercisable for all the option shares as fully vested shares of Common Stock and
may be exercised for any or all of those vested shares. Each such option shall
remain exercisable for such fully vested option shares until the expiration or
sooner termination of the option term or the surrender of the option in
connection with a Hostile Take-Over.
C. All outstanding repurchase rights under this under this Automatic Option
Grant Program shall automatically terminate, and the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
of any Corporate Transaction or Change in Control.
D. Upon the occurrence of a Hostile Take-Over while the Optionee remains a Board
member, such Optionee shall have a thirty (30)-day period in which to surrender
to the Corporation each of his or her outstanding options under this Automatic
Option Grant Program. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock at the time subject to each
surrendered option (whether or not the Optionee is otherwise at the time vested
in those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
surrender of the option to the Corporation. No approval or consent of the Board
or any Plan Administrator shall be required at the time of the actual option
surrender and cash distribution.
E. Each option which is assumed in connection with a Corporate Transaction shall
be appropriately adjusted, immediately after such Corporate Transaction, to
apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to the exercise price payable per share under
each outstanding option, provided the aggregate exercise price payable for such
securities shall remain the same. To the extent the actual holders of the
Corporation's outstanding Common Stock receive cash consideration for their
Common Stock in consummation of the Corporate Transaction, the successor
corporation may, in connection with the assumption of the outstanding options
under the Automatic Option Grant Program, substitute one or more shares of its
own common stock with a fair market value equivalent to the cash consideration
paid per share of Common Stock in such Corporate Transaction.
F. The grant of options under the Automatic Option Grant Program shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option Grant
Program shall be the same as the terms in effect for option grants made under
the Discretionary Option Grant Program.
ARTICLE SIX
MISCELLANEOUS
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I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay the option
exercise price under the Discretionary Option Grant Program or the purchase
price of shares issued under the Stock Issuance Program by delivering a
full-recourse, interest-bearing promissory note payable in one or more
installments. The terms of any such promissory note (including the interest rate
and the terms of repayment) shall be established by the Plan Administrator in
its sole discretion. In no event may the maximum credit available to the
Optionee or Participant exceed the sum of (i) the aggregate option exercise
price or purchase price payable for the purchased shares (less the par value of
such shares) plus (ii) any Federal, state and local income and employment tax
liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
II. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock upon the
exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion, provide any or all holders of
Non-Statutory Options or unvested shares of Common Stock under the Plan (other
than the options granted or the shares issued under the Automatic Option Grant
Program) with the right to use shares of Common Stock in satisfaction of all or
part of the Withholding Taxes to which such holders may become subject in
connection with the exercise of their options or the vesting of their shares.
Such right may be provided to any such holder in either or both of the following
formats:
Stock Withholding: The election to have the Corporation withhold, from
the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Withholding
Taxes (not to exceed one hundred percent (100%)) designated by the holder.
Stock Delivery: The election to deliver to the Corporation, at the time
the Non-Statutory Option is exercised or the shares vest, one or more shares of
Common Stock previously acquired by such holder (other than in connection with
the option exercise or share vesting triggering the Withholding Taxes) with an
aggregate Fair Market Value equal to the percentage of the Withholding Taxes
(not to exceed one hundred percent (100%)) designated by the holder.
III. EFFECTIVE DATE AND TERM OF THE PLAN
A. The Plan shall become effective immediately on the Plan Effective Date.
However, the Salary Investment Option Grant Program shall not be implemented
until such time as the Primary Committee may deem appropriate. Options may be
granted under the Discretionary Option Grant at any time on or after the Plan
Effective Date, and the initial option grants under the Automatic Option Grant
Program shall also be made on the Plan Effective Date to any non-employee Board
members eligible for such grants at that time. However, no options granted under
the Plan may be exercised, and no shares shall be issued under the Plan, until
the Plan is approved by the Corporation's shareholders. If such shareholder
approval is not obtained within twelve (12) months after the Plan Effective
Date, then all options previously granted under this Plan shall terminate and
cease to be outstanding, and no further options shall be granted and no shares
shall be issued under the Plan.
B. The Plan shall terminate upon the earliest to occur of (i) ten (10) years
from the Plan Effective Date, (ii) the date on which all shares available for
issuance under the Plan shall have been issued as fully vested shares or (iii)
the termination of all outstanding options in connection with a Corporate
Transaction. Should the Plan terminate on the ten (10) year anniversary of the
Plan Effective Date, then all option grants and unvested stock issuances
outstanding at that time shall continue to have force and effect in accordance
with the provisions of the documents evidencing such grants or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to amend or
modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require shareholder approval
pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant and Salary Investment Option Grant Programs and
shares of Common Stock may be issued under the Stock Issuance Program that are
in each instance in excess of the number of shares then available for issuance
under the Plan, provided any excess shares actually issued under those programs
shall be held in escrow until there is obtained shareholder approval of an
amendment sufficiently increasing the number of shares of Common Stock available
for issuance under the Plan. If such shareholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of Common
Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option under the
Plan and the issuance of any shares of Common Stock (i) upon the exercise of any
granted option or (ii) under the Stock Issuance Program shall be subject to the
Corporation's procurement of all approvals and permits required by regulatory
authorities having jurisdiction over the Plan, the stock options granted under
it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered under
the Plan unless and until there shall have been compliance with all applicable
requirements of Federal and state securities laws, including the filing and
effectiveness of the Form S-8 registration statement for the shares of Common
Stock issuable under the Plan, and all applicable listing requirements of any
stock exchange (or the Nasdaq National Market, if applicable) on which Common
Stock is then listed for trading.
VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any right
to continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee or the
Participant, which rights are hereby expressly reserved by each, to terminate
such person's Service at any time for any reason, with or without cause.
<PAGE>
APPENDIX
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The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic option grant
program in effect under Article Five of the Plan.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall mean a change in ownership or control of the
Corporation effected through either of the following transactions but excluding
a Hostile Takeover:
(i) the acquisition, directly or indirectly by any person or related group of
persons (other than the Corporation or a person that directly or indirectly
controls, is controlled by, or is under common control with, the Corporation),
of beneficial ownership (within the meaning of Rule 13d-3 of the 1934 Act) of
securities possessing more than fifty percent (50%) of the total combined voting
power of the Corporation's outstanding securities pursuant to a tender or
exchange offer made directly to the Corporation's shareholders, or
(ii) a change in the composition of the Board over a period of thirty-six (36)
consecutive months or less such that a majority of the Board members ceases, by
reason of one or more contested elections for Board membership, to be comprised
of individuals who either (A) have been Board members continuously since the
beginning of such period or (B) have been elected or nominated for election as
Board members during such period by at least a majority of the Board members
described in clause (A) who were still in office at the time the Board approved
such election or nomination.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Common Stock shall mean the Corporation's common stock.
F. Corporate Transaction shall mean either of the following shareholder-
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different from the
persons holding those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or substantially all
of the Corporation's assets in complete liquidation or dissolution of the
Corporation.
G. Corporation shall mean Entrada Networks, Inc., a Delaware corporation,
and any corporate successor to all or substantially all of the assets or voting
stock of Entrada Networks, Inc., which shall by appropriate action adopt the
Plan.
<PAGE>
H. Discretionary Option Grant Program shall mean the discretionary option
grant program in effect under Article Two of the Plan.
I. Employee shall mean an individual who is in the employ of the Corporation
(or any Parent or Subsidiary), subject to the control and direction of the
employer entity as to both the work to be performed and the manner and method
of performance.
J. Exercise Date shall mean the date on which the Corporation shall have
received written notice of the option exercise.
K. Fair Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National Market,
then the Fair Market Value shall be the closing selling price per share of
Common Stock on the date in question, as such price is reported by the National
Association of Securities Dealers on the Nasdaq National Market and published in
The Wall Street Journal. If there is no closing selling price for the Common
Stock on the date in question, then the Fair Market Value shall be the closing
selling price on the last preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any Stock Exchange, then the
Fair Market Value shall be the closing selling price per share of Common Stock
on the date in question on the Stock Exchange determined by the Plan
Administrator to be the primary market for the Common Stock, as such price is
officially quoted in the composite tape of transactions on such exchange and
published in The Wall Street Journal. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such quotation
exists.
L. Hostile Take-Over shall mean the acquisition, directly or indirectly, by any
person or related group of persons (other than the Corporation or a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Corporation) of beneficial ownership (within the meaning of Rule 13d-3
of the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities pursuant
to a tender or exchange offer made directly to the Corporation's shareholders
which the Board does not recommend such shareholders to accept.
M. Incentive Option shall mean an option which satisfies the requirements of
Code Section 422.
N. Involuntary Termination shall mean the termination of the Service of any
individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the Corporation
for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change in his or
her position with the Corporation which materially reduces his or her duties and
responsibilities or the level of management to which he or she reports, (B) a
<PAGE>
reduction in his or her level of compensation (including base salary, fringe
benefits and target bonus under any corporate-performance based bonus or
incentive programs) by more than fifteen percent (15%) or (C) a relocation of
such individual's place of employment by more than fifty (50) miles, provided
and only if such change, reduction or relocation is effected by the Corporation
without the individual's consent.
O. Misconduct shall mean the commission of any act of fraud, embezzlement or
dishonesty by the Optionee or Participant, any unauthorized use or disclosure by
such person of confidential information or trade secrets of the Corporation (or
any Parent or Subsidiary), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Corporation (or any Parent or
Subsidiary) in a material manner. The foregoing definition shall not in any way
preclude or restrict the right of the Corporation (or any Parent or Subsidiary)
to discharge or dismiss any Optionee, Participant or other person in the Service
of the Corporation (or any Parent or Subsidiary) for any other acts or
omissions, but such other acts or omissions shall not be deemed, for purposes of
the Plan, to constitute grounds for termination for Misconduct.
P. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
Q. Non-Statutory Option shall mean an option not intended to satisfy the
requirements of Code Section 422.
R. Optionee shall mean any person to whom an option is granted under the
Discretionary Option Grant, Salary Investment Option Grant or Automatic Option
Grant Program.
S. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at
the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.
T. Participant shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.
U. Permanent Disability or Permanently Disabled shall mean the inability of
the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more. However, solely for purposes of the Automatic Option Grant Program,
Permanent Disability or Permanently Disabled shall mean the inability of the
non-employee Board member to perform his or her usual duties as a Board member
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
V. Plan shall mean the Corporation's 2000 Stock Incentive Plan, as set forth
in this document.
W. Plan Administrator shall mean the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
<PAGE>
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
X. Plan Effective Date shall mean the date the Plan shall become effective
and shall be the date the Board adopts the Plan.
Y. Primary Committee shall mean the committee of two (2) or more non-employee
Board members appointed by the Board to administer the Discretionary Option
Grant and Stock Issuance Programs with respect to Section 16 Insiders and to
administer the Salary Investment Option Grant Program solely with respect to the
selection of the eligible individuals who may participate in such program.
Z. Salary Investment Option Grant Program shall mean the salary investment
option grant program in effect under Article Three of the Plan.
AA. Secondary Committee shall mean a committee of one or more Board members
appointed by the Board to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to eligible persons other than Section 16
Insiders.
BB. Section 16 Insider shall mean an officer or director of the Corporation
subject to the short-swing profit liabilities of Section 16 of the 1934 Act.
CC. Service shall mean the performance of services for the Corporation (or any
Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant or independent advisor, except
to the extent otherwise specifically provided in the documents evidencing the
option grant or stock issuance.
DD. Stock Exchange shall mean either the American Stock Exchange or the New
York Stock Exchange.
EE. Stock Issuance Agreement shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
FF. Stock Issuance Program shall mean the stock issuance program in effect
under Article Four of the Plan.
GG. Subsidiary shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
HH. Take-Over Price shall mean the greater of (i) the Fair Market Value per
share of Common Stock on the date the option is surrendered to the Corporation
in connection with a Hostile Take-Over or (ii) the highest reported price per
share of Common Stock paid by the tender offeror in effecting such Hostile
<PAGE>
Take-Over. However, if the surrendered option is an Incentive Option, the
Take-Over Price shall not exceed the clause (i) price per share.
II. 10% Shareholder shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).
JJ. Withholding Taxes shall mean the Federal, state and local income and
employment withholding taxes to which the holder of Non-Statutory Options or
unvested shares of Common Stock may become subject in connection with the
exercise of those options or the vesting of those shares.
