<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______________TO _______________.
COMMISSION FILE NUMBER 0-28660
- --------------------------------------------------------------------------------
TRITEAL CORPORATION
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
DELAWARE 33-0548924
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2011 PALOMAR AIRPORT ROAD
CARLSBAD, CA 92009-1431
(Address of principal executive offices)
(760) 827-5000
(Registrant s phone number, including area code)
------------------------------------------------
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS: YES [X] NO [ ]
As of November 12, 1997 there were 11,152,970 shares of $.001 par value
common stock outstanding.
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TRITEAL CORPORATION
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations . . . . . . . . . . 4
Consolidated Statements of Cash Flows . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . 6
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations . . . . 8
PART II OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 17
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . 17
Item 4. Submission of Matters to a Vote of Security Holders . . . 18
Item 6. Exhibits and Reports on 8-K . . . . . . . . . . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
TRITEAL CORPORATION
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
SEPTEMBER 30, MARCH 31,
1997 1997
------------ ------------
(Unaudited) (Note)
<S> <C> <C>
Current assets:
Cash and cash equivalents .......................................... $ 5,958,640 $ 11,614,707
Short-term investments ............................................. 27,751,551 31,248,987
Accounts receivable, net ........................................... 8,244,947 8,748,817
Prepaid expenses and other current assets .......................... 2,159,522 2,196,112
------------ ------------
Total current assets ............................................ 44,114,660 53,808,623
Property and equipment, net .......................................... 1,828,183 1,561,609
Other assets, net .................................................... 2,458,987 330,622
------------ ------------
Total assets ................................................... $ 48,401,830 $ 55,700,854
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable ................................................. $ 840,764 $ 1,507,250
Accrued liabilities .............................................. 5,743,323 5,064,570
Deferred revenues ................................................ 1,245,213 1,013,414
------------ ------------
Total current liabilities ...................................... 7,829,300 7,585,234
Stockholders' equity:
Preferred Stock, $.001 par value
Authorized shares -- 5,000,000
Issued and outstanding - no shares ............................... -- --
Common Stock, $.001 par value
Authorized shares -- 30,000,000
Issued and outstanding -- 11,033,058 shares and
10,768,493 shares at September 30, 1997 and
March 31, 1997, respectively ................................... 11,033 10,769
Additional paid-in capital ....................................... 55,285,441 54,861,983
Notes receivable from stockholders ............................... (77,333) (96,667)
Deferred compensation ............................................ (74,500) (100,300)
Accumulated deficit .............................................. (14,572,111) (6,560,165)
------------ ------------
Total stockholders' equity ...................................... 40,572,530 48,115,620
------------ ------------
Total liabilities and stockholders' equity ...................... $ 48,401,830 $ 55,700,854
============ ============
</TABLE>
Note: The balance sheet at March 31, 1997 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes.
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TRITEAL CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues:
License fees ...................... $ 229,680 $ 3,066,468 $ 5,047,742 $ 5,403,360
Maintenance and services .......... 514,357 539,229 1,166,183 1,002,895
------------ ------------ ------------ ------------
Total revenues ................. 744,037 3,605,697 6,213,925 6,406,255
Cost of revenues:
Cost of license fees .............. 142,881 519,825 878,132 1,040,063
Cost of maintenance and services .. 290,232 158,927 606,489 266,391
------------ ------------ ------------ ------------
Total cost of revenues ......... 433,113 678,752 1,484,621 1,306,454
------------ ------------ ------------ ------------
Gross profit ................... 310,924 2,926,945 4,729,304 5,099,801
Operating expenses:
Research and development .......... 1,367,205 552,045 2,571,385 1,035,335
Selling, general and
administrative .................. 3,806,491 2,792,826 7,327,223 5,466,532
Special charges ................... 3,865,550 -- 3,865,550 --
------------ ------------ ------------ ------------
Total operating expenses ....... 9,039,246 3,344,871 13,764,158 6,501,867
------------ ------------ ------------ ------------
Operating loss ..................... (8,728,322) (417,926) (9,034,854) (1,402,066)
Interest income, net ............... 493,247 164,567 1,035,185 154,717
------------ ------------ ------------ ------------
Loss before income taxes .......... (8,235,075) (253,359) (7,999,669) (1,247,349)
Income tax expense ................ -- -- 12,277 --
------------ ------------ ------------ ------------
Net loss ........................... $ (8,235,075) $ (253,359) $ (8,011,946) $ (1,247,349)
============ ============ ============ ============
Net loss per share ................. $ (0.75) $ (0.03) $ (0.74) $ (0.17)
============ ============ ============ ============
Shares used in computing
net loss per share .............. 10,952,012 7,987,335 10,895,782 7,354,098
============ ============ ============ ============
</TABLE>
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TRITEAL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
SEPTEMBER 30,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ........................................................ $ (8,011,946) $ (1,247,349)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization ............................... 506,151 234,952
Provision for doubtful accounts ............................. 2,800,000 --
Amortization of deferred compensation ....................... 25,800 25,800
Changes in operating assets and liabilities:
Accounts recereceivable ................................... (2,296,130) 2,606,879
Prepaid expenses and other current assets ................. 36,590 (482,578)
Accounts payable .......................................... (666,486) (474,472)
Accrued liabilities ....................................... 678,753 761,370
Deferred revenues ......................................... 231,799 (34,122)
------------ ------------
Net cash provided by (used in) operating activities ............ (6,695,469) 1,390,480
Cash flows from investing activities:
Short-term investments ...................................... 3,497,436 (9,531,226)
Purchase of property and equipment .......................... (772,725) (333,012)
Other assets ................................................ (2,128,365) (73,922)
------------ ------------
Net cash provided by (used in) investing activities ............. 596,346 (9,938,160)
Cash flows from financing activities:
Repayments on line of credit ................................ -- (113,542)
Repayments of long-term debt ................................ -- (334,373)
Proceeds from repayments on shareholder notes ............... 19,334 --
Proceeds from issuance of common stock ...................... 423,722 20,400,931
Proceeds from issuance of preferred stock, net .................. -- 3,566,164
------------ ------------
Net cash provided by financing activities ....................... 443,056 23,519,180
------------ ------------
Increase (decrease) in cash and cash equivalents ................ (5,656,067) 14,971,500
Cash and cash equivalents at beginning of period ................ 11,614,707 301,251
------------ ------------
Cash and cash equivalents at end of period ...................... $ 5,958,640 $ 15,272,751
============ ============
</TABLE>
See accompanying notes.
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TRITEAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION
TriTeal Corporation (the "Company") develops, markets and supports open
systems-based, mission-critical desktop system software and integrated
applications that enable multi-platform deployment of client/server
applications throughout an enterprise.
The Consolidated Financial Statements of the Company included in the
Company's Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the year ended March 31, 1997 (the "Form 10-K") contain
additional information about the Company, its operations and its financial
statements and accounting practices, and should be read in conjunction with
this Quarterly Report on Form 10-Q. These unaudited consolidated financial
statements have been prepared in accordance with the instructions on Form 10-Q
and, therefore, certain information and footnote disclosures normally contained
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted.
The accompanying unaudited consolidated financial statements of the Company
reflect all adjustments of a normal recurring nature which are, in the opinion
of management, necessary for a fair presentation of the financial position,
results of operations and cash flows for all periods presented. The interim
financial information herein are not necessarily indicative of results for any
future interim periods or for the full fiscal year ending March 31, 1998.
NOTE 2 - COMPUTATION OF NET INCOME (LOSS) PER SHARE
Net income (loss) per share is computed using the weighted average number of
common shares and common stock equivalents outstanding. Common equivalent
shares from stock options and warrants are excluded from the computation when
their effect is antidilutive except that, pursuant to the Securities and
Exchange Commission Staff Accounting Bulletins, common shares and common
equivalent shares issued during the twelve months prior to the initial filing
of the Registration Statement with the Securities and Exchange Commission have
been included in the calculation as outstanding for all periods prior to the
Company's initial public offering (using the treasury stock method). The
calculation also gives effect to the conversion of all convertible preferred
shares (using the if-converted method), which automatically converted into
common shares upon completion of the Company's initial public offering.
NOTE 3 - USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and
disclosures made in the accompanying notes to the consolidated financial
statements. Actual results could differ from those estimates.
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NOTE 4 - INTANGIBLES AND OTHER ASSETS
During the first quarter of fiscal 1998, the Company acquired certain
third-party technologies associated with the development of its SoftNC
technology and related products for $2.25 million. These costs were
capitalized and are being amortized to research and development expense over a
three-year useful life.
In accordance with Statement of Financial Accounting Standards No. 121
("SFAS No. 121), "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of," the Company records impairment losses on
long-lived assets used in operations when events and circumstances indicate
that assets might be impaired and the estimated future undiscounted cash flows
to be generated by those assets are less than the assets' carrying amounts. To
date, the Company has incurred no such losses.
NOTE 5 - RECENT ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," which
the Company will adopt for all periods ending after December 15, 1997.
Pursuant to SFAS No. 128, the Company will replace the reporting of primary
earnings per share ("EPS") with basic EPS, which excludes the dilutive effect
of stock options and warrants. Fully diluted EPS will be replaced by diluted
EPS, which includes the dilutive effect of stock options, similar to the
calculation of fully diluted EPS under Accounting Principles Board Opinion No.
15. The Company will be required to change the method currently used and to
restate all prior periods. The effect of the adoption of SFAS No. 128 was not
material for the three months ended September 30, 1997 and 1996.
NOTE 6 - SPECIAL CHARGES
During the quarter ended September 30, 1997, the Company recorded special
charges of $3.9 million associated primarily with a charge related to
potentially uncollectible receivables from a U.S. government reseller and
employee termination expenses related to the Company's sales and marketing
functions.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements that involve risks and
uncertainties including, among other things, the effect of the Company's plans
to reduce operating expenses. Words such as "believes," "expects," "intends" and
similar expressions are intended to identify forward- looking statements, but
are not the exclusive means of identifying such statements. The Company's actual
results may differ materially from the results discussed in or implied by the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those risks and uncertainties discussed below, as well
as other risks set forth under the caption "Business-Risk Factors" in the Form
10-K. The following discussion should be read in conjunction with the
Consolidated Financial Statements and the Notes thereto included in Item 1 of
this Quarterly Report on Form 10-Q and in the Form 10-K.
OVERVIEW
TriTeal develops, markets and supports open systems-based, mission-critical
desktop system software and integrated applications that enable multi-platform
deployment of client/server applications throughout an enterprise. The Company
was founded in January 1993, commenced operations in April 1993 and released
its first product in May 1993. In August 1995, the Company introduced its
current flagship product, TED. The Company's current products are based, in
part, on certain technologies licensed from Hewlett-Packard, The Open Group
(formerly the Open Software Foundation), SPYRUS and other technology vendors.
The Company's revenues historically have been derived from two principal
sources: (i) license fees for the use of the Company's software products, and
(ii) maintenance agreements and software development contract revenues. To
date, substantially all of the Company's revenues have been attributable to
sales of licenses of the TED family of products and related services. The
Company does not anticipate receiving a significant amount of revenues from
software development contracts in the future. The Company has not introduced
for commercial sale any products based on its Java-based SoftNC technology,
introduced during fiscal 1997, and the Company currently expects that the TED
family of products and related services will account for substantially all of
its revenues for the foreseeable future. Revenues from software licenses are
generally recognized upon shipment. Revenues from maintenance agreements are
recognized over the contract terms, which generally is one year. Software
development contract revenues are recognized using the percentage-of-
completion method.
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Revenues
The Company's total revenues decreased to $744,000 for the three months
ended September 30, 1997 from $3.6 million for the three months ended September
30, 1996. License fees decreased to $230,000 for the three months ended
September 30, 1997 from $3.1 million for the three months ended September 30,
1996. During the three months ended September 30, 1997 and 1996, license fees
aggregated 31% and 85% of total revenues, respectively. The Company's sales
generally comprise a small number of orders with a large dollar amount per
order. The decrease in
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license fees was due primarily to the Company's failure to close any of the
large transactions it was pursuing at the end of the second quarter of fiscal
1998. The Company believes that there is significant customer uncertainty and
confusion in the enterprise computing market concerning selection of systems and
applicable standards, particularly with respect to the migration from UNIX
client workstations to Windows NT platforms and the early-stage development of
Java and Java-based computing environments. This uncertainty has contributed,
and may continue to contribute, to some customer hesitation or reluctance to
purchase the Company's products, as well as to an extension of the Company's
product sales cycle. Maintenance and services revenues, which also include
revenues derived from software development contracts, decreased to $514,000 for
the three months ended September 30, 1997 from $539,000 for the three months
ended September 30, 1996. The decrease in maintenance and services revenues was
due primarily to a decrease in revenues from software development contracts,
offset in part by an increase in maintenance revenues associated with a larger
installed base of customers. The Company does not anticipate receiving a
significant amount of revenues from software development contracts in the
future; however, it may enter into such contracts in special situations where
such software development may be necessary or where the technology may allow the
Company to introduce new products, penetrate new markets or establish strategic
relationships.
Cost of Revenues
The Company's total cost of revenues decreased to $433,000 for the three
months ended September 30, 1997 from $679,000 for the three months ended
September 30, 1996. As a percentage of total revenues, gross margin decreased
to 42% for the three months ended September 30, 1997 from 81% for the three
months ended September 30, 1996. The decrease in gross margin was a result of
the decrease in the volume of sales of licenses, which typically have higher
gross margins. Furthermore, the Company's gross margin for the three months
ended September 30, 1997 was substantially lower than historical levels due
primarily to the fixed component of third-party royalty costs and related
maintenance. The cost of license fees, which consists primarily of third-party
royalties for licensed technology, related maintenance charges, and media and
documentation, decreased to $143,000 for the three months ended September 30,
1997 from $520,000 for the three months ended September 30, 1996. The decrease
in the cost of license fees was due principally to a lower volume of sales of
licenses. The cost of maintenance and services, which consists primarily of
labor and related overhead, increased to $290,000 for the three months ended
September 30, 1997 from $159,000 for the three months ended September 30, 1996.
The increase in the cost of maintenance and services was due primarily to an
increase in the number of professional services and technical support personnel
and related overhead costs necessary to support a larger installed customer
base, product upgrades and development activities.
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Research and Development
Research and development expenses include costs associated with the
development of new products, enhancements of existing products and quality
assurance activities. These expenses consist primarily of personnel costs,
overhead costs relating to occupancy, equipment depreciation and supplies. In
accordance with Statement of Financial Accounting Standards No. 86, internal
development costs incurred in the research and development of new software
products and enhancements to existing software products are expensed as
incurred until technological feasibility has been established. To date, the
Company's internal software development has been completed concurrent with the
establishment of technological feasibility and, accordingly, no such costs have
been capitalized. During the first quarter of fiscal 1998, the Company
acquired certain third-party technologies associated with the development of
its SoftNC technology and related products for $2.25 million. These costs were
capitalized and are being amortized to research and development expense over a
three-year useful life. Total amortization expense associated with these
technologies for the three months ended September 30, 1997 was approximately
$188,000.
Research and development expenses increased to $1.4 million for the three
months ended September 30, 1997 from $552,000 for the three months ended
September 30, 1996. The increase in research and development expenses was
attributable primarily to the development of the Company's research and
development organization and reflects the increased costs associated with both
additional headcount and expanded research and development efforts, as well as
amortization of acquired third-party technologies. Research and development
expenses represented 184% and 15% of total revenues for the three months ended
September 30, 1997 and 1996, respectively, reflecting both increased
expenditures and decreased revenues in the second quarter of fiscal 1998. The
Company believes that a significant level of investment for product development
is required and, accordingly, the Company anticipates that, for the foreseeable
future, these expenses will continue to represent a significant percentage of
total revenues.
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of salaries,
commissions and bonuses, promotional expenses and occupancy costs. Selling,
general and administrative expenses increased to $3.8 million for the three
months ended September 30, 1997 from $2.8 million for the three months ended
September 30, 1996. The increase in selling, general and administrative
expenses was due primarily to increased administrative personnel and occupancy
costs, the hiring of additional sales and marketing personnel, increased travel
associated with additional headcount and additional promotional activities.
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Special Charges
The Company recorded special charges of $3.9 million, associated primarily
with a charge related to potentially uncollectible receivables from a U.S.
government reseller and employee termination expenses related to the Company's
sales and marketing functions.
Operating Losses
The Company reported a net loss of $8.2 million, or $.75 per share, for the
quarter ended September 30, 1997 as a result of a significant shortfall in
anticipated revenue due to the Company's inability to close any of the large
transactions it was pursuing at the end of the second quarter of fiscal 1998.
Included in the net loss for the quarter were special charges of $3.9 million
associated primarily with a charge related to potentially uncollectible
receivables from a U.S. government reseller and employee termination expenses
related to the Company's sales and marketing functions. The Company expects to
incur a loss in the third quarter of fiscal 1998, and there can be no assurance
that the Company will be able to achieve or sustain profitability in future
quarters. The Company believes that there is significant customer uncertainty
and confusion in the enterprise computing market concerning selection of
systems and applicable standards, particularly with respect to the migration
from UNIX client workstations to Windows NT platforms and the early-stage
development of Java and Java-based computing environments. This uncertainty has
contributed, and may continue to contribute, to some customer hesitation or
reluctance to purchase the Company's products, as well as to an extension of
the Company's product sales cycle. The Company is currently developing plans
intended to reduce operating costs in an effort to bring expenses in line with
revenue expectations; however, if revenues cannot be increased and operating
expense reduced in the third quarter of fiscal 1998 and subsequent quarters,
the Company may be required to further reorganize and realign its operations,
including additional reductions in personnel and other measures designed to
reduce ongoing operating expenses. Any such reorganization or realignment may
cause the Company to incur additional charges, which could have a material
adverse effect on the Company's business, results of operations and financial
condition.
Interest Income, Net
Interest income (expense), net, represents interest earned on the Company's
cash, cash equivalents and short-term investments, offset in part during the
three months ended September 30, 1996 by interest expense on the Company's
borrowings. Net interest income was $493,000 for the three months ended
September 30, 1997 compared to net interest income of $165,000 for the three
months ended September 30, 1996. This increase was attributable to earnings on
the proceeds from the Company's initial and follow-on public offerings during
fiscal 1997, which together generated approximately $44.7 million in net cash
proceeds.
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SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Revenues
The Company's total revenues decreased to $6.2 million for the six months
ended September 30, 1997 from $6.4 million for the six months ended September
30, 1996. License fees decreased to $5.0 million for the six months ended
September 30, 1997 from $5.4 million for the six months ended September 30,
1996. During the six months ended September 30, 1997 and 1996, license fees
aggregated 81% and 84% of total revenues, respectively. The Company's sales
generally comprise a small number of orders with a large dollar amount per
order. The decrease in license fees was due primarily to the Company's failure
to close any of the large transactions it was pursuing at the end of the second
quarter of fiscal 1998. The Company believes that there is significant customer
uncertainty and confusion in the enterprise computing market concerning
selection of systems and applicable standards, particularly with respect to the
migration from UNIX client workstations to Windows NT platforms and the
early-stage development of Java and Java-based computing environments. This
uncertainty has contributed, and may continue to contribute, to some customer
hesitation or reluctance to purchase the Company's products, as well as to an
extension of the Company's product sales cycle. Maintenance and services
revenues, which also include revenues derived from software development
contracts, increased to $1.2 million for the six months ended September 30, 1997
from $1.0 million for the six months ended September 30, 1996. The increase in
maintenance and services revenues was due primarily to additional maintenance
agreements associated with a larger installed base of customers, offset in part
by a decrease in revenue from software development contracts. The Company does
not anticipate receiving a significant amount of revenues from software
development contracts in the future; however, it may enter into such contracts
in special situations where such software development may be necessary or where
the technology may allow the Company to introduce new products, penetrate new
markets or establish strategic relationships.
Cost of Revenues
The Company's total cost of revenues increased to $1.5 million for the six
months ended September 30, 1997 from $1.3 million for the six months ended
September 30, 1996 associated primarily with an increase in the number of
professional services and technical support personnel and related overhead costs
necessary to support a larger installed customer base, product upgrades and
development activities. As a percentage of total revenues, gross margin
decreased to 76% for the six months ended September 30, 1997 from 80% for the
six months ended September 30, 1996. The decrease in gross margin was a result
of the decrease in the volume of sales of licenses, which typically have higher
gross margins. The cost of license fees decreased to $878,000 for the six months
ended September 30, 1997 from $1.0 million for the six months ended September
30, 1996. The decrease in the cost of license fees was due principally to a
lower volume of sales of licenses in the second quarter of fiscal 1998. The cost
of maintenance and services, which consists primarily of labor and related
overhead, increased to $606,000 for the six months ended September 30, 1997 from
$266,000 for the six months ended September 30, 1996. The increase in the cost
of maintenance and services was due primarily to an increase in the number of
professional services and technical support personnel and related overhead costs
necessary to support a larger installed customer base, product upgrades and
development activities.
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Research and Development
Research and development expenses increased to $2.6 million for the six
months ended September 30, 1997 from $1.0 for the six months ended September
30, 1996. The increase in research and development expenses was attributable
primarily to the development of the Company's research and development
organization and reflects the increased costs associated with both additional
headcount and expanded research and development efforts, as well as
amortization on acquired third-party technologies totaling $250,000. Research
and development expenses represented 41% and 16% of total revenues for the six
months ended September 30, 1997 and 1996, respectively. The Company believes
that a significant level of investment for product development is required and,
accordingly, the Company anticipates that, for the foreseeable future, these
expenses will continue to represent a significant percentage of total revenues.
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of salaries,
commissions and bonuses, promotional expenses and occupancy costs. Selling,
general and administrative expenses increased to $7.3 million for the six
months ended September 30, 1997 from $5.5 million for the six months ended
September 30, 1996. The increase in selling, general and administrative
expenses was due primarily to increased administrative personnel and occupancy
costs, the hiring of additional sales and marketing personnel, increased travel
associated with additional headcount and additional promotional activities.
Operating Losses
The Company reported a net loss of $8.0 million, or $.75 per share, for the
six months ended September 30, 1997 as a result of a significant shortfall in
anticipated revenue due to the Company's inability to close any of the large
transactions it was pursuing at the end of the second quarter of fiscal 1998.
Included in the net loss for the quarter were special charges of $3.9 million
associated primarily with a charge related to potentially uncollectible
receivables from a U.S. government reseller and employee termination expenses
related to the sales and marketing functions. The Company expects to incur a
loss in the third quarter of fiscal 1998, and there can be no assurance that the
Company will be able to achieve or sustain profitability in future quarters. The
Company believes that there is significant customer uncertainty and confusion in
the enterprise computing market concerning selection of systems and applicable
standards, particularly with respect to the migration from UNIX client
workstations to Windows NT platforms, and the early-stage development of Java
and Java-based computing environments. This uncertainty has contributed, and may
continue to contribute, to some customer hesitation or reluctance to purchase
the Company's products, as well as to an extension of the Company's product
sales cycle. The Company is currently developing plans intended to reduce
operating costs in an effort to bring expenses in line with revenue
expectations; however, if revenues cannot be increased and operating expenses
reduced in the third quarter of fiscal 1998 and subsequent quarters, the Company
may be required to further reorganize and realign its operations, including
additional reductions in personnel and other measures designed to reduce ongoing
operating expenses. Any such reorganization or realignment may
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<PAGE> 14
cause the Company to incur additional charges, which could have a material
adverse effect on the Company's business, results of operations and financial
condition.
Interest Income, Net
Net interest income increased to $1.0 million for the six months ended
September 30, 1997 from $155,000 for the six months ended September 30, 1996.
This increase was attributable to earnings on the proceeds from the Company's
initial and follow-on public offerings during fiscal 1997, which together
generated approximately $44.7 million in net cash proceeds.
FACTORS AFFECTING OPERATING RESULTS
The Company has experienced significant fluctuations in its revenues
and operating results from quarter to quarter and anticipates that it will
continue to experience such quarterly fluctuations. In addition, the Company's
sales are made predominantly in the third month of each fiscal quarter and tend
to be concentrated in the latter half of that third month.
Accordingly, the Company's quarterly results of operations are difficult to
predict, and delays in product delivery or in closings of sales near the end of
a quarter could cause quarterly revenues to fall substantially short of
anticipated levels and, to a greater degree, adversely affect profitability.
Factors that may contribute to such quarterly fluctuations include rapid and
continued changes in the enterprise computing market, such as the migration
from UNIX client workstations to Windows NT platforms; uncertainty over
evolving standards within the enterprise computing market; reduction in demand
for existing products and shortening of product life cycles as a result of new
product introductions by the Company; the Company's competitors or other
providers of hardware, software and components for the Company's market; the
timing of introduction of products or product enhancements by the Company;
competition and pricing in the software industry; market acceptance of new
products; customer order deferrals in anticipation of new products; seasonal
factors, such as the fiscal year ends of the government and other customers;
the number of new orders and product shipments; the size and timing of
individual orders; product quality problems; changes in customer budgets or
procurement procedures; changes in operating expenses; changes in Company or
customer strategy; personnel changes; changes in foreign currency exchange
rates; changes in mix of products sold; and changes in general economic
conditions.
The Company's sales generally comprise a small number of orders with a large
dollar amount per order. The loss or delay in receipt of individual orders,
therefore, could have a more significant impact on the revenues and quarterly
results of the Company than on those of companies with higher sales volumes or
lower revenues per order. The Company's software products generally are shipped
as orders are received, and revenues are recognized upon shipment of the
products and related software licenses to commercial customers, agencies of
the U.S. government and U.S. government resellers, provided no significant
vendor obligations exist and collection of the related receivable is deemed
probable. As a result, software license revenues in any quarter are
substantially dependent on orders booked and shipped in that quarter. The
timing of license fee revenue is difficult to predict because of the length of
the Company's sales cycle, which is typically three to nine months from the
initial contact. Because the Company's operating expenses are based on
anticipated revenue trends and because a high
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<PAGE> 15
percentage of the Company's expenses are relatively fixed, a delay in the
recognition of revenue from a limited number of license transactions could
cause significant variations in operating results from quarter to quarter and
could result in losses substantially in excess of anticipated amounts. To the
extent such expenses precede, or are not subsequently followed by, increased
revenues, the Company's operating results would be materially and adversely
affected.
For example, during the second quarter of fiscal 1998, the Company
experienced a substantial revenue shortfall due primarily to the Company's
failure to close any of the large transactions it was pursuing at the end of
the second quarter of fiscal 1998. This significant revenue shortfall, along
with certain charges, caused the Company to incur a substantial loss for the
quarter and there can be no assurance that additional revenue shortfalls due to
delays, cancellations or failures to close orders will not occur in the future.
As a result of the foregoing factors, among others, revenues for any quarter
are subject to significant variation, and the Company believes that
period-to-period comparisons of its results of operations are not necessarily
meaningful and should not be relied upon as indications of future performance.
In addition, the achievement of anticipated revenues is substantially dependent
on the ability of the Company to attract, on a timely basis, and retain skilled
personnel, especially sales and support personnel. Fluctuations in operating
results may also result in volatility in the price of the Company's common
stock in the public market. Due to all of the foregoing factors, among others,
it is likely that, from time to time in the future, the Company's results of
operations would be below the expectations of public market analysts and
investors.
Because the Company derives a substantial portion of its revenues from
government resellers and agencies of the U.S. government, the Company's largest
receivables tend to have lengthy collection cycles. To date, the impact of such
lengthy collection cycles has not been material to the Company's working
capital requirements; however, during the second quarter of fiscal 1998, the
Company recorded a $2.8 million charge related to potentially uncollectible
receivables from a U.S. government reseller. There can be no assurance that
future delays in payment from government or commercial customers will not
adversely affect the Company's results of operations or ability to meet its
anticipated liquidity needs.
The Company's business is subject to a number of other significant risks
including, but not limited to, its limited operating history and history of
operating losses (including an accumulated deficit of $14.6 million at
September 30, 1997); the relatively small number of customers that have
historically accounted for a significant percentage of the Company's revenues,
particularly departments and agencies of the U.S. government; the
concentration of the Company's customers among enterprises supporting UNIX
operating systems; confusion in the enterprise computing market concerning
selection of systems and applicable standards, particularly with respect to the
migration from UNIX client workstations to Windows NT platforms and the
early-stage development of Java and Java-based computing environments; the
Company's dependence on the growth of the desktop and client/server market and
continuation of heterogeneous operating environments; intense competition in
the Company's markets (including competitors and potential competitors with
significantly greater resources than the Company); the Company's dependence on
certain strategic relationships, third-party technology licenses and indirect
channel partners; the risks associated with rapidly changing technology and
evolving standards;
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the concentration of the Company's product line on the TED family of products
and services; successful retention and management of the Company's employee
base; the Company's dependence on proprietary technology and other risks common
to emerging growth, high technology software companies as well as other factors
discussed herein.
LIQUIDITY AND CAPITAL RESOURCES
Since inception, the Company has financed its operations and met its capital
expenditure requirements primarily from proceeds of the Company's initial and
follow-on public offerings of Common Stock and private sales of Preferred
Stock, sales of its software products and services, as well as borrowings under
its bank credit facility.
At September 30, 1997, the Company had $33.7 million in cash, cash
equivalents and short-term investments, representing 70% of total assets.
Net cash used in operating activities for the six months ended September 30,
1997 reflects primarily the net loss for the period and an increase in accounts
receivable, which was offset by an increase in the provision for doubtful
accounts. The Company generally does not offer payment terms beyond 60 days;
however, the Company's sales to government resellers and agencies of the U.S.
government typically have longer payment cycles. Because the Company derives a
substantial portion of its revenues from government resellers and agencies of
the U.S. government, the Company's largest receivables tend to have lengthy
collection cycles. To date, the impact of such lengthy collection cycles has
not been material to the Company's working capital requirements; however,
during the second quarter of fiscal 1998, the Company recorded a $2.8 million
charge related to potentially uncollectible receivables from a U.S. government
reseller. There can be no assurance that future delays in payment from
government or commercial customers will not adversely affect the Company's
results of operations or ability to meet its anticipated liquidity needs.
Investing activities provided net cash of $596,000 for the six months ended
September 30, 1997, and consisted primarily of maturities on short-term
investments, offset in part by the purchase of property and equipment. Capital
expenditures have generally consisted of computer workstations, networking
equipment, office furniture and equipment and leasehold improvements. The
Company had no material firm commitments for capital expenditures at September
30, 1997, but expects to purchase additional computer equipment, furniture and
fixtures and to enhance its management information systems throughout fiscal
1998 and 1999.
In April 1997, the Company signed a 10-year lease agreement, scheduled to
commence in July 1998, for approximately 51,000 square feet of office space
intended for use as the new corporate headquarters in Carlsbad, California. As
of September 30, 1997, the Company's principal commitments, including the
10-year lease signed in April 1997, consisted of obligations under operating
leases aggregating approximately $12.5 million through 2008.
The Company's operations to date have required substantial amounts of
capital. The Company expects to spend substantial funds to support the growth
of its products, to add enhancements and additional applications to its
products and to expand internationally. The Company's capital requirements will
depend on numerous factors, including the progress of the
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Company's research and development programs, the commercial acceptance of its
products, the resources the Company devotes to advanced technologies and the
demand for its products. The Company believes that its current cash, cash
equivalents and short-term investments, along with its available credit
facility, will be sufficient to meet its anticipated cash needs for working
capital, capital expenditures and business expansion for at least the next 12
months. The estimate of the period for which the Company expects its available
cash balances and credit facilities to be sufficient to meet its capital
requirements is a forward-looking statement that involves risks and
uncertainties set forth herein and under the caption "Business - Risk Factors"
in the Form 10-K.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On November 7, 1997, a complaint was filed with the United States District
Court for the Southern District of California against the Company and certain
of its officers. The complaint was brought on behalf of a purported class of
investors in the Company's Common Stock. The complaint alleges, among other
things, that the defendants misrepresented or failed to disclose to investors
material facts concerning the Company and its business, operations, revenues
and prospects and that certain of the defendants improperly sold shares of
Common Stock of the Company at prices that were artificially inflated as a
result of these alleged non-disclosures or misrepresentations. The complaint
alleges violations of the federal securities laws. No specific amount of
damages is alleged. The Company believes that the allegations of the complaint
are without merit and intends to defend against these allegations vigorously.
No assurance as to the outcome of this matter can be given; however, an
unfavorable resolution of this matter could have a material adverse effect on
the Company's business, results of operations and financial condition.
ITEM 2. CHANGES IN SECURITIES
A) REPORT OF SALES OF SECURITIES AND USE OF PROCEEDS THEREFROM
On August 6, 1996, the Securities and Exchange Commission declared
effective the Company's Registration Statement on Form SB-2 (File No.
333-5052-LA) covering an aggregate of 2,875,000 shares of Common Stock at a
price to the public of $8.00 per share, or an aggregate price of $23,000,000.
The managing underwriters of the offering were PaineWebber Incorporated and
Piper Jaffray Inc. All of the shares registered were sold prior to termination
of the offering. Net proceeds, after deducting underwriting commissions and
discounts of $1,610,000 and other offering costs of $1,008,006, were
$20,381,994, including net proceeds from shares sold on the exercise of the
underwriters' over-allotment option. Use of net proceeds from August 6, 1996
through September 30, 1997, was as follows:
<TABLE>
<S> <C>
Purchase and installation of machinery and equipment $ 1,603,167
Repayment of indebtedness $ 334,373
Working capital $12,316,531
</TABLE>
The use of proceeds described above does not represent a material
change in the use of proceeds described in the prospectus. None of the
proceeds used were paid to persons or entities
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that were, at the time, affiliates, directors, or officers of the Company,
associates of officers or directors, or persons owning 10% or more of any class
of equity security of the Company
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on August 27, 1997
(the "Annual Meeting"). At the Annual Meeting, the Company's stockholders
elected one director to the Company's Board of Directors and approved the
proposals as more fully described below.
At the Annual Meeting, 9,095,605 shares out of a total of 10,890,710
shares of Common Stock outstanding at the record date were represented in person
or by proxy.
The proposals considered at the Annual Meeting were voted on as follows:
1. Election of Director
Proposal to elect one director to hold office until the 2000 Annual
Meeting of Stockholders or his earlier resignation or removal.
<TABLE>
<CAPTION>
Nominee Votes For Votes Withheld
------- --------- --------------
<S> <C> <C>
Arthur S. Budman 9,085,845 9,760
</TABLE>
2. Approval of 1995 Stock Option Plan, as amended
Proposal to approve the Company's 1995 Stock Option Plan, as amended,
to, among other things, (a) increase the aggregate number of shares
of Common Stock authorized for issuance under such plan by 1 million
shares, (b) extend eligibility under the plan to non- employee
directors of the Company and provide for automatic grant of options to
non-employee directors, and (c) extend the term of such plan to July
2007. Proposal was approved by a vote of 5,661,523 shares in favor;
1,038,429 shares against; 15,407 shares abstaining; and 2,380,246
shares unvoted.
3. Approval of 1996 Employee Stock Purchase Plan, as amended
Proposal to approve the Company's 1996 Employee Stock Purchase Plan,
as amended, to increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 50,000 shares. Proposal was
approved by a vote of 6,984,011 shares in favor; 550,426 shares
against; 15,347 shares abstaining; and 1,545,821 shares unvoted.
4. Appointment of Independent Auditors
Proposal to ratify the selection of Ernst & Young LLP as independent
auditors of the Company for its fiscal year ending March 31, 1998.
Proposal was approved by a vote of 9,076,908 shares in favor, 14,400
shares against, and 4,297 shares abstaining.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A) EXHIBITS:
*10.32 1995 Stock Option Plan, as amended
*10.33 Form of Incentive Stock Option Agreement Under the
1995 Stock Option Plan, as amended
*10.34 Form of Nonstatutory Stock Option Agreement Under the
1995 Stock Option Plan, as amended
*10.35 Form of Non-insider Director Nonstatutory Stock Option
Agreement Under the 1995 Stock Option Plan, as amended
*10.36 1996 Employee Stock Purchase Plan, as amended
*10.37 Incentive Stock Option Agreement for David Chen,
granted pursuant to 1995 Stock Option Plan, as amended
*10.38 Nonstatutory Stock Option Agreement for David Chen,
granted pursuant to the 1995 Stock Option Plan, as
amended
*10.39 Non-Plan Nonstatutory Stock Option Agreement for David
Chen
*10.40 Agreement Between TriTeal Corporation and Armando
Viteri Regarding Continued Employment, dated March 31,
1997
*10.41 Agreement Between TriTeal Corporation and Rand
Schulman Regarding Continued Employment, dated
August 7, 1997
*10.42 Severance Agreement and General Release of Claims
Between TriTeal Corporation and Robert D. Ruhe, dated
September 7, 1997
11.1 Statement Regarding Calculation of Net Income (Loss)
Per Share
27.1 Financial Data Schedule
*Indicates management compensatory plan, contract or arrangement
B) REPORTS ON FORM 8-K:
No reports on Form 8-K were filed by the Company during the three
months ended September 30, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TRITEAL CORPORATION
Date: November 12, 1997 /s/ Jeffrey D. Witous
------------------------ --------------------------------------------
Jeffrey D. Witous
Chief Executive Officer and
Chairman of the Board
Date: November 12, 1997 /s/ Arthur S. Budman
------------------------ --------------------------------------------
Arthur S. Budman
Chief Financial Officer and Director
(Principal financial and accounting officer)
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<PAGE> 1
Exhibit 10.32
TRITEAL CORPORATION
1995 STOCK OPTION PLAN
AMENDED AND RESTATED JULY 15, 1997
APPROVED BY STOCKHOLDERS AUGUST 27, 1997
1. INTRODUCTION; PURPOSES.
(A) This 1995 Stock Option Plan ("Plan") was originally adopted by the
Board of Directors of the Company on May 15, 1995 and approved by the
stockholders of the Company on May 6, 1996. Subsequent amendments were adopted
by the Board on June 11, 1996 and approved by stockholders on July 26, 1996.
This amendment and restatement of the Plan was adopted by the Board on July 15,
1997 (the "Amendment Date") and approved by the stockholders on August 27, 1997
(the "Stockholder Approval Date").
(B) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company and its Affiliates may
be given an opportunity to benefit from increases in value of the stock of the
Company through the granting of (i) Incentive Stock Options, (ii) Nonstatutory
Stock Options, (iii) stock bonuses, and (iv) rights to purchase restricted
stock, all as defined below.
(C) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(D) The Company intends that the Stock Awards issued under the Plan
shall, in the discretion of the Board or any Committee to which responsibility
for administration of the Plan has been delegated pursuant to subsection 3(c),
be either (i) Options granted pursuant to Section 6 hereof, including Incentive
Stock Options and Nonstatutory Stock Options, or (ii) stock bonuses or rights to
purchase restricted stock granted pursuant to Section 7 hereof. All Options
shall be separately designated Incentive Stock Options or Nonstatutory Stock
Options at the time of grant, and in such form as issued pursuant to Section 6,
and a separate certificate or certificates will be issued for shares purchased
on exercise of each type of Option.
2. DEFINITIONS.
(A) "AFFILIATE" means any parent corporation or subsidiary
corporation, whether now or hereafter existing, as those terms are defined in
Sections 424(e) and (f), respectively, of the Code.
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<PAGE> 2
(B) "BOARD" means the Board of Directors of the Company.
(C) "CODE" means the Internal Revenue Code of 1986, as amended.
(D) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(E) "COMPANY" means TriTeal Corporation, a Delaware corporation.
(F) "CONSULTANT" means any person, including an advisor, engaged by
the Company or an Affiliate to render consulting services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors who are paid only a director's fee by the Company or who are not
compensated by the Company for their services as Directors.
(G) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means
an individual's continuation as a provider of services to the Company, whether
through employment or as a Director or Consultant (and notwithstanding any
changes in such capacities), without interruption or termination. The Board or
the Chief Executive Officer of the Company, in its or his or her discretion, may
determine whether Continuous Status as an Employee, Director or Consultant shall
be considered interrupted in the case of: (i) any leave of absence approved by
the Company, including sick leave, military leave, or any other personal leave;
or (ii) transfers between locations of the Company or between the Company,
Affiliates or their successors.
(H) "COVERED EMPLOYEE" means the chief executive officer and the four
(4) other highest compensated officers of the Company for whom total
compensation is required to be reported to shareholders under the Exchange Act,
as determined for purposes of Section 162(m) of the Code.
(I) "DIRECTOR" means a member of the Board.
(J) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(K) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(L) "FAIR MARKET VALUE" means, as of any date, the value of the
common stock of the Company determined as follows:
(1) If the common stock is listed on any established stock
exchange or a national market system, including without limitation the
National Market of The Nasdaq Stock Market, the Fair Market Value of a share of
common stock shall be the closing sales price for such stock (or the closing
bid, if no sales were reported) as quoted on such system or exchange (or the
exchange with the greatest volume of trading in the Company's common stock) on
the last market trading day prior to the day of determination, as reported in
the Wall Street Journal or such other source as the Board deems reliable;
(2) If the common stock is quoted on The Nasdaq Stock Market (but
not on the National Market thereof) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of common stock shall be the mean between the bid and asked prices for
the common stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the Board deems reliable;
(3) In the absence of an established market for the common stock,
the Fair Market Value shall be determined in good faith by the Board.
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<PAGE> 3
(M) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(N) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as a Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
of 1933 ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(O) "NONSTATUTORY STOCK OPTION" means an Option not intended to
qualify as an Incentive Stock Option.
(P) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(Q) "OPTION" means a stock option granted pursuant to the Plan.
(R) "OPTION AGREEMENT" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. Each Option Agreement shall be subject to the terms and conditions of the
Plan.
(S) "OPTIONEE" means a person who holds an outstanding Option.
(T) "OUTSIDE DIRECTOR" means a Director who either (i) is not a
current employee of the Company or an "affiliated corporation" (within the
meaning of Treasury regulations promulgated under Section 162(m) of the Code),
is not a former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(U) "PLAN" means this TriTeal Corporation 1995 Stock Option Plan.
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<PAGE> 4
(V) "RULE 16B-3" means Rule 16b-3 under the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(W) "STOCK AWARD" means any right granted under the Plan, including
any Option, any stock bonus, and any right to purchase restricted stock.
(X) "STOCK AWARD AGREEMENT" means a written agreement between the
Company and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to the
terms and conditions of the Plan.
3. ADMINISTRATION.
(A) The Plan shall be administered by the Board unless and until the
Board delegates administration to a Committee, as provided in subsection 3(c).
(B) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Incentive Stock Option, a
Nonstatutory Stock Option, a stock bonus, a right to purchase restricted stock,
or a combination of the foregoing; the provisions of each Stock Award granted
(which need not be identical), including the time or times when a person shall
be permitted to receive stock pursuant to a Stock Award and the number of shares
with respect to which a Stock Award shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any Stock Award Agreement,
in a manner and to the extent it shall deem necessary or expedient to make the
Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 14.
(4) Generally, to exercise such powers and to perform such acts
as the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
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<PAGE> 5
(C) The Board may delegate administration of the Plan to a committee
of the Board composed of not fewer than two (2) members (the "Committee"), all
of the members of which Committee may be, in the discretion of the Board,
Non-Employee Directors and/or Outside Directors. If administration is delegated
to a Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board, including the power
to delegate to a subcommittee of two (2) or more Outside Directors any of the
administrative powers the Committee is authorized to exercise (and references in
this Plan to the Board shall thereafter be to the Committee or such a
subcommittee), subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan. Notwithstanding anything in this Section 3 to the
contrary, the Board or the Committee may delegate to a committee of one or more
members of the Board the authority to grant Stock Awards to eligible persons who
(1) are not then subject to Section 16 of the Exchange Act and/or (2) are either
(i) not then Covered Employees and are not expected to be Covered Employees at
the time of recognition of income resulting from such Stock Award, or (ii) not
persons with respect to whom the Company wishes to comply with Section 162(m) of
the Code.
4. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, the stock that may be issued pursuant to Stock Awards
shall not exceed in the aggregate two million three hundred fifty thousand
(2,350,000) shares of the Company's common stock. If any Stock Award shall for
any reason expire or otherwise terminate, in whole or in part, without having
been exercised in full, the stock not acquired under such Stock Award shall
revert to and again become available for issuance under the Plan.
(B) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(A) Incentive Stock Options may be granted only to Employees. Stock
Awards other than Incentive Stock Options may be granted only to Employees,
Directors or Consultants.
(B) No person shall be eligible for the grant of an Incentive Stock
Option if, at the time of grant, such person owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of any
of its Affiliates unless the exercise
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<PAGE> 6
price of such Incentive Stock Option is at least one hundred ten percent (110%)
of the Fair Market Value of such stock at the date of grant and the Incentive
Stock Option is not exercisable after the expiration of five (5) years from the
date of grant.
(C) Subject to the provisions of Section 13 relating to adjustments
upon changes in stock, no person shall be eligible to be granted Options
covering more than five hundred thousand (500,000) shares of the Company's
common stock in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(A) TERM. No Option shall be exercisable after the expiration of ten
(10) years from the date it was granted.
(B) PRICE. The exercise price of each Incentive Stock Option shall be
not less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted, and the exercise price
of a Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
(C) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, including,
at the discretion of the Board or Committee, pursuant to a cashless exercise of
Options as described in Regulation T promulgated by the Federal Reserve Board,
subject to applicable securities law restrictions or (ii) at the discretion of
the Board or the Committee exercised at the time of grant of the Option, (A) by
delivery to the Company of other common stock of the Company having a Fair
Market Value at the time of exercise equal to the option exercise price
(provided that such shares have been held for a period of at least six (6)
months), (B) according to a deferred payment or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the Optionee, or (C) in any other form of
legal consideration that may be acceptable to the Board.
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<PAGE> 7
In the case of any deferred payment arrangement, (i) interest shall be payable
at least annually and shall be charged at the minimum rate of interest necessary
to avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement, and (ii) the "par value" of the common stock (as defined in
the Delaware General Corporation Law) shall be paid by the Participant in cash.
(D) TRANSFERABILITY. An Incentive Stock Option shall not be
transferable except by will or by the laws of descent and distribution, and
shall be exercisable during the lifetime of the person to whom the Incentive
Stock Option is granted only by such person. A Nonstatutory Stock Option may be
transferred to the extent provided in the Option Agreement; provided that if the
Option Agreement does not expressly permit the transfer of a Nonstatutory Stock
Option, the Nonstatutory Stock Option shall not be transferable except by will
or by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person.
Notwithstanding the foregoing, the person to whom the Option is granted may, by
delivering written notice to the Company, in a form satisfactory to the Company,
designate a third party who, in the event of the death of the Optionee, shall
thereafter be entitled to exercise the Option.
(E) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The Option may be subject to such other terms and conditions on the
time or times when it may be exercised (which may be based on performance or
other criteria) as the Board may deem appropriate. The provisions of this
subsection 6(e) are subject to any Option provisions governing the minimum
number of shares as to which an Option may be exercised.
(F) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it at the date of termination) but only within
the earlier of (i) such period of time as is determined by the Board or (ii) the
expiration of the term of the Option as set forth in the Option Agreement. If,
after termination, the Optionee does not exercise his or her Option within the
time specified in the Option Agreement, the Option shall terminate,
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<PAGE> 8
and the shares covered by such Option shall revert to and again become available
for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise
of the Option following the termination of the Optionee's Continuous Status as
an Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act.
(G) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous
Status as an Employee, Director or Consultant terminates as a result of the
Optionee's disability, the Optionee may exercise his or her Option (to the
extent that the Optionee was entitled to exercise it at the date of
termination), but only within the earlier of (i) such period of time as is
determined by the Board or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(H) DEATH OF OPTIONEE. In the event of the death of an Optionee
during, or within a period specified in the Option after the termination of, the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
at the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the earlier of (i) such period of time as is determined by the
Board or (ii) the expiration of the term of the Option as set forth in the
Option Agreement. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan. If, after death, the Option is not exercised within the time
specified herein, the Option shall terminate, and the shares covered by such
Option shall revert to and again become available for issuance under the Plan.
(I) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased may be subject to a
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<PAGE> 9
repurchase right in favor of the Company or to any other restriction the Board
determines to be appropriate.
(J) RE-LOAD OPTIONS. Without in any way limiting the authority of the
Board or Committee to make or not to make grants of Options hereunder, the Board
or Committee shall have the authority (but not an obligation) to include as part
of any Option Agreement a provision entitling the Optionee to a further Option
(a "Re-Load Option") in the event the Optionee exercises the Option evidenced by
the Option Agreement, in whole or in part, by surrendering other shares of the
Company's common stock in accordance with this Plan and the terms and conditions
of the Option Agreement. Any such Re-Load Option (i) shall be for a number of
shares equal to the number of shares surrendered as part or all of the exercise
price of such Option; (ii) shall have an expiration date which is the same as
the expiration date of the Option the exercise of which gave rise to such
Re-Load Option; and (iii) shall have an exercise price which is equal to one
hundred percent (100%) of the Fair Market Value of the common stock subject to
the Re-Load Option on the date of exercise of the original Option.
Notwithstanding the foregoing, a Re-Load Option which is an Incentive Stock
Option and which is granted to a 10% stockholder (as described in subsection
5(b)), shall have an exercise price which is equal to one hundred ten percent
(110%) of the Fair Market Value of the stock subject to the Re-Load Option on
the date of exercise of the original Option and shall have a term which is no
longer than five (5) years.
Any such Re-Load Option may be an Incentive Stock Option or a
Nonstatutory Stock Option, as the Board or Committee may designate at the time
of the grant of the original Option; provided, however, that the designation of
any Re-Load Option as an Incentive Stock Option shall be subject to the one
hundred thousand dollar ($100,000) annual limitation on exercisability of
Incentive Stock Options described in subsection 12(d) of the Plan and in Section
422(d) of the Code. There shall be no Re-Load Options on a Re-Load Option. Any
such Re-Load Option shall be subject to the availability of sufficient shares
under subsection 4(a) and shall be subject to such other terms and conditions as
the Board or Committee may determine which are not inconsistent with the express
provisions of the Plan regarding the terms of Options.
7. TERMS OF STOCK BONUSES AND PURCHASES OF RESTRICTED STOCK.
Each stock bonus or restricted stock purchase agreement shall be in
such form and shall contain such terms and conditions as the Board or the
Committee shall deem appropriate. The terms and conditions of stock bonus or
restricted stock purchase agreements may change from time to time, and the terms
and conditions of separate agreements need not be identical, but each stock
bonus or restricted stock purchase agreement shall include (through
incorporation of provisions hereof by reference in the agreement or otherwise)
the substance of each of the following provisions as appropriate:
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<PAGE> 10
(A) PURCHASE PRICE. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such agreement but in no event shall the purchase
price be less than eighty-five percent (85%) of the stock's Fair Market Value on
the date such award is made. Notwithstanding the foregoing, the Board or the
Committee may determine that eligible participants in the Plan may be awarded
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company for its benefit.
(B) TRANSFERABILITY. No rights under a stock bonus or restricted stock
purchase agreement shall be transferable except by will or the laws of descent
and distribution or, if provided by the terms of the Stock Award Agreement,
pursuant to a domestic relations order within the meaning of Rule 16a-12 under
the Exchange Act and any administrative interpretations or pronouncements
thereunder, so long as stock awarded under such agreement remains subject to the
terms of the agreement.
(C) CONSIDERATION. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment or other arrangement with the person to whom the stock is sold,
except that payment of the common stock's "par value" (as defined in the
Delaware General Corporation Law) shall not be made by deferred payment or other
arrangement; or (iii) in any other form of legal consideration that may be
acceptable to the Board or the Committee in its discretion. Notwithstanding the
foregoing, the Board or the Committee to which administration of the Plan has
been delegated may award stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
(D) VESTING. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(E) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR
CONSULTANT. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. OPTION GRANTS TO NON-EMPLOYEE DIRECTORS.
(A) Each individual who, on the Stockholder Approval Date, is a
Director and is not an Employee of the Company (a "Non-Insider Director") shall
automatically be granted, on the Stockholder Approval Date, a Nonstatutory
Option to
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<PAGE> 11
purchase ten thousand (10,000) shares of the Company's common stock (a "1997
Director Option"). Each individual who first becomes a Non-Insider Director of
the Company (and was not already a Director) after the Stockholder Approval Date
shall automatically be granted, upon his or her election or appointment as a
Non-Insider Director, a Nonstatutory Option to purchase thirty thousand (30,000)
shares of the Company's common stock (an "Initial Option"). In addition, at the
time of each of the Company's annual meetings of stockholders, beginning with
the Company's 1998 annual meeting, each Non-Insider Director who has been a
Director for at least six (6) months as of the date of such meeting shall
automatically be granted a Nonstatutory Option to purchase ten thousand (10,000)
shares of the Company's common stock (an "Annual Option"). The number of shares
of common stock to be covered by Options granted pursuant to this Section 8
shall be subject to adjustment pursuant to Section 13 hereof.
(B) The date of grant for each 1997 Director Option shall be the
Stockholder Approval Date. The date of grant for each Initial Option shall be
the date of the Non-Insider Director's election or appointment to the Board.
The date of grant for each Annual Option shall be the first business day
following the date of the Company's 1998 annual meeting of stockholders and each
annual meeting of stockholders thereafter, as long as such Non-Insider Director
is then serving as a Non-Insider Director of the Company.
(C) The exercise price of Options granted pursuant to this Section 8
shall be the Fair Market Value of the Company's common stock on the date of
grant.
(D) Each Option granted to a Non-Insider Director pursuant to this
Section 8 shall expire upon the earlier of (i) ten (10) years from the date of
grant, (ii) three (3) months after termination of the Non-Insider Director's
Continuous Status as an Employee, Director or Consultant (other than upon the
Non-Insider Director's death or disability), or (iii) one (1) year after
termination of the Non-Insider Director's Continuous Status as an Employee,
Director or Consultant as a result of death or disability.
(E) Each Initial Option granted pursuant to this Section 8 shall vest
monthly as to one-forty-eighth (1/48th) of the shares subject to such Option
after the date of grant of the Option, until fully vested, provided that the
Optionee's Continuous Status as an Employee, Director or Consultant has not
terminated prior to such monthly vesting date. Upon the vesting of each
installment portion of the Option as provided herein, the Option may be
exercised with respect to the shares represented by that installment. Each 1997
Director Option and each Annual Option shall vest monthly as to one-twelfth
(1/12th) of the shares subject to such Option after the date of grant of the
Option, until fully vested, provided that the Optionee's Continuous Status as an
Employee, Director or Consultant has not terminated prior to such monthly
vesting date. No portion of an
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<PAGE> 12
Option granted under this Section 8 may be exercised prior to the vesting date
applicable to such Option or portion thereof, as the case may be.
(F) Payment of the exercise price per share of each Option granted
under this Section 8 shall be made (i) in cash (including check) at the time of
exercise, (ii) pursuant to a cashless exercise program that is in compliance
with regulations promulgated by the Federal Reserve Board and which, prior to
the issuance of the shares being purchased, results in either the receipt by the
Company of cash (or check) or irrevocable instructions to a qualified broker
that sufficient shares be sold immediately in order to deliver the aggregate
exercise price to the Company from the sales proceeds, or (iii) by a combination
of the methods specified in (i) and (ii).
(G) No Options granted pursuant to this Section 8 may be exercised
prior to shareholder approval of the amendment of the Plan adding this Section
8.
9. CANCELLATION AND RE-GRANT OF OPTIONS.
(A) The Board or the Committee shall have the authority to effect, at
any time and from time to time, (i) the repricing of any outstanding Options,
(ii) with the consent of any adversely affected holders of Options, the
cancellation of any outstanding Options under the Plan and the grant in
substitution therefor of new Options under the Plan covering the same or
different numbers of shares of stock, but having an exercise price per share not
less than: eighty-five percent (85%) of the Fair Market Value for a Nonstatutory
Stock Option, one hundred percent (100%) of the Fair Market Value in the case of
an Incentive Stock Option or, in the case of an Incentive Stock Option held by a
10% stockholder (as described in subsection 5(b)), not less than one hundred ten
percent (110%) of the Fair Market Value per share of stock on the new grant
date. Notwithstanding the foregoing, the Board or the Committee may grant an
Option with an exercise price lower than that set forth above if such Option is
granted as part of a transaction to which Section 424(a) of the Code applies.
(B) Shares subject to an Option canceled under this Section 9 shall
continue to be counted against the maximum number of shares subject to Options
permitted to be granted pursuant to subsection 5(c) of the Plan. The repricing
of an Option under this Section 9, resulting in a reduction of the exercise
price, shall be deemed to be a cancellation of the original Option and the grant
of a substitute Option; in the event of such repricing, both the original and
the substituted Options shall be counted against the maximum number of shares
subject to Options permitted to be granted pursuant to subsection 5(c) of the
Plan. The provisions of this subsection 9(b) shall be applicable only to the
extent required by Section 162(m) of the Code.
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<PAGE> 13
10. COVENANTS OF THE COMPANY.
(A) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
(B) The Company shall seek to obtain from each regulatory commission
or agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act of 1933, as amended (the "Securities Act") either the Plan,
any Stock Award or any stock issued or issuable pursuant to any such Stock
Award. If, after reasonable efforts, the Company is unable to obtain from any
such regulatory commission or agency the authority which counsel for the Company
deems necessary for the lawful issuance and sale of stock under the Plan, the
Company shall be relieved from any liability for failure to issue and sell stock
upon exercise of such Stock Awards unless and until such authority is obtained.
11. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Stock Awards shall
constitute general funds of the Company.
12. MISCELLANEOUS.
(A) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or any
part thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding the
provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(B) Neither an Employee, a Director, a Consultant nor any person to
whom a Stock Award is transferred pursuant to subsection 6(d) or 7(b) shall be
deemed to be the holder of, or to have any of the rights of a holder with
respect to, any shares subject to such Stock Award unless and until such person
has satisfied all requirements for exercise of the Stock Award pursuant to its
terms.
(C) Nothing in the Plan or any instrument executed or Stock Award
granted pursuant thereto shall confer upon any Employee, Director or Consultant
or other holder of Stock Awards any right to continue in the employ of the
Company or any Affiliate (or to continue acting as a Director or Consultant) or
shall affect the right of the Company or any Affiliate to terminate the
employment of any Employee with or without notice and with or without cause, or
the right of the Company's Board of Directors and/or the Company's stockholders
to remove any Director pursuant to the terms of the Company's By-laws and the
provisions of the Delaware General Corporation Law, or the
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<PAGE> 14
right to terminate the relationship of any Consultant pursuant to the terms of
such Consultant's agreement with the Company or Affiliate.
(D) To the extent that the aggregate Fair Market Value (determined at
the time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(E) The Company may require any person to whom a Stock Award is
granted, or any person to whom a Stock Award is transferred in accordance with
the Plan, as a condition of exercising or acquiring stock under any Stock Award,
(1) to give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account and
not with any present intention of selling or otherwise distributing the stock.
The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company, place legends on stock certificates issued under the Plan as such
counsel deems necessary or appropriate in order to comply with applicable
securities laws, including, but not limited to, legends restricting the transfer
of the stock.
(F) To the extent provided by the terms of a Stock Award Agreement,
the person to whom a Stock Award is granted may satisfy any federal, state or
local tax withholding obligation relating to the exercise or acquisition of
stock under a Stock Award by any of the following means or by a combination of
such means: (1) tendering a cash payment; (2) authorizing the Company to
withhold shares from the shares of the common stock otherwise issuable to the
participant as a result of the exercise or acquisition of stock under the Stock
Award; or (3) delivering to the Company owned and unencumbered shares of the
common stock of the Company having a Fair Market Value at the time of such
withholding equal to the amount of the withholding obligation (provided that
such shares have been held for a period of at least six (6) months).
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<PAGE> 15
13. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) If any change is made in the stock subject to the Plan, or subject
to any Stock Award, without the receipt of consideration by the Company (through
merger, consolidation, reorganization, recapitalization, reincorporation, stock
dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the class(es) and maximum
number of shares subject to the Plan pursuant to subsection 4(a) and the maximum
number of shares subject to award to any person during any calendar year
pursuant to subsection 5(c), and the outstanding Stock Awards will be
appropriately adjusted in the class(es) and number of shares and price per share
of stock subject to such outstanding Stock Awards. Such adjustments shall be
made by the Board or the Committee, the determination of which shall be final,
binding and conclusive. (The conversion of any convertible securities of the
Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company".)
(B) In the event of: (1) a dissolution, liquidation or sale of
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; or (4) the acquisition by any person, entity or group within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, or any
comparable successor provisions (excluding any employee benefit plan, or related
trust, sponsored or maintained by the Company or any Affiliate of the Company)
of the beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then (a) with respect to Stock Awards held
by persons then performing services as Employees, Directors or Consultants, the
vesting and, if applicable, exercisability of such Stock Awards shall be
accelerated prior to such event and any Stock Awards requiring exercise shall be
terminated if not exercised after such acceleration and at or prior to such
event, and (b) with respect to any other Stock Awards outstanding under the
Plan, such Stock Awards shall be terminated if not exercised prior to such
event.
14. AMENDMENT OF THE PLAN AND STOCK AWARDS.
(A) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 13 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company to
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<PAGE> 16
the extent stockholder approval is necessary for the Plan, as modified by the
amendment, to satisfy the requirements of Section 422 of the Code or Rule 16b-3
under the Exchange Act.
(B) The Board may in its sole discretion submit any other amendment to
the Plan for stockholder approval, including, but not limited to, amendments to
the Plan intended to satisfy the requirements of Section 162(m) of the Code and
the regulations promulgated thereunder regarding the exclusion of
performance-based compensation from the limit on corporate deductibility of
compensation paid to certain executive officers.
(C) It is expressly contemplated that the Board may amend the Plan in
any respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(D) Rights and obligations under any Stock Award granted before
amendment of the Plan shall not be impaired by any amendment of the Plan unless
(i) the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
(E) The Board at any time, and from time to time, may amend the terms
of any one or more Stock Award; provided, however, that the rights and
obligations under any Stock Award shall not be impaired by any such amendment
unless (i) the Company requests the consent of the person to whom the Stock
Award was granted and (ii) such person consents in writing.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on July 15, 2007. No Stock Awards
may be granted under the Plan while the Plan is suspended or after it is
terminated.
(B) Rights and obligations under any Stock Award granted while the
Plan is in effect shall not be impaired by suspension or termination of the
Plan, except with the consent of the person to whom the Stock Award was granted.
16. EFFECTIVE DATE OF PLAN; TERM OF PLAN.
The Plan, as amended and restated by the Board on the Amendment Date
shall be effective on the Amendment Date, provided that no Stock Awards granted
under the Plan that were not provided for under the Plan prior to the Amendment
Date shall be
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exercised unless and until the Plan, as amended, has been approved by the
stockholders of the Company within twelve (12) months before or after the
Amendment Date.
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EXHIBIT 10.33
TRITEAL CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
(FACING PAGE)
FOR GOOD AND VALUABLE CONSIDERATION, TriTeal Corporation, a Delaware
corporation, hereby irrevocably grants to the Employee named below an incentive
stock option (the "Option") to purchase any part or all of the specified number
of shares of its Common Stock upon the terms and subject to the conditions set
forth in this Agreement, at the specified purchase price per share without
commission or other charge. The Option is granted pursuant to the TriTeal
Corporation 1995 Stock Option Plan (the "Plan") and the Standard Terms and
Conditions Relating to Incentive Stock Options (the "Terms and Conditions")
promulgated under the Plan and in effect as of the date of this Option
Agreement, a copy of which is attached hereto. The terms of the Plan and the
Terms and Conditions are hereby incorporated herein by reference and made a part
of this Option Agreement.
Name of Employee:
-----------------------------------------
Social Security Number:
-----------------------------------------
Number of Shares covered by
Option (the "Option Shares"):
-----------------------------------------
Purchase Price Per Option Share: $
-----------------------------------------
Minimum Number of Option Shares Per
Partial Exercise (unless Optionee
exercises all of the Option then
exercisable):
-----------------------------------------
The Option shall become exercisable as follows:
1/4th of the total number of shares granted hereunder shall vest on
_______________, and thereafter 1/36th of the remaining number of
shares shall vest on the ____ of each month, such that the options
shall be 100% vested on __________________. Once subject to
purchase, the Option Shares shall remain subject to purchase until
____________ [10 years from the date of grant] (the "Expiration
Date") unless the Option is earlier terminated in accordance with
the Plan and the Terms and Conditions.
Date of this Option Agreement: _______________, 199__ [date of grant]
TRITEAL CORPORATION
-----------------------------------------
Employee's Signature
By: Residence Address:
-------------------------------
Name:
----------------------------- -----------------------------------------
Title:
---------------------------- -----------------------------------------
<PAGE> 2
STANDARD TERMS AND CONDITIONS RELATING TO
INCENTIVE STOCK OPTIONS
UNDER THE TRITEAL CORPORATION 1995 STOCK OPTION PLAN
Adopted as of July 15, 1997
The following Standard Terms and Conditions Relating to Incentive Stock
Options (the "Terms and Conditions") apply to Incentive Stock Options granted
under the TriTeal Corporation 1995 Stock Option Plan (the "Plan"), the
applicable terms of which are hereby incorporated by reference and made a part
of these Terms and Conditions. In turn, these Terms and Conditions are
incorporated by reference into each such Option. Whenever capitalized terms are
used in these Terms and Conditions, they shall have the meaning specified (i) in
the Plan, (ii) in the TriTeal Corporation Incentive Stock Option Agreement
Facing Page (the "Facing Page") into which these Terms and Conditions are
incorporated by reference, or (iii) below, unless the context clearly indicates
to the contrary. As used herein and in the Plan, the "Option Agreement" shall
mean the Incentive Stock Option Agreement Facing Page and these Terms and
Conditions as incorporated therein. The masculine pronoun shall include the
feminine and neuter, and the singular and plural, where the context so
indicates.
1. TERM OF OPTION. Subject to the maximum time limitations in Section 6(a)
of the Plan, the term of the Option shall be the period commencing on the date
of the Option Agreement and ending on the Expiration Date (as defined in the
Facing Page), unless terminated earlier as provided herein or in the Plan;
provided, however, if the Optionee owns (or is deemed to own pursuant to Section
424(d) of the Code) stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company (or any of its
Affiliates), the Option shall expire not later than five (5) years after the
date of the Option Agreement.
2. EXERCISE PRICE. The exercise price of the Option granted hereby shall
not be less than one hundred percent (100%) of the Fair Market Value of the
Option Shares subject to the Option on the date the Option is granted.
3. EXERCISE OF OPTION.
(A) The Facing Page shall set forth the rate at which the Option
Shares shall become subject to purchase by Optionee.
(B) Optionee shall exercise the Option to the extent exercisable, in
whole or in part, by sending written notice to the Company in the form attached
hereto as Exhibit A of his intention to purchase Option Shares hereunder. Except
as otherwise provided in the Plan, Optionee shall not exercise the Option at any
one time with respect to less than the minimum number of Option Shares as is set
forth on the Facing Page.
(C) Payment of the exercise price per share is due in full upon
exercise of all or any part of each installment which has accrued to the
Optionee. The Optionee may elect, to the extent permitted by applicable statutes
and regulations, to make payment of the exercise price under one of the
following alternatives:
1.
<PAGE> 3
(I) Payment of the exercise price per Option Share in cash
(including check) at the time of exercise;
(II) Payment pursuant to a program developed in compliance with
regulations promulgated by the Federal Reserve Board which, prior to the
issuance of the Option Shares, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to a qualified broker
that sufficient Option Shares to pay the aggregate exercise price be sold
immediately and that the exercise price be delivered to the Company from the
sales proceeds; or
(III) Payment by a combination of the above methods of payment.
(D) Optionee agrees to complete and execute any additional documents
which the Company reasonably requests that Optionee complete in order to comply
with applicable federal, state and local securities laws, rules and regulations.
(E) Subject to the Company's compliance with all applicable laws,
rules and regulations relating to the issuance of such Option Shares and
Optionee's compliance with all the terms and conditions of the Option Agreement,
these Terms and Conditions and the Plan, the Company shall promptly deliver the
Option Shares to the Optionee.
(F) Except as otherwise provided herein or in the Plan, the Option may
be exercised during the lifetime of the Optionee only by the Optionee.
4. OPTION NOT TRANSFERABLE. The Option granted hereunder shall not be
transferable in any manner other than upon the death of Optionee as provided in
the Plan. More particularly (but without limiting the foregoing), the Option may
not be assigned, transferred (except as expressly provided herein), pledged or
hypothecated in any way, shall not be assignable by operation of law and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
5. TERMINATION OF OPTION.
(A) To the extent not previously exercised, the Option shall terminate
on the Expiration Date; provided, however, that except as otherwise provided in
this Section 5 the Option may not be exercised more than thirty (30) days after
the termination of Optionee's Continuous Status as an Employee, Director or
Consultant for any reason (other than upon Optionee's death or disability).
Within such thirty (30) day period, Optionee may exercise the Option only to the
extent the same was exercisable on the date of such termination of Optionee's
Continuous Status as an Employee, Director or Consultant, and said right to
exercise shall terminate at the end of such period.
(B) In the event of a termination of Optionee's Continuous Status as
an Employee, Director or Consultant as a result of Optionee's disability, the
Option shall be exercisable for a period of twelve (12) months from the date of
such termination of Optionee's Continuous Status as an Employee, Director or
Consultant, but in no event later than the
2.
<PAGE> 4
Expiration Date and only to the extent that the Option was exercisable on the
date of such termination.
(C) In the event of a termination of Optionee's Continuous Status as
an Employee, Director or Consultant as a result of Optionee's death, the Option
shall be exercisable by the Optionee's estate (or by the person who acquires the
right to exercise the Option by will or by the laws descent and distribution or
by designation pursuant to Section 6(d) of the Plan) for a period of twelve (12)
months from the date of such termination, but in no event later than the
Expiration Date and only to the extent that the Optionee was entitled to
exercise the Option on the date of death.
(D) Notwithstanding anything herein to the contrary, no portion of any
Option which is not exercisable by the Optionee upon a termination of Optionee's
continuous status as an Employee, Director or Consultant shall thereafter become
exercisable, regardless of the reason for such termination.
6. NO RIGHT TO CONTINUED EMPLOYMENT. The Option does not confer upon
Optionee any right to continue in his or her capacity as an Employee, Consultant
or Director of the Company, nor does it limit in any way the right of the
Company to terminate Optionee's service relationship at any time, with or
without cause.
7. NOTICE OF TAX ELECTION. If Optionee makes any tax election relating to
the treatment of the Option Shares under the Internal Revenue Code of 1986, as
amended, Optionee shall promptly notify the Company of such election.
8. ACKNOWLEDGMENTS OF OPTIONEE. Optionee acknowledges and agrees that:
(A) Although the Company has made a good faith attempt to qualify the
Option as an incentive stock option within the meaning of Sections 421, 422 and
424 of the Code, the Company does not warrant that the Option granted herein
constitutes an "incentive stock option" within the meaning of such sections, or
that the transfer of Option Shares will be treated for federal income tax
purposes as specified in Section 421 of the Code.
(B) Optionee shall notify the Company in writing within fifteen (15)
days of each disposition (including a sale, exchange, gift or a transfer of
legal title) of the Option Shares made within three years after the issuance of
such Option Shares.
(C) Optionee understands that if, among other things, he or she
disposes of any Option Shares granted within two years of the granting of the
Option to him or within one year of the issuance of such shares to him, then
such Option Shares will not qualify for the beneficial treatment which Optionee
might otherwise receive under Sections 421 and 422 of the Code.
(D) Optionee and his transferees shall have no rights as a shareholder
with respect to any Option Shares until the date of the issuance of a stock
certificate (or such other means of issuance of the Option Shares as provided by
the Company in accordance with the terms of the Plan) evidencing such Option
Shares. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other
3.
<PAGE> 5
rights for which the record date is prior to the date such stock certificate is
issued, except as provided in Section 13 of the Plan.
9. WITHHOLDING TAXES. Whenever Option Shares are to be issued under the
Option Agreement, the Company shall have the right to require Optionee to remit
to the Company an amount sufficient to satisfy federal, state and local
withholding tax requirements prior to issuance and/or delivery of any
certificate or certificates for such Option Shares.
10. MISCELLANEOUS.
(A) The Option Agreement shall bind and inure to the benefit of the
parties' heirs, legal representatives, successors and permitted assigns.
(B) The Option Agreement, the Plan, and these Terms and Conditions
constitute the entire agreement between the parties pertaining to the subject
matter contained herein and they supersede all prior and contemporaneous
agreements, representations and understandings of the parties. No supplement,
modification or amendment of the Option Agreement shall be binding unless
executed in writing by all of the parties. No waiver of any of the provisions of
the Option Agreement shall be deemed or shall constitute a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver. No waiver shall be binding unless executed in writing by the party
making the waiver. In the event there exists any conflict or discrepancy between
any of the terms in the Plan and the Option Agreement, the terms of the Plan
shall be controlling. A copy of the Plan has been delivered to the Optionee and
also may be inspected by Optionee at the principal office of the Company.
(C) Should any portion of the Plan, the Option Agreement of these
Terms and Conditions be declared invalid and unenforceable, then such portion
shall be deemed to be severable from the Option Agreement and shall not affect
the remainder hereof.
(D) All notices to be sent hereunder shall be delivered in person or
sent by United States Mail, certified and postage prepaid, to Optionee at the
address set forth on the Facing Page of the Option Agreement or to the Company
at its principal place of business, Attention: President. Any change in the
address to which notices shall be sent under the Option Agreement to the
Optionee shall be made by the Optionee upon ten (10) days' written notice to the
Company.
(E) The prevailing party in any court action brought to interpret or
enforce any provision of the Plan or the Option Agreement shall be entitled to
recover, as an element of the costs of suit, and not as damages, an award of
reasonable attorneys' fees, to be fixed by the court. Such award may be made as
part of a judgment by default or as part of a judgment after trial or after
appeal.
4.
<PAGE> 6
EXHIBIT A
NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
To: TriTeal Corporation
2011 Palomar Airport Road
Carlsbad, CA 92009-1432
I, a resident of the State of _________________________, hereby
exercise my incentive stock option granted by TRITEAL CORPORATION, a Delaware
corporation (the "Company"), pursuant to an Incentive Stock Option Agreement
dated _________, 199__, subject to all the terms and provisions thereof and
notify the Company of my desire to purchase _____ shares of Common Stock of the
Company at the exercise price of ____________________________ Dollars
($________) per share pursuant to said option.
I agree to complete and execute any additional documents which the
Company may request that I complete in order to comply with applicable federal,
state and local securities laws, rules and regulations.
Dated:
----------------------------
- ---------------------------------- -----------------------------------------
Social Security or [Name]
Taxpayer I.D. Number
Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
<PAGE> 1
EXHIBIT 10.34
TRITEAL CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
(FACING PAGE)
FOR GOOD AND VALUABLE CONSIDERATION, TriTeal Corporation, a Delaware
corporation, hereby irrevocably grants to the Optionee named below a
nonstatutory stock option (the "Option") to purchase any part or all of the
specified number of shares of its Common Stock upon the terms and subject to the
conditions set forth in this Option Agreement, at the specified purchase price
per share without commission or other charge. The Option is granted pursuant to
the TriTeal Corporation 1995 Stock Option Plan (the "Plan") and the Standard
Terms and Conditions Relating to Nonstatutory Stock Options (the "Terms and
Conditions") promulgated under the Plan and in effect as of the date of this
Option Agreement, a copy of which is attached hereto. The terms of the Plan and
the Terms and Conditions are hereby incorporated herein by reference and made a
part of this Option Agreement.
Name of Optionee:
-----------------------------------------
Social Security Number:
-----------------------------------------
Number of Shares covered by
Option (the "Option Shares"):
-----------------------------------------
Purchase Price Per Option Share: $
-----------------------------------------
Minimum Number of Option Shares Per
Partial Exercise (unless Optionee
exercises all of the Option then
exercisable):
-----------------------------------------
The Option shall become exercisable as follows:
1/4th of the total number of shares granted hereunder shall vest on
_______________, and thereafter 1/36th of the remaining number of
shares shall vest on the ____ of each month, such that the options
shall be 100% vested on __________________. Once subject to
purchase, the Option Shares shall remain subject to purchase until
____________ [10 years from the date of grant] (the "Expiration
Date") unless the Option is earlier terminated in accordance with
the Plan and the Terms and Conditions.
Date of this Option Agreement: _________________, 199__ [date of grant]
TRITEAL CORPORATION
-----------------------------------------
Optionee's Signature
By: Residence Address:
-------------------------------
Name:
----------------------------- -----------------------------------------
Title:
---------------------------- -----------------------------------------
<PAGE> 2
STANDARD TERMS AND CONDITIONS RELATING TO
NONSTATUTORY STOCK OPTIONS
UNDER THE TRITEAL CORPORATION 1995 STOCK OPTION PLAN
Adopted as of July 15, 1997
The following Standard Terms and Conditions Relating to Nonstatutory Stock
Options (the "Terms and Conditions") apply to Nonstatutory Stock Options granted
under the TriTeal Corporation 1995 Stock Option Plan (the "Plan"), the
applicable terms of which are hereby incorporated by reference and made a part
of these Terms and Conditions. In turn, these Terms and Conditions are
incorporated by reference into each such Option. Whenever capitalized terms are
used in these Terms and Conditions, they shall have the meaning specified (i) in
the Plan, (ii) in the TriTeal Corporation Nonstatutory Stock Option Agreement
Facing Page (the "Facing Page") into which these Terms and Conditions are
incorporated by reference, or (iii) below, unless the context clearly indicates
to the contrary. As used herein and in the Plan, the "Option Agreement" shall
mean the Nonstatutory Stock Option Agreement Facing Page and these Terms and
Conditions as incorporated therein. The masculine pronoun shall include the
feminine and neuter, and the singular the plural, where the context so
indicates.
1. TERM OF OPTION. Subject to the maximum time limitations in Section 6(a)
of the Plan, the term of the Option shall be the period commencing on the date
of the Option Agreement and ending on the Expiration Date (as defined in the
Facing Page), unless terminated earlier as provided herein or in the Plan.
2. EXERCISE PRICE. The exercise price of the Option granted hereby shall be
not less than eighty-five percent (85%) of the Fair Market Value of the Option
Shares subject to the Option on the date the Option is granted.
3. EXERCISE OF OPTION.
(A) The Facing Page shall set forth the rate at which the Option
Shares shall become subject to purchase by Optionee.
(B) Optionee shall exercise the Option to the extent exercisable, in
whole or in part, by sending written notice to the Company in the form attached
hereto as Exhibit A of his intention to purchase Option Shares hereunder. Except
as otherwise provided in the Plan, Optionee shall not exercise the Option at any
one time with respect to less than the minimum number of Option Shares as is set
forth on the Facing Page.
(C) Payment of the exercise price per share is due in full upon
exercise of all or any part of each installment which has accrued to the
Optionee. The Optionee may elect, to the extent permitted by applicable statutes
and regulations, to make payment of the exercise price under one of the
following alternatives.
(I) Payment of the exercise price per Option Share in cash
(including check) at the time of exercise;
(II) Payment pursuant to a program developed in compliance with
regulations promulgated by the Federal Reserve Board which, prior to the
issuance of the Option Shares, results in either the receipt of cash (or check)
by the Company or the receipt of
1.
<PAGE> 3
irrevocable instructions to a qualified broker that sufficient Option Shares to
pay the aggregate exercise price be sold immediately and that the exercise price
be delivered to the Company from the sales proceeds; or
(III) Payment by a combination of the above methods of payment.
(D) Optionee agrees to complete and execute any additional documents
which the Company reasonably requests that Optionee complete in order to comply
with applicable federal, state and local securities laws, rules and regulations.
(E) Subject to the Company's compliance with all applicable laws,
rules and regulations relating to the issuance of such Option Shares and
Optionee's compliance with all the terms and conditions of the Option Agreement,
these Terms and Conditions and the Plan, the Company shall promptly deliver the
Option Shares to the Optionee.
(F) Except as otherwise provided herein or in the Plan, the Option may
be exercised during the lifetime of the Optionee only by the Optionee.
4. OPTION NOT TRANSFERABLE. The Option granted hereunder shall not be
transferable in any manner other than upon the death of Optionee as provided in
the Plan. More particularly (but without limiting the foregoing), the Option may
not be assigned, transferred (except as expressly provided herein), pledged or
hypothecated in any way, shall not be assignable by operation of law and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
5. TERMINATION OF OPTION.
(A) To the extent not previously exercised, the Option shall terminate
on the Expiration Date; provided, however, that except as otherwise provided in
this Section 5 the Option may not be exercised more than thirty (30) days after
the termination of Optionee's Continuous Status as an Employee, Director or
Consultant for any reason (other than upon Optionee's death or disability).
Within such thirty (30) day period, Optionee may exercise the Option only to the
extent the same was exercisable on the date of such termination of Optionee's
Continuous Status as an Employee, Director or Consultant, and said right to
exercise shall terminate at the end of such period.
(B) In the event of a termination of Optionee's Continuous Status as
an Employee, Director or Consultant as a result of Optionee's disability, the
Option shall be exercisable for a period of twelve (12) months from the date of
such termination of Optionee's Continuous Status as an Employee, Director or
Consultant, but in no event later than the Expiration Date and only to the
extent that the Option was exercisable on the date of such termination.
(C) In the event of a termination of Optionee's Continuous Status as
an Employee, Director or Consultant as a result of Optionee's death, the Option
shall be exercisable by the Optionee's estate (or by the person who acquires the
right to exercise the Option by will or by the laws descent and distribution or
by designation pursuant to Section 6(d) of the Plan) for a period of twelve (12)
months from the date of such termination, but in no event later than the
2.
<PAGE> 4
Expiration Date and only to the extent that the Optionee was entitled to
exercise the Option on the date of death.
(D) Notwithstanding anything herein to the contrary, no portion of any
Option which is not exercisable by the Optionee upon a termination of Optionee's
continuous status as an Employee, Director or Consultant shall thereafter become
exercisable, regardless of the reason for such termination.
6. NO RIGHT TO CONTINUED EMPLOYMENT. The Option does not confer upon
Optionee any right to continue in his or her capacity as an Employee, Consultant
or Director of the Company, nor does it limit in any way the right of the
Company to terminate Optionee's service relationship with the Company at any
time, with or without cause.
7. NOTICE OF TAX ELECTION. If Optionee makes any tax election relating to
the treatment of the Option Shares under the Internal Revenue Code of 1986, as
amended, Optionee shall promptly notify the Company of such election.
8. ACKNOWLEDGMENTS OF OPTIONEE. Optionee acknowledges and agrees that:
(A) Optionee and his or her transferees shall have no rights as a
shareholder with respect to any Option Shares until the date of the issuance of
a stock certificate (or such other means of issuance of the Option Shares as
provided by the Company in accordance with the terms of the Plan) evidencing
such Option Shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 13 of the Plan.
9. WITHHOLDING TAXES. Whenever Option Shares are to be issued under the
Option Agreement, the Company shall have the right to require Optionee to remit
to the Company an amount sufficient to satisfy federal, state and local
withholding tax requirements prior to issuance and/or delivery of any
certificate or certificates for such Option Shares.
10. MISCELLANEOUS.
(A) The Option Agreement shall bind and inure to the benefit of the
parties' heirs, legal representatives, successors and permitted assigns.
(B) The Option Agreement, the Plan, and these Terms and Conditions
constitute the entire agreement between the parties pertaining to the subject
matter contained herein and they supersede all prior and contemporaneous
agreements, representations and understandings of the parties. No supplement,
modification or amendment of the Option Agreement shall be binding unless
executed in writing by all of the parties. No waiver of any of the provisions of
the Option Agreement shall be deemed or shall constitute a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver. No waiver shall be binding unless executed in writing by the party
making the waiver. In the event there exists any conflict or discrepancy between
any of the terms in the Plan and the Option Agreement, the terms of the Plan
shall be controlling. A copy of the Plan has been delivered to the Optionee and
also may be inspected by Optionee at the principal office of the Company.
3.
<PAGE> 5
(C) Should any portion of the Plan, the Option Agreement or these
Terms and Conditions be declared invalid and unenforceable, then such portion
shall be deemed to be severable from the Option Agreement and shall not affect
the remainder hereof.
(D) All notices to be sent hereunder shall be delivered in person or
sent by United States Mail, certified and postage prepaid, to Optionee at the
address set forth on the Facing Page of the Option Agreement or to the Company
at its principal place of business, Attention: President. Any change in the
address to which notices shall be sent under the Option Agreement to the
Optionee shall be made by the Optionee upon ten (10) days' written notice to the
Company.
(E) The prevailing party in any court action brought to interpret or
enforce any provision of the Plan or the Option Agreement shall be entitled to
recover, as an element of the costs of suit, and not as damages, an award of
reasonable attorneys' fees, to be fixed by the court. Such award may be made as
part of a judgment by default or as part of a judgment after trial or after
appeal.
4.
<PAGE> 6
EXHIBIT A
NOTICE OF EXERCISE OF NONSTATUTORY STOCK OPTION
To: TriTeal Corporation
2011 Palomar Airport Road
Carlsbad, CA 92009-1432
I, a resident of the State of _____________________, hereby exercise
my nonstatutory stock option granted by TRITEAL CORPORATION, a Delaware
corporation (the "Company"), pursuant to a Nonstatutory Stock Option Agreement
dated __________, 199__, subject to all the terms and provisions thereof and
notify the Company of my desire to purchase _____ shares of Common Stock of the
Company at the exercise price of _______________ Dollars ($_______) per share
pursuant to said option.
I agree to complete and execute any additional documents which the
Company may request that I complete in order to comply with applicable federal,
state and local securities laws, rules and regulations.
Dated:
----------------------------
- ---------------------------------- -----------------------------------------
Social Security or [Name]
Taxpayer I.D. Number
Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
<PAGE> 1
EXHIBIT 10.35
TRITEAL CORPORATION
NON-INSIDER DIRECTOR
NONSTATUTORY STOCK OPTION AGREEMENT
(FACING PAGE)
FOR GOOD AND VALUABLE CONSIDERATION, TriTeal Corporation, a Delaware
corporation, hereby irrevocably grants to the Optionee named below a
nonstatutory stock option (the "Option") to purchase any part or all of the
specified number of shares of its Common Stock upon the terms and subject to the
conditions set forth in this Option Agreement, at the specified purchase price
per share without commission or other charge. The Option is granted pursuant to
Section 8 of the TriTeal Corporation 1995 Stock Option Plan (the "Plan") and the
Standard Terms and Conditions Relating to Nonstatutory Stock Options (the "Terms
and Conditions") promulgated under the Plan and in effect as of the date of this
Option Agreement, a copy of which is attached hereto. The terms of the Plan and
the Terms and Conditions are hereby incorporated herein by reference and made a
part of this Option Agreement.
Name of Optionee:
-----------------------------------------
Social Security Number:
-----------------------------------------
Number of Shares covered by
Option (the "Option Shares"): [30,000/10,000]
-----------------------------------------
Purchase Price Per Option Share: $
-----------------------------------------
Minimum Number of Option Shares Per
Partial Exercise (unless Optionee
exercises all of the Option then
exercisable):
-----------------------------------------
The Option shall become exercisable as follows:
[1/48th] [1/12th] of the total number of shares granted hereunder
shall vest on the ____ of each month following the date of this
Option Agreement, such that the Option shall be 100% vested on
__________________. Once subject to purchase, the Option Shares
shall remain subject to purchase until ____________ [10 years from
the date of grant] (the "Expiration Date") unless the Option is
earlier terminated in accordance with Section 8(d) of the Plan and
the Terms and Conditions.
Date of this Option Agreement: _________________, 199__ [date of grant]
TRITEAL CORPORATION
-----------------------------------------
Optionee's Signature
By: Residence Address:
-------------------------------
Name:
----------------------------- -----------------------------------------
Title:
---------------------------- -----------------------------------------
<PAGE> 2
STANDARD TERMS AND CONDITIONS RELATING TO
NONSTATUTORY STOCK OPTIONS FOR
NON-INSIDER DIRECTORS
UNDER THE TRITEAL CORPORATION 1995 STOCK OPTION PLAN
The following Standard Terms and Conditions Relating to Nonstatutory Stock
Options (the "Terms and Conditions") apply to Nonstatutory Stock Options granted
to Non-Insider Directors of the Company under Section 8 of the TriTeal
Corporation 1995 Stock Option Plan (the "Plan"), the applicable terms of which
are hereby incorporated by reference and made a part of these Terms and
Conditions. In turn, these Terms and Conditions are incorporated by reference
into each such Option. Whenever capitalized terms are used in these Terms and
Conditions, they shall have the meaning specified (i) in the Plan, (ii) in the
TriTeal Corporation Nonstatutory Stock Option Agreement Facing Page (the "Facing
Page") into which these Terms and Conditions are incorporated by reference, or
(iii) below, unless the context clearly indicates to the contrary. As used
herein and in the Plan, the "Option Agreement" shall mean the Nonstatutory Stock
Option Agreement Facing Page and these Terms and Conditions as incorporated
therein. The masculine pronoun shall include the feminine and neuter, and the
singular the plural, where the context so indicates.
1. TERM OF OPTION. Subject to the maximum time limitations in Section 8(d)
of the Plan, the term of the Option shall be the period commencing on the date
of the Option Agreement and ending on the Expiration Date (as defined in the
Facing Page), unless terminated earlier as provided herein or in the Plan.
2. EXERCISE PRICE. The exercise price of the Option granted hereby shall be
the Fair Market Value of the Option Shares subject to the Option on the date the
Option is granted.
3. EXERCISE OF OPTION.
(A) The Facing Page shall set forth the rate at which the Option
Shares shall become subject to purchase by Optionee.
(B) Optionee shall exercise the Option to the extent exercisable, in
whole or in part, by sending written notice to the Company in the form attached
hereto as Exhibit A of his intention to purchase Option Shares hereunder. Except
as otherwise provided in the Plan, Optionee shall not exercise the Option at any
one time with respect to less than the minimum number of Option Shares as is set
forth on the Facing Page.
(C) Payment of the exercise price per share is due in full upon
exercise of all or any part of each installment which has accrued to the
Optionee. The Optionee may elect, to the extent permitted by applicable statutes
and regulations, to make payment of the exercise price under one of the
following alternatives.
(I) Payment of the exercise price per Option Share in cash
(including check) at the time of exercise;
1.
<PAGE> 3
(II) Payment pursuant to a program developed in compliance with
regulations promulgated by the Federal Reserve Board which, prior to the
issuance of the Option Shares, results in either the receipt of cash (or check)
by the Company or the receipt of irrevocable instructions to a qualified broker
that sufficient Option Shares to pay the aggregate exercise price be sold
immediately and that the exercise price be delivered to the Company from the
sales proceeds; or
(III) Payment by a combination of the above methods of payment.
(D) Optionee agrees to complete and execute any additional documents
which the Company reasonably requests that Optionee complete in order to comply
with applicable federal, state and local securities laws, rules and regulations.
(E) Subject to the Company's compliance with all applicable laws,
rules and regulations relating to the issuance of such Option Shares and
Optionee's compliance with all the terms and conditions of the Option Agreement,
these Terms and Conditions and the Plan, the Company shall promptly deliver the
Option Shares to the Optionee.
(F) Except as otherwise provided herein or in the Plan, the Option may
be exercised during the lifetime of the Optionee only by the Optionee.
4. OPTION NOT TRANSFERABLE. The Option granted hereunder shall not be
transferable in any manner other than upon the death of Optionee as provided in
the Plan. More particularly (but without limiting the foregoing), the Option may
not be assigned, transferred (except as expressly provided herein), pledged or
hypothecated in any way, shall not be assignable by operation of law and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
5. TERMINATION OF OPTION.
(A) To the extent not previously exercised, the Option shall terminate
on the Expiration Date; provided, however, that except as otherwise provided in
this Section 5 the Option may not be exercised more than three (3) months after
the termination of Optionee's Continuous Status as an Employee, Director or
Consultant for any reason (other than upon Optionee's death or disability).
Within such three (3) month period, Optionee may exercise the Option only to the
extent the same was exercisable on the date of such termination of Optionee's
Continuous Status as an Employee, Director or Consultant, and said right to
exercise shall terminate at the end of such period.
(B) In the event of a termination of Optionee's Continuous Status as
an Employee, Director or Consultant as a result of Optionee's disability, the
Option shall be exercisable for a period of one (1) year from the date of such
termination of Optionee's Continuous Status as an Employee, Director or
Consultant, but in no event later than the Expiration Date and only to the
extent that the Option was exercisable on the date of such termination.
(C) In the event of a termination of Optionee's Continuous Status as
an Employee, Director or Consultant as a result of Optionee's death, the Option
shall be exercisable
2.
<PAGE> 4
by the Optionee's estate (or by the person who acquires the right to exercise
the Option by will or by the laws descent and distribution or by designation
pursuant to Section 6(d) of the Plan) for a period of one (1) year from the date
of such termination, but in no event later than the Expiration Date and only to
the extent that the Optionee was entitled to exercise the Option on the date of
death.
(D) Notwithstanding anything herein to the contrary, no portion of any
Option which is not exercisable by the Optionee upon a termination of Optionee's
continuous status as an Employee, Director or Consultant shall thereafter become
exercisable, regardless of the reason for such termination.
6. NO RIGHT TO CONTINUED SERVICE. The Option does not confer upon Optionee
any right to continue in his or her capacity as an Employee, Consultant or
Director of the Company, nor does it limit in any way the right of the Company
to terminate Optionee's service relationship with the Company at any time, with
or without cause.
7. NOTICE OF TAX ELECTION. If Optionee makes any tax election relating to
the treatment of the Option Shares under the Internal Revenue Code of 1986, as
amended, Optionee shall promptly notify the Company of such election.
8. ACKNOWLEDGMENTS OF OPTIONEE. Optionee acknowledges and agrees that
Optionee and his or her transferees shall have no rights as a shareholder with
respect to any Option Shares until the date of the issuance of a stock
certificate (or such other means of issuance of the Option Shares as provided by
the Company in accordance with the terms of the Plan) evidencing such Option
Shares. No adjustment shall be made for dividends (ordinary or extraordinary,
whether in cash, securities or other property) or distributions or other rights
for which the record date is prior to the date such stock certificate is issued,
except as provided in Section 13 of the Plan.
9. WITHHOLDING TAXES. Whenever Option Shares are to be issued under the
Option Agreement, the Company shall have the right to require Optionee to remit
to the Company an amount sufficient to satisfy federal, state and local
withholding tax requirements prior to issuance and/or delivery of any
certificate or certificates for such Option Shares.
10. MISCELLANEOUS.
(A) The Option Agreement shall bind and inure to the benefit of the
parties' heirs, legal representatives, successors and permitted assigns.
(B) The Option Agreement, the Plan, and these Terms and Conditions
constitute the entire agreement between the parties pertaining to the subject
matter contained herein and they supersede all prior and contemporaneous
agreements, representations and understandings of the parties. No supplement,
modification or amendment of the Option Agreement shall be binding unless
executed in writing by all of the parties. No waiver of any of the provisions of
the Option Agreement shall be deemed or shall constitute a waiver of any other
provisions, whether or not similar, nor shall any waiver constitute a continuing
waiver. No waiver shall be binding unless executed in writing by the party
making the waiver. In the event there exists any conflict or discrepancy between
any of the terms in the Plan and the Option Agreement, the terms of the Plan
shall be controlling. A copy of the Plan has been delivered to the Optionee and
also may be inspected by Optionee at the principal office of the Company.
3.
<PAGE> 5
(C) Should any portion of the Plan, the Option Agreement or these
Terms and Conditions be declared invalid and unenforceable, then such portion
shall be deemed to be severable from the Option Agreement and shall not affect
the remainder hereof.
(D) All notices to be sent hereunder shall be delivered in person or
sent by United States Mail, certified and postage prepaid, to Optionee at the
address set forth on the Facing Page of the Option Agreement or to the Company
at its principal place of business, Attention: President. Any change in the
address to which notices shall be sent under the Option Agreement to the
Optionee shall be made by the Optionee upon ten (10) days' written notice to the
Company.
(E) The prevailing party in any court action brought to interpret or
enforce any provision of the Plan or the Option Agreement shall be entitled to
recover, as an element of the costs of suit, and not as damages, an award of
reasonable attorneys' fees, to be fixed by the court. Such award may be made as
part of a judgment by default or as part of a judgment after trial or after
appeal.
4.
<PAGE> 6
EXHIBIT A
NOTICE OF EXERCISE OF NONSTATUTORY STOCK OPTION
To: TriTeal Corporation
2011 Palomar Airport Road
Carlsbad, CA 92009-1432
I, a resident of the State of _____________________, hereby exercise
my nonstatutory stock option granted by TRITEAL CORPORATION, a Delaware
corporation (the "Company"), pursuant to a Nonstatutory Stock Option Agreement
dated __________, 199__, subject to all the terms and provisions thereof and
notify the Company of my desire to purchase _____ shares of Common Stock of the
Company at the exercise price of _______________ Dollars ($_______) per share
pursuant to said option.
I agree to complete and execute any additional documents which the
Company may request that I complete in order to comply with applicable federal,
state and local securities laws, rules and regulations.
Dated:
----------------------------
- ---------------------------------- -----------------------------------------
Social Security or [Name]
Taxpayer I.D. Number
Address:
-----------------------------------------
-----------------------------------------
-----------------------------------------
<PAGE> 1
EXHIBIT 10.36
TRITEAL CORPORATION
EMPLOYEE STOCK PURCHASE PLAN
AMENDED AND RESTATED JULY 15, 1997
APPROVED BY STOCKHOLDERS AUGUST 27, 1997
1. PURPOSE.
(A) The purpose of this Employee Stock Purchase Plan (the "Plan") is to
provide a means by which employees of TriTeal Corporation (the "Company"), and
its Affiliates, as defined in subparagraph 1(b), which are designated as
provided in subparagraph 2(b), may be given an opportunity to purchase stock of
the Company.
(B) The word "Affiliate" as used in the Plan means any parent corporation
or subsidiary corporation of the Company, as those terms are defined in Sections
424(e) and (f), respectively, of the Internal Revenue Code of 1986, as amended
(the "Code").
(C) The Company, by means of the Plan, seeks to retain the services of its
employees, to secure and retain the services of new employees, and to provide
incentives for such persons to exert maximum efforts for the success of the
Company.
(D) The Company intends that the rights to purchase stock of the Company
granted under the Plan be considered options issued under an "employee stock
purchase plan" as that term is defined in Section 423(b) of the Code.
2. ADMINISTRATION.
(A) The Plan shall be administered by the Board of Directors (the "Board")
of the Company unless and until the Board delegates administration to a
Committee, as provided in subparagraph 2(c). Whether or not the Board has
delegated administration, the Board shall have the final power to determine all
questions of policy and expediency that may arise in the administration of the
Plan.
(B) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(I) To determine when and how rights to purchase stock of the Company
shall be granted and the provisions of each offering of such rights (which need
not be identical).
(II) To designate from time to time which Affiliates of the Company
shall be eligible to participate in the Plan.
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<PAGE> 2
(III) To construe and interpret the Plan and rights granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan, in a manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective.
(IV) To amend the Plan as provided in paragraph 13.
(V) Generally, to exercise such powers and to perform such acts as the
Board deems necessary or expedient to promote the best interests of the Company
and its Affiliates and to carry out the intent that the Plan be treated as an
"employee stock purchase plan" within the meaning of Section 423 of the Code.
(C) The Board may delegate administration of the Plan to a Committee
composed of not fewer than two (2) members of the Board (the "Committee"). If
administration is delegated to a Committee, the Committee shall have, in
connection with the administration of the Plan, the powers theretofore possessed
by the Board, subject, however, to such resolutions, not inconsistent with the
provisions of the Plan, as may be adopted from time to time by the Board. The
Board may abolish the Committee at any time and revest in the Board the
administration of the Plan.
3. SHARES SUBJECT TO THE PLAN.
(A) Subject to the provisions of paragraph 12 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to rights granted under
the Plan shall not exceed in the aggregate Three Hundred Thousand (300,000)
shares of the Company's common stock (the "Common Stock"). If any right granted
under the Plan shall for any reason terminate without having been exercised, the
Common Stock not purchased under such right shall again become available for the
Plan.
(B) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
4. GRANT OF RIGHTS; OFFERING.
The Board or the Committee may from time to time grant or provide for the
grant of rights to purchase Common Stock of the Company under the Plan to
eligible employees (an "Offering") on a date or dates (the "Offering Date(s)")
selected by the Board or the Committee. Each Offering shall be in such form and
shall contain such terms and conditions as the Board or the Committee shall deem
appropriate, which shall comply with the requirements of Section 423(b)(5) of
the Code that all employees granted rights to purchase stock under the Plan
shall have the same rights and privileges. The terms and conditions of an
Offering shall be incorporated by reference into the Plan and treated as part of
the Plan. The provisions of separate Offerings need not be identical, but each
Offering shall include (through incorporation of the provisions of this Plan by
reference in the document comprising the Offering or
2
<PAGE> 3
otherwise) the period during which the Offering shall be effective, which period
shall not exceed twenty-seven (27) months beginning with the Offering Date, and
the substance of the provisions contained in paragraphs 5 through 8, inclusive.
5. ELIGIBILITY.
(A) Rights may be granted only to employees of the Company or, as the Board
or the Committee may designate as provided in subparagraph 2(b), to employees of
any Affiliate of the Company. Except as provided in subparagraph 5(b), an
employee of the Company or any Affiliate shall not be eligible to be granted
rights under the Plan, unless, on the Offering Date, such employee has been in
the employ of the Company or any Affiliate for such continuous period preceding
such grant as the Board or the Committee may require, but in no event shall the
required period of continuous employment be greater than two (2) years. In
addition, unless otherwise determined by the Board or the Committee and set
forth in the terms of the applicable Offering, no employee of the Company or any
Affiliate shall be eligible to be granted rights under the Plan, unless, on the
Offering Date, such employee's customary employment with the Company or such
Affiliate is for at least twenty (20) hours per week and at least five (5)
months per calendar year.
(B) The Board or the Committee may provide that, each person who, during
the course of an Offering, first becomes an eligible employee of the Company or
designated Affiliate will, on a date or dates specified in the Offering which
coincides with the day on which such person becomes an eligible employee or
occurs thereafter, receive a right under that Offering, which right shall
thereafter be deemed to be a part of that Offering. Such right shall have the
same characteristics as any rights originally granted under that Offering, as
described herein, except that:
(I) the date on which such right is granted shall be the "Offering
Date" of such right for all purposes, including determination of the exercise
price of such right;
(II) the period of the Offering with respect to such right shall begin
on its Offering Date and end coincident with the end of such Offering; and
(III) the Board or the Committee may provide that if such person first
becomes an eligible employee within a specified period of time before the end of
the Offering, he or she will not receive any right under that Offering.
(C) No employee shall be eligible for the grant of any rights under the
Plan if, immediately after any such rights are granted, such employee owns stock
possessing five percent (5%) or more of the total combined voting power or value
of all classes of stock of the Company or of any Affiliate. For purposes of this
subparagraph 5(c), the rules of Section 424(d) of the Code shall apply in
determining the stock ownership of any employee, and stock which such employee
may purchase under all outstanding rights and options shall be treated as stock
owned by such employee.
3
<PAGE> 4
(D) An eligible employee may be granted rights under the Plan only if such
rights, together with any other rights granted under "employee stock purchase
plans" of the Company and any Affiliates, as specified by Section 423(b)(8) of
the Code, do not permit such employee's rights to purchase stock of the Company
or any Affiliate to accrue at a rate which exceeds twenty-five thousand dollars
($25,000) of fair market value of such stock (determined at the time such rights
are granted) for each calendar year in which such rights are outstanding at any
time.
(E) Officers of the Company and any designated Affiliate shall be eligible
to participate in Offerings under the Plan, provided, however, that the Board
may provide in an Offering that certain employees who are highly compensated
employees within the meaning of Section 423(b)(4)(D) of the Code shall not be
eligible to participate.
6. RIGHTS; PURCHASE PRICE.
(A) On each Offering Date, each eligible employee, pursuant to an Offering
made under the Plan, shall be granted the right to purchase up to the number of
shares of Common Stock of the Company purchasable with a percentage designated
by the Board or the Committee not exceeding fifteen percent (15%) of such
employee's Earnings (as defined in subparagraph 7(a)) during the period which
begins on the Offering Date (or such later date as the Board or the Committee
determines for a particular Offering) and ends on the date stated in the
Offering, which date shall be no later than the end of the Offering. The Board
or the Committee shall establish one or more dates during an Offering (the
"Purchase Date(s)") on which rights granted under the Plan shall be exercised
and purchases of Common Stock carried out in accordance with such Offering.
(B) In connection with each Offering made under the Plan, the Board or the
Committee may specify a maximum number of shares that may be purchased by any
employee as well as a maximum aggregate number of shares that may be purchased
by all eligible employees pursuant to such Offering. In addition, in connection
with each Offering that contains more than one Purchase Date, the Board or the
Committee may specify a maximum aggregate number of shares which may be
purchased by all eligible employees on any given Purchase Date under the
Offering. If the aggregate purchase of shares upon exercise of rights granted
under the Offering would exceed any such maximum aggregate number, the Board or
the Committee shall make a pro rata allocation of the shares available in as
nearly a uniform manner as shall be practicable and as it shall deem to be
equitable.
(C) The purchase price of stock acquired pursuant to rights granted under
the Plan shall be not less than the lesser of:
(I) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Offering Date; or
(II) an amount equal to eighty-five percent (85%) of the fair market
value of the stock on the Purchase Date.
4
<PAGE> 5
7. PARTICIPATION; WITHDRAWAL; TERMINATION.
(A) An eligible employee may become a participant in the Plan pursuant to
an Offering by delivering a participation agreement to the Company within the
time specified in the Offering, in such form as the Company provides. Each such
agreement shall authorize payroll deductions of up to the maximum percentage
specified by the Board or the Committee of such employee's Earnings during the
Offering. "Earnings" is defined as an employee's wages (including amounts
thereof elected to be deferred by the employee, that would otherwise have been
paid, under any arrangement established by the Company that is intended to
comply with Section 125, Section 401(k), Section 402(h) or Section 403(b) of the
Code or that provides non-qualified deferred compensation), which shall include
overtime pay, bonuses and commissions, but shall exclude incentive pay, profit
sharing, other remuneration paid directly to the employee, the cost of employee
benefits paid for by the Company or an Affiliate, education or tuition
reimbursements, imputed income arising under any group insurance or benefit
program, traveling expenses, business and moving expense reimbursements, income
received in connection with stock options, contributions made by the Company or
an Affiliate under any employee benefit plan, and similar items of compensation,
as determined by the Board or the Committee. The payroll deductions made for
each participant shall be credited to an account for such participant under the
Plan and shall be deposited with the general funds of the Company. A participant
may reduce (including to zero) or increase such payroll deductions, and an
eligible employee may begin such payroll deductions, after the beginning of any
Offering only as provided for in the Offering. A participant may make additional
payments into his or her account only if specifically provided for in the
Offering and only if the participant has not had the maximum amount withheld
during the Offering.
(B) At any time during an Offering, a participant may terminate his or her
payroll deductions under the Plan and withdraw from the Offering by delivering
to the Company a notice of withdrawal in such form as the Company provides. Such
withdrawal may be elected at any time prior to the end of the Offering except as
provided by the Board or the Committee in the Offering. Upon such withdrawal
from the Offering by a participant, the Company shall distribute to such
participant all of his or her accumulated payroll deductions (reduced to the
extent, if any, such deductions have been used to acquire stock for the
participant) under the Offering, without interest, and such participant's
interest in that Offering shall be automatically terminated. A participant's
withdrawal from an Offering will have no effect upon such participant's
eligibility to participate in any other Offerings under the Plan but such
participant will be required to deliver a new participation agreement in order
to participate in subsequent Offerings under the Plan.
(C) Rights granted pursuant to any Offering under the Plan shall terminate
immediately upon cessation of any participating employee's employment with the
Company and any designated Affiliate, for any reason, and the Company shall
distribute to such terminated employee all of his or her accumulated payroll
deductions (reduced to the extent, if any, such deductions have been used to
acquire stock for the terminated employee), under the Offering, without
interest.
5
<PAGE> 6
(D) Rights granted under the Plan shall not be transferable by a
participant otherwise than by will or the laws of descent and distribution, or
by a beneficiary designation as provided in paragraph 14 and, otherwise during
his or her lifetime, shall be exercisable only by the person to whom such rights
are granted.
8. EXERCISE.
(A) On each Purchase Date specified therefor in the relevant Offering, each
participant's accumulated payroll deductions and other additional payments
specifically provided for in the Offering (without any increase for interest)
will be applied to the purchase of whole shares of stock of the Company, up to
the maximum number of shares permitted pursuant to the terms of the Plan and the
applicable Offering, at the purchase price specified in the Offering. No
fractional shares shall be issued upon the exercise of rights granted under the
Plan. The amount, if any, of accumulated payroll deductions remaining in each
participant's account after the purchase of shares which is less than the amount
required to purchase one share of stock on the final Purchase Date of an
Offering shall be held in each such participant's account for the purchase of
shares under the next Offering under the Plan, unless such participant withdraws
from such next Offering, as provided in subparagraph 7(b), or is no longer
eligible to be granted rights under the Plan, as provided in paragraph 5, in
which case such amount shall be distributed to the participant after such final
Purchase Date, without interest. The amount, if any, of accumulated payroll
deductions remaining in any participant's account after the purchase of shares
which is equal to the amount required to purchase whole shares of stock on the
final Purchase Date of an Offering shall be distributed in full to the
participant after such Purchase Date, without interest.
(B) No rights granted under the Plan may be exercised to any extent unless
the shares to be issued upon such exercise under the Plan (including rights
granted thereunder) are covered by an effective registration statement pursuant
to the Securities Act of 1933, as amended (the "Securities Act") and the Plan is
in material compliance with all applicable state, foreign and other securities
and other laws applicable to the Plan. If on a Purchase Date in any Offering
hereunder the Plan is not so registered or in such compliance, no rights granted
under the Plan or any Offering shall be exercised on such Purchase Date, and the
Purchase Date shall be delayed until the Plan is subject to such an effective
registration statement and such compliance, except that the Purchase Date shall
not be delayed more than twelve (12) months and the Purchase Date shall in no
event be more than twenty-seven (27) months from the Offering Date. If on the
Purchase Date of any Offering hereunder, as delayed to the maximum extent
permissible, the Plan is not registered and in such compliance, no rights
granted under the Plan or any Offering shall be exercised and all payroll
deductions accumulated during the Offering (reduced to the extent, if any, such
deductions have been used to acquire stock) shall be distributed to the
participants, without interest.
9. COVENANTS OF THE COMPANY.
(A) During the terms of the rights granted under the Plan, the Company
shall keep
6
<PAGE> 7
available at all times the number of shares of stock required to satisfy such
rights.
(B) The Company shall seek to obtain from each federal, state, foreign or
other regulatory commission or agency having jurisdiction over the Plan such
authority as may be required to issue and sell shares of stock upon exercise of
the rights granted under the Plan. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such rights unless and until
such authority is obtained.
10. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to rights granted under the Plan
shall constitute general funds of the Company.
11. RIGHTS AS A STOCKHOLDER.
A participant shall not be deemed to be the holder of, or to have any of
the rights of a holder with respect to, any shares subject to rights granted
under the Plan unless and until the participant's shareholdings acquired upon
exercise of rights under the Plan are recorded in the books of the Company.
12. ADJUSTMENTS UPON CHANGES IN STOCK.
(A) If any change is made in the stock subject to the Plan, or subject to
any rights granted under the Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange of
shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan and outstanding rights will
be appropriately adjusted in the class(es) and maximum number of shares subject
to the Plan and the class(es) and number of shares and price per share of stock
subject to outstanding rights. Such adjustments shall be made by the Board or
the Committee, the determination of which shall be final, binding and
conclusive. (The conversion of any convertible securities of the Company shall
not be treated as a "transaction not involving the receipt of consideration by
the Company.")
(B) In the event of: (1) a dissolution or liquidation of the Company; (2) a
merger or consolidation in which the Company is not the surviving corporation;
(3) a reverse merger in which the Company is the surviving corporation but the
shares of the Company's Common Stock outstanding immediately preceding the
merger are converted by virtue of the merger into other property, whether in the
form of securities, cash or otherwise; or (4) any other capital reorganization
in which more than fifty percent (50%) of the shares of the Company entitled to
vote are exchanged, then, as determined by the Board in its sole discretion (i)
any surviving corporation may assume outstanding rights or substitute similar
rights for those under the Plan, (ii) such rights may continue in full force and
effect, or (iii) participants' accumulated payroll
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<PAGE> 8
deductions may be used to purchase Common Stock immediately prior to the
transaction described above and the participants' rights under the ongoing
Offering terminated.
13. AMENDMENT OF THE PLAN.
(A) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in paragraph 12 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where the amendment will:
(I) Increase the number of shares reserved for rights under the Plan;
(II) Modify the provisions as to eligibility for participation in the
Plan (to the extent such modification requires stockholder approval in order for
the Plan to obtain employee stock purchase plan treatment under Section 423 of
the Code or to comply with the requirements of Rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended ("Rule 16b-3")); or
(III) Modify the Plan in any other way if such modification requires
stockholder approval in order for the Plan to obtain employee stock purchase
plan treatment under Section 423 of the Code or to comply with the requirements
of Rule 16b-3.
It is expressly contemplated that the Board may amend the Plan in any respect
the Board deems necessary or advisable to provide eligible employees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to employee stock purchase plans
and/or to bring the Plan and/or rights granted under it into compliance
therewith.
(B) Rights and obligations under any rights granted before amendment of the
Plan shall not be impaired by any amendment of the Plan, except with the consent
of the person to whom such rights were granted, or except as necessary to comply
with any laws or governmental regulations, or except as necessary to ensure that
the Plan and/or rights granted under the Plan comply with the requirements of
Section 423 of the Code.
14. DESIGNATION OF BENEFICIARY.
(A) A participant may file a written designation of a beneficiary who is to
receive any shares and cash, if any, from the participant's account under the
Plan in the event of such participant's death subsequent to the end of an
Offering but prior to delivery to the participant of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death during an Offering.
8
<PAGE> 9
(B) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such participant's death, the Company shall deliver such shares
and/or cash to the executor or administrator of the estate of the participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Company), the Company, in its sole discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
participant, or if no spouse, dependent or relative is known to the Company,
then to such other person as the Company may designate.
15. TERMINATION OR SUSPENSION OF THE PLAN.
(A) The Board in its discretion, may suspend or terminate the Plan at any
time. No rights may be granted under the Plan while the Plan is suspended or
after it is terminated.
(B) Rights and obligations under any rights granted while the Plan is in
effect shall not be altered or impaired by suspension or termination of the
Plan, except as expressly provided in the Plan or with the consent of the person
to whom such rights were granted, or except as necessary to comply with any laws
or governmental regulation, or except as necessary to ensure that the Plan
and/or rights granted under the Plan comply with the requirements of Section 423
of the Code.
16. EFFECTIVE DATE OF PLAN.
The Plan shall become effective on the day immediately prior to the
effectiveness of the Company's registration statement under the Securities Act
with respect to the initial public offering of shares of the Company's common
stock (the "Effective Date"), but no rights granted under the Plan shall be
exercised unless and until the Plan has been approved by the stockholders of the
Company within twelve (12) months before or after the date the Plan is adopted
by the Board or the Committee, which date may be prior to the Effective Date.
9
<PAGE> 1
EXHIBIT 10.37
TRITEAL CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
(FACING PAGE)
FOR GOOD AND VALUABLE CONSIDERATION, TriTeal Corporation, a Delaware
corporation (the "Company"), hereby irrevocably grants to the Employee named
below an incentive stock option (the "Option") to purchase any part or all of
the specified number of shares of its Common Stock upon the terms and subject
to the conditions set forth in this Agreement, at the specified purchase price
per share without commission or other charge. The Option is granted pursuant
to the TriTeal Corporation 1995 Stock Option Plan (the "Plan") and the Terms
and Conditions Relating to Incentive Stock Option (the "Terms and Conditions")
attached hereto. The terms of the Plan and the Terms and Conditions are hereby
incorporated herein by reference and made a part of this Option Agreement.
<TABLE>
<CAPTION>
Name of Employee: David Y. Chen
<S> <C>
Social Security Number:
--------------
Number of Shares covered by
Option (the "Option Shares"): 29,263
Purchase Price Per Option Share: $10.25
Minimum Number of Option Shares Per
Partial Exercise (unless Optionee exercises
all of the Option then exercisable):
--------------
</TABLE>
The Option shall become exercisable as follows:
8,071 of the total number of shares granted hereunder shall vest on July
22, 1998, and thereafter 337 of the remaining number of shares shall vest
on the 22nd of each month for the remainder of calendar year 1998; 813 of
the remaining shares shall vest on the 22nd of each month during calendar
year 1999; and 1,393 of the remaining shares shall vest on the 22nd of
each month during calendar year 2,000, such that the Option shall be 100%
vested on July 22, 2000. Notwithstanding the foregoing, in the event that
(1) the employment of the Optionee is, prior to July 22, 1998, terminated
by the Company other than for Cause (as that term is defined in the Terms
and Conditions), or (2) the Optionee terminates his employment with the
Company prior to July 22, 1998 for Good Reason (as that term is defined in
the Terms and Conditions), then 8,071 of the total number of shares
granted hereunder shall be 100% vested immediately following such event.
Once subject to purchase, the Option Shares shall remain subject to
purchase until July 21, 2007 (the "Expiration Date") unless the Option is
earlier terminated in accordance with the Plan and the Terms and
Conditions.
Date of this Option Agreement: July 22, 1997
TRITEAL CORPORATION ______________________________
Optionee's Signature
By:____________________________ Residence Address:
Name:_______________________ ______________________________
Title:______________________ ______________________________
<PAGE> 2
TERMS AND CONDITIONS RELATING TO
INCENTIVE STOCK OPTION
GRANTED TO DAVID Y. CHEN
UNDER THE TRITEAL CORPORATION 1995 STOCK OPTION PLAN
July 22, 1997
The following Terms and Conditions Relating to Incentive Stock Option
(the "Terms and Conditions") apply to the Incentive Stock Option granted as of
the date hereof to David Y. Chen under the TriTeal Corporation 1995 Stock
Option Plan (the "Plan"), the applicable terms of which are hereby incorporated
by reference and made a part of these Terms and Conditions. In turn, these
Terms and Conditions are incorporated by reference into the Option. Whenever
capitalized terms are used in these Terms and Conditions, they shall have the
meaning specified (i) in the Plan, (ii) in the TriTeal Corporation Incentive
Stock Option Agreement Facing Page (the "Facing Page") into which these Terms
and Conditions are incorporated by reference, or (iii) below, unless the
context clearly indicates to the contrary. As used herein and in the Plan, the
"Option Agreement" shall mean the Incentive Stock Option Agreement Facing Page
and these Terms and Conditions as incorporated therein. The masculine pronoun
shall include the feminine and neuter, and the singular and plural, where the
context so indicates.
1. TERM OF OPTION. Subject to the maximum time limitations in
Section 6(a) of the Plan, the term of the Option shall be the period commencing
on the date of the Option Agreement and ending on the Expiration Date (as
defined in the Facing Page), unless terminated earlier as provided herein or in
the Plan; provided, however, if the Optionee owns (or is deemed to own pursuant
to Section 424(d) of the Code) stock possessing more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company (or any
of its Affiliates), the Option shall expire not later than five (5) years after
the date of the Option Agreement.
2. EXERCISE PRICE. The exercise price of the Option granted
hereby shall not be less than one hundred percent (100%) of the Fair Market
Value of the Option Shares subject to the Option on the date the Option is
granted.
3. EXERCISE OF OPTION.
(a) The Facing Page shall set forth the rate at which the
Option Shares shall become subject to purchase by Optionee.
(b) "Cause," as that term is used in the Facing Page,
shall mean misconduct, including: (i) conviction of any felony or any crime
involving moral turpitude or dishonesty; (ii) participation in a fraud or act
of dishonesty against the Company; (iii) willful breach of the Company's
policies; (iv) intentional damage to the Company's property; (v) material
breach of Optionee's employment agreement or Optionee's Proprietary Information
and Inventions Agreement; or (vi) conduct by Optionee which in the good faith
and reasonable determination of the Board demonstrates unacceptable job
performance or gross unfitness to serve. Physical or mental disability shall
not constitute Cause. "Good Reason," as that term is used in the Facing Page,
shall mean (i) substantial reduction of Optionee's rate of compensation in
effect on the date hereof (except to the extent that substantially all other
officers of the Company are similarly
1.
<PAGE> 3
affected); (ii) failure to provide a package of welfare benefit plans which,
taken as a whole, provide substantially similar benefits to those in which the
Optionee is entitled to participate as of the date hereof (except that employee
contributions may be raised to the extent of any cost increases imposed by
third parties) or any action by the Company which would adversely affect
Optionee's participation or substantially reduce Optionee's benefits under any
of such plans (except to the extent that substantially all other officers of
the Company are similarly affected); (iii) change in Optionee's employment
responsibilities, authority, title or office resulting in diminution of
position, excluding for this purpose an isolated, insubstantial and inadvertent
action not taken in bad faith which is remedied by the Company promptly after
notice thereof is given by Optionee; or (iv) requirement that Optionee relocate
his current residence, unless Optionee accepts the request of the Company to
make such relocation.
(c) Optionee shall exercise the Option to the extent
exercisable, in whole or in part, by sending written notice to the Company in
the form attached hereto as Exhibit A of his intention to purchase Option
Shares hereunder. Except as otherwise provided in the Plan, Optionee shall not
exercise the Option at any one time with respect to less than the minimum
number of Option Shares as is set forth on the Facing Page.
(d) Payment of the exercise price per share is due in
full upon exercise of all or any part of each installment which has accrued to
the Optionee. The Optionee may elect, to the extent permitted by applicable
statutes and regulations, to make payment of the exercise price under one of
the following alternatives:
(i) Payment of the exercise price per Option
Share in cash (including check) at the time of exercise;
(ii) Payment pursuant to a program developed in
compliance with regulations promulgated by the Federal Reserve Board which,
prior to the issuance of the Option Shares, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to a
qualified broker that sufficient Option Shares to pay the aggregate exercise
price be sold immediately and that the exercise price be delivered to the
Company from the sales proceeds; or
(iii) Payment by a combination of the above methods
of payment.
(e) Optionee agrees to complete and execute any
additional documents which the Company reasonably requests that Optionee
complete in order to comply with applicable federal, state and local securities
laws, rules and regulations.
(f) Subject to the Company's compliance with all
applicable laws, rules and regulations relating to the issuance of such Option
Shares and Optionee's compliance with all the terms and conditions of the
Option Agreement, these Terms and Conditions and the Plan, the Company shall
promptly deliver the Option Shares to the Optionee.
(g) Except as otherwise provided herein or in the Plan,
the Option may be exercised during the lifetime of the Optionee only by the
Optionee.
4. OPTION NOT TRANSFERABLE. The Option granted hereunder shall
not be transferable in any manner other than upon the death of Optionee as
provided in the Plan. More
2.
<PAGE> 4
particularly (but without limiting the foregoing), the Option may not be
assigned, transferred (except as expressly provided herein), pledged or
hypothecated in any way, shall not be assignable by operation of law and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
5. TERMINATION OF OPTION.
(a) To the extent not previously exercised, the Option
shall terminate on the Expiration Date; provided, however, that except as
otherwise provided in this Section 5 the Option may not be exercised more than
thirty (30) days after the termination of Optionee's Continuous Status as an
Employee, Director or Consultant for any reason (other than upon Optionee's
death or disability). Within such thirty (30) day period, Optionee may
exercise the Option only to the extent the same was exercisable on the date of
such termination of Optionee's Continuous Status as an Employee, Director or
Consultant, and said right to exercise shall terminate at the end of such
period.
(b) In the event of a termination of Optionee's
Continuous Status as an Employee, Director or Consultant as a result of
Optionee's disability, the Option shall be exercisable for a period of twelve
(12) months from the date of such termination of Optionee's Continuous Status
as an Employee, Director or Consultant, but in no event later than the
Expiration Date and only to the extent that the Option was exercisable on the
date of such termination.
(c) In the event of a termination of Optionee's
Continuous Status as an Employee, Director or Consultant as a result of
Optionee's death, the Option shall be exercisable by the Optionee's estate (or
by the person who acquires the right to exercise the Option by will or by the
laws descent and distribution or by designation pursuant to Section 6(d) of the
Plan) for a period of twelve (12) months from the date of such termination, but
in no event later than the Expiration Date and only to the extent that the
Optionee was entitled to exercise the Option on the date of death.
(d) Notwithstanding anything herein to the contrary, no
portion of any Option which is not exercisable by the Optionee upon a
termination of Optionee's continuous status as an Employee, Director or
Consultant shall thereafter become exercisable, regardless of the reason for
such termination.
6. NO RIGHT TO CONTINUED EMPLOYMENT. The Option does not confer
upon Optionee any right to continue in his or her capacity as an Employee,
Consultant or Director of the Company, nor does it limit in any way the right
of the Company to terminate Optionee's service relationship at any time, with
or without cause.
7. NOTICE OF TAX ELECTION. If Optionee makes any tax election
relating to the treatment of the Option Shares under the Internal Revenue Code
of 1986, as amended, Optionee shall promptly notify the Company of such
election.
3.
<PAGE> 5
8. ACKNOWLEDGMENTS OF OPTIONEE. Optionee acknowledges and
agrees that:
(a) Although the Company has made a good faith attempt to
qualify the Option as an incentive stock option within the meaning of Sections
421, 422 and 424 of the Code, the Company does not warrant that the Option
granted herein constitutes an "incentive stock option" within the meaning of
such sections, or that the transfer of Option Shares will be treated for
federal income tax purposes as specified in Section 421 of the Code.
(b) Optionee shall notify the Company in writing within
fifteen (15) days of each disposition (including a sale, exchange, gift or a
transfer of legal title) of the Option Shares made within three years after the
issuance of such Option Shares.
(c) Optionee understands that if, among other things, he
or she disposes of any Option Shares granted within two years of the granting
of the Option to him or within one year of the issuance of such shares to him,
then such Option Shares will not qualify for the beneficial treatment which
Optionee might otherwise receive under Sections 421 and 422 of the Code.
(d) Optionee and his transferees shall have no rights as
a shareholder with respect to any Option Shares until the date of the issuance
of a stock certificate (or such other means of issuance of the Option Shares as
provided by the Company in accordance with the terms of the Plan) evidencing
such Option Shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 13 of the Plan.
9. WITHHOLDING TAXES. Whenever Option Shares are to be issued
under the Option Agreement, the Company shall have the right to require
Optionee to remit to the Company an amount sufficient to satisfy federal, state
and local withholding tax requirements prior to issuance and/or delivery of any
certificate or certificates for such Option Shares.
10. MISCELLANEOUS.
(a) The Option Agreement shall bind and inure to the
benefit of the parties' heirs, legal representatives, successors and permitted
assigns.
(b) The Option Agreement, the Plan, and these Terms and
Conditions constitute the entire agreement between the parties pertaining to
the subject matter contained herein and they supersede all prior and
contemporaneous agreements, representations and understandings of the parties.
No supplement, modification or amendment of the Option Agreement shall be
binding unless executed in writing by all of the parties. No waiver of any of
the provisions of the Option Agreement shall be deemed or shall constitute a
waiver of any other provisions, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless executed in
writing by the party making the waiver. In the event there exists any conflict
or discrepancy between any of the terms in the Plan and the Option Agreement,
the terms of the Plan shall be controlling. A copy of the Plan has been
delivered to the Optionee and also may be inspected by Optionee at the
principal office of the Company.
4.
<PAGE> 6
(c) Should any portion of the Plan, the Option Agreement
of these Terms and Conditions be declared invalid and unenforceable, then such
portion shall be deemed to be severable from the Option Agreement and shall not
affect the remainder hereof.
(d) All notices to be sent hereunder shall be delivered
in person or sent by United States Mail, certified and postage prepaid, to
Optionee at the address set forth on the Facing Page of the Option Agreement or
to the Company at its principal place of business, Attention: Chief Financial
Officer. Any change in the address to which notices shall be sent under the
Option Agreement to the Optionee shall be made by the Optionee upon ten (10)
days' written notice to the Company.
(e) The prevailing party in any court action brought to
interpret or enforce any provision of the Plan or the Option Agreement shall be
entitled to recover, as an element of the costs of suit, and not as damages, an
award of reasonable attorneys' fees, to be fixed by the court. Such award may
be made as part of a judgment by default or as part of a judgment after trial
or after appeal.
5.
<PAGE> 7
EXHIBIT A
NOTICE OF EXERCISE OF INCENTIVE STOCK OPTION
To: TriTeal Corporation
2011 Palomar Airport Road
Carlsbad, CA 92009-1432
I, a resident of the State of _________________________, hereby
exercise my incentive stock option granted by TRITEAL CORPORATION, a Delaware
corporation (the "Company"), pursuant to an Incentive Stock Option Agreement
dated _________, 199__, subject to all the terms and provisions thereof and
notify the Company of my desire to purchase _____ shares of Common Stock of the
Company at the exercise price of ____________________________ Dollars
($________) per share pursuant to said option.
I agree to complete and execute any additional documents which the
Company may request that I complete in order to comply with applicable federal,
state and local securities laws, rules and regulations.
Dated:___________________
_________________________
_________________________ [Name]
Social Security or
Taxpayer I.D. Number
Address:
_________________________
_________________________
_________________________
<PAGE> 1
Exhibit 10.38
TRITEAL CORPORATION
NONSTATUTORY STOCK OPTION AGREEMENT
(FACING PAGE)
FOR GOOD AND VALUABLE CONSIDERATION, TriTeal Corporation, a Delaware
corporation, hereby irrevocably grants to the Optionee named below a
nonstatutory stock option (the "Option") to purchase any part or all of the
specified number of shares of its Common Stock upon the terms and subject to the
conditions set forth in this Option Agreement, at the specified purchase price
per share without commission or other charge. The Option is granted pursuant to
the TriTeal Corporation 1995 Stock Option Plan (the "Plan") and the Terms and
Conditions Relating to Nonstatutory Stock Options (the "Terms and Conditions")
attached hereto. The terms of the Plan and the Terms and Conditions are hereby
incorporated herein by reference and made a part of this Option Agreement.
<TABLE>
<CAPTION>
Name of Optionee: David Y. Chen
<S> <C>
Social Security Number:
--------------
Number of Shares covered by
Option (the "Option Shares"): 210,737
Purchase Price Per Option Share: $10.25
Minimum Number of Option Shares Per
Partial Exercise (unless Optionee exercises
all of the Option then exercisable):
---------------
</TABLE>
The Option shall become exercisable as follows:
111,929 of the total number of shares granted hereunder shall vest on
July 22, 1998, and thereafter 4,663 of the remaining number of shares
shall vest on the 22nd of each month for the remainder of calendar
year 1998; 4,187 of the remaining number of shares shall vest on the
2nd of each month during calendar year 1999; and 3,607 of the
remaining number of shares shall vest on the 22nd of each month during
calendar year 2000, such that the Option shall be 100% vested on July
22, 2000. Notwithstanding the foregoing, in the event that (1) the
employment of the Optionee is, prior to July 22, 1998, terminated by
the Company other than for Cause (as that term is defined in the Term
and Conditions), or (2) the Optionee terminates his employment with
the Company prior to July 22, 1998 for Good Reason (as that term is
defined in the Terms and Conditions), then 111,929 of the total number
of shares granted hereunder shall be 100% vested immediately following
such event. Once subject to purchase, the Option Shares shall remain
subject to purchase until July 21, 2007 (the "Expiration Date") unless
the Option is earlier terminated in accordance with the Plan and the
Terms and Conditions.
Date of this Option Agreement: July 22, 1997
TRITEAL CORPORATION ______________________________
Optionee's Signature
By:____________________________ Residence Address:
Name:_______________________ ______________________________
Title:______________________ ______________________________
<PAGE> 2
TERMS AND CONDITIONS RELATING TO
NONSTATUTORY STOCK OPTION
UNDER THE TRITEAL CORPORATION 1995 STOCK OPTION PLAN
July 22, 1997
The following Terms and Conditions Relating to Nonstatutory Stock
Option (the "Terms and Conditions") apply to the Nonstatutory Stock Option
granted as of the date hereof to David Y. Chen under the TriTeal Corporation
1995 Stock Option Plan (the "Plan"), the applicable terms of which are hereby
incorporated by reference and made a part of these Terms and Conditions. In
turn, these Terms and Conditions are incorporated by reference into the Option.
Whenever capitalized terms are used in these Terms and Conditions, they shall
have the meaning specified (i) in the Plan, (ii) in the TriTeal Corporation
Nonstatutory Stock Option Agreement Facing Page (the "Facing Page") into which
these Terms and Conditions are incorporated by reference, or (iii) below,
unless the context clearly indicates to the contrary. As used herein and in
the Plan, the "Option Agreement" shall mean the Nonstatutory Stock Option
Agreement Facing Page and these Terms and Conditions as incorporated therein.
The masculine pronoun shall include the feminine and neuter, and the singular
the plural, where the context so indicates.
1. TERM OF OPTION. Subject to the maximum time limitations in
Section 6(a) of the Plan, the term of the Option shall be the period commencing
on the date of the Option Agreement and ending on the Expiration Date (as
defined in the Facing Page), unless terminated earlier as provided herein or in
the Plan.
2. EXERCISE PRICE. The exercise price of the Option granted
hereby shall be not less than eighty-five percent (85%) of the Fair Market
Value of the Option Shares subject to the Option on the date the Option is
granted.
3. EXERCISE OF OPTION.
(a) The Facing Page shall set forth the rate at which the
Option Shares shall become subject to purchase by Optionee.
(b) "Cause," as that term is used in the Facing Page,
shall mean misconduct, including: (i) conviction of any felony or any crime
involving moral turpitude or dishonesty; (ii) participation in a fraud or act
of dishonesty against the Company; (iii) willful breach of the Company's
policies; (iv) intentional damage to the Company's property; (v) material
breach of Optionee's employment agreement or Optionee's Proprietary Information
and Inventions Agreement; or (vi) conduct by Optionee which in the good faith
and reasonable determination of the Board demonstrates unacceptable job
performance or gross unfitness to serve. Physical or mental disability shall
not constitute Cause. "Good Reason," as that term is used in the Facing Page,
shall mean (i) substantial reduction of Optionee's rate of compensation in
effect on the date hereof (except to the extent that substantially all other
officers of the Company are similarly affected); (ii) failure to provide a
package of welfare benefit plans which, taken as a whole, provide substantially
similar benefits to those in which the Optionee is entitled to participate as
of the date hereof (except that employee contributions may be raised to the
extent of any cost increases imposed by third parties) or any action by the
Company which would adversely affect Optionee's participation or substantially
reduce Optionee's benefits under any of such plans (except to the extent that
substantially all other officers of the Company are similarly affected); (iii)
change in
1.
<PAGE> 3
Optionee's employment responsibilities, authority, title or office resulting in
diminution of position, excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith which is remedied by the Company
promptly after notice thereof is given by Optionee, or (iv) requirement that
Optionee relocate his current residence, unless Optionee accepts the request of
the Company to make such relocation.
(c) Optionee shall exercise the Option to the extent
exercisable, in whole or in part, by sending written notice to the Company in
the form attached hereto as Exhibit A of his intention to purchase Option
Shares hereunder. Except as otherwise provided in the Plan, Optionee shall not
exercise the Option at any one time with respect to less than the minimum
number of Option Shares as is set forth on the Facing Page.
(d) Payment of the exercise price per share is due in
full upon exercise of all or any part of each installment which has accrued to
the Optionee. The Optionee may elect, to the extent permitted by applicable
statutes and regulations, to make payment of the exercise price under one of
the following alternatives.
(i) Payment of the exercise price per Option
Share in cash (including check) at the time of exercise;
(ii) Payment pursuant to a program developed in
compliance with regulations promulgated by the Federal Reserve Board which,
prior to the issuance of the Option Shares, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to a
qualified broker that sufficient Option Shares to pay the aggregate exercise
price be sold immediately and that the exercise price be delivered to the
Company from the sales proceeds; or
(iii) Payment by a combination of the above methods
of payment.
(e) Optionee agrees to complete and execute any
additional documents which the Company reasonably requests that Optionee
complete in order to comply with applicable federal, state and local securities
laws, rules and regulations.
(f) Subject to the Company's compliance with all
applicable laws, rules and regulations relating to the issuance of such Option
Shares and Optionee's compliance with all the terms and conditions of the
Option Agreement, these Terms and Conditions and the Plan, the Company shall
promptly deliver the Option Shares to the Optionee.
(g) Except as otherwise provided herein or in the Plan,
the Option may be exercised during the lifetime of the Optionee only by the
Optionee.
4. OPTION NOT TRANSFERABLE. The Option granted hereunder shall
not be transferable in any manner other than upon the death of Optionee as
provided in the Plan. More particularly (but without limiting the foregoing),
the Option may not be assigned, transferred (except as expressly provided
herein), pledged or hypothecated in any way, shall not be assignable by
operation of law and shall not be subject to execution, attachment or similar
process. Any attempted assignment, transfer, pledge, hypothecation or other
disposition of the Option contrary to the provisions hereof, or the levy of any
execution, attachment or similar process upon the Option, shall be null and
void and without effect.
2.
<PAGE> 4
5. TERMINATION OF OPTION.
(a) To the extent not previously exercised, the Option
shall terminate on the Expiration Date; provided, however, that except as
otherwise provided in this Section 5 the Option may not be exercised more than
thirty (30) days after the termination of Optionee's Continuous Status as an
Employee, Director or Consultant for any reason (other than upon Optionee's
death or disability). Within such thirty (30) day period, Optionee may exercise
the Option only to the extent the same was exercisable on the date of such
termination of Optionee's Continuous Status as an Employee, Director or
Consultant, and said right to exercise shall terminate at the end of such
period.
(b) In the event of a termination of Optionee's
Continuous Status as an Employee, Director or Consultant as a result of
Optionee's disability, the Option shall be exercisable for a period of twelve
(12) months from the date of such termination of Optionee's Continuous Status
as an Employee, Director or Consultant, but in no event later than the
Expiration Date and only to the extent that the Option was exercisable on the
date of such termination.
(c) In the event of a termination of Optionee's
Continuous Status as an Employee, Director or Consultant as a result of
Optionee's death, the Option shall be exercisable by the Optionee's estate (or
by the person who acquires the right to exercise the Option by will or by the
laws descent and distribution or by designation pursuant to Section 6(d) of the
Plan) for a period of twelve (12) months from the date of such termination, but
in no event later than the Expiration Date and only to the extent that the
Optionee was entitled to exercise the Option on the date of death.
(d) Notwithstanding anything herein to the contrary, no
portion of any Option which is not exercisable by the Optionee upon a
termination of Optionee's continuous status as an Employee, Director or
Consultant shall thereafter become exercisable, regardless of the reason for
such termination.
6. NO RIGHT TO CONTINUED EMPLOYMENT. The Option does not confer
upon Optionee any right to continue in his or her capacity as an Employee,
Consultant or Director of the Company, nor does it limit in any way the right
of the Company to terminate Optionee's service relationship with the Company at
any time, with or without cause.
7. NOTICE OF TAX ELECTION. If Optionee makes any tax election
relating to the treatment of the Option Shares under the Internal Revenue Code
of 1986, as amended, Optionee shall promptly notify the Company of such
election.
8. ACKNOWLEDGMENTS OF OPTIONEE. Optionee acknowledges and
agrees that Optionee and his or her transferees shall have no rights as a
shareholder with respect to any Option Shares until the date of the issuance of
a stock certificate (or such other means of issuance of the Option Shares as
provided by the Company in accordance with the terms of the Plan) evidencing
such Option Shares. No adjustment shall be made for dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section 13 of the Plan.
9. WITHHOLDING TAXES. Whenever Option Shares are to be issued
under the Option Agreement, the Company shall have the right to require
Optionee to remit to the Company an
3.
<PAGE> 5
amount sufficient to satisfy federal, state and local withholding tax
requirements prior to issuance and/or delivery of any certificate or
certificates for such Option Shares.
10. MISCELLANEOUS.
(a) The Option Agreement shall bind and inure to the
benefit of the parties' heirs, legal representatives, successors and permitted
assigns.
(b) The Option Agreement, the Plan, and these Terms and
Conditions constitute the entire agreement between the parties pertaining to
the subject matter contained herein and they supersede all prior and
contemporaneous agreements, representations and understandings of the parties.
No supplement, modification or amendment of the Option Agreement shall be
binding unless executed in writing by all of the parties. No waiver of any of
the provisions of the Option Agreement shall be deemed or shall constitute a
waiver of any other provisions, whether or not similar, nor shall any waiver
constitute a continuing waiver. No waiver shall be binding unless executed in
writing by the party making the waiver. In the event there exists any conflict
or discrepancy between any of the terms in the Plan and the Option Agreement,
the terms of the Plan shall be controlling. A copy of the Plan has been
delivered to the Optionee and also may be inspected by Optionee at the
principal office of the Company.
(c) Should any portion of the Plan, the Option Agreement
or these Terms and Conditions be declared invalid and unenforceable, then such
portion shall be deemed to be severable from the Option Agreement and shall not
affect the remainder hereof.
(d) All notices to be sent hereunder shall be delivered
in person or sent by United States Mail, certified and postage prepaid, to
Optionee at the address set forth on the Facing Page of the Option Agreement or
to the Company at its principal place of business, Attention: Chief Financial
Officer. Any change in the address to which notices shall be sent under the
Option Agreement to the Optionee shall be made by the Optionee upon ten (10)
days' written notice to the Company.
(e) The prevailing party in any court action brought to
interpret or enforce any provision of the Plan or the Option Agreement shall be
entitled to recover, as an element of the costs of suit, and not as damages, an
award of reasonable attorneys' fees, to be fixed by the court. Such award may
be made as part of a judgment by default or as part of a judgment after trial
or after appeal.
4.
<PAGE> 6
EXHIBIT A
NOTICE OF EXERCISE OF NONSTATUTORY STOCK OPTION
To: TriTeal Corporation
2011 Palomar Airport Road
Carlsbad, CA 92009-1432
I, a resident of the State of _____________________, hereby exercise
my nonstatutory stock option granted by TRITEAL CORPORATION, a Delaware
corporation (the "Company"), pursuant to a Nonstatutory Stock Option Agreement
dated __________, 199__, subject to all the terms and provisions thereof and
notify the Company of my desire to purchase _____ shares of Common Stock of the
Company at the exercise price of _______________ Dollars ($_______) per share
pursuant to said option.
I agree to complete and execute any additional documents which the
Company may request that I complete in order to comply with applicable federal,
state and local securities laws, rules and regulations.
Dated: ____________________
_______________________________ _______________________________
[Name]
Social Security or
Taxpayer I.D. Number
Address:
_______________________________
_______________________________
_______________________________
<PAGE> 1
EXHIBIT 10.39
TRITEAL CORPORATION
NON-PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
(FACING PAGE)
FOR GOOD AND VALUABLE CONSIDERATION, TriTeal Corporation, a Delaware
corporation, hereby irrevocably grants to the Optionee named below a
nonstatutory stock option (the "Option") to purchase any part or all of the
specified number of shares of its Common Stock upon the terms and subject to
the conditions set forth in this Option Agreement, at the specified purchase
price per share without commission or other charge. The Option is subject to
the Terms and Conditions Relating to Nonstatutory Stock Option (the "Terms and
Conditions") attached hereto. The provisions of the Terms and Conditions are
hereby incorporated herein by reference and made a part of this Option
Agreement.
<TABLE>
<CAPTION>
Name of Optionee: David Y. Chen
<S> <C>
Social Security Number:
-------------
Number of Shares covered by
Option (the "Option Shares"): 160,000
Purchase Price Per Option Share: $10.25
Minimum Number of Option Shares Per
Partial Exercise (unless Optionee exercises
all of the Option then exercisable):
-------------
</TABLE>
The Option shall become exercisable as follows:
1/2 of the total number of shares granted hereunder shall vest on
July 22, 1998, and thereafter 1/24th of the remaining number of shares
shall vest on the 22nd of each month, such that the options shall be
100% vested on July 22, 2000. Notwithstanding the foregoing, in the
event that (1) the employment of the Optionee is terminated by the
Company prior to July 22, 1998 other than for Cause (as that term is
defined in the Terms and Conditions), or (2) the Optionee terminates
his employment with the Company prior to July 22, 1998 for Good Reason
(as that term is defined in the Terms and Conditions), then 1/2 of the
total number of shares granted hereunder shall be 100% vested
immediately following such event. Once subject to purchase, the
Option Shares shall remain subject to purchase until July 21, 2007
(the "Expiration Date") unless the Option is earlier terminated in
accordance with the Terms and Conditions.
Date of this Option Agreement: July 22, 1997
TRITEAL CORPORATION ______________________________
Optionee's Signature
By:____________________________ Residence Address:
Name:_______________________ ______________________________
Title:______________________ ______________________________
<PAGE> 2
TERMS AND CONDITIONS RELATING TO
NON-PLAN
NONSTATUTORY STOCK OPTION
GRANTED TO DAVID Y. CHEN
July 22, 1997
The following Terms and Conditions Relating to Non-Plan Nonstatutory
Stock Option (the "Terms and Conditions") apply to the Option to which it is
attached. Whenever capitalized terms are used in these Terms and Conditions,
they shall have the meaning specified in the TriTeal Corporation Nonstatutory
Stock Option Agreement Facing Page (the "Facing Page") into which these Terms
and Conditions are incorporated by reference, or below, unless the context
clearly indicates to the contrary. As used herein, the "Option Agreement"
shall mean the Nonstatutory Stock Option Agreement Facing Page and these Terms
and Conditions as incorporated therein. The masculine pronoun shall include
the feminine and neuter, and the singular the plural, where the context so
indicates.
1. TERM OF OPTION. Subject to the maximum time limitations
described herein, the term of the Option shall be the period commencing on the
date of the Option Agreement and ending on the Expiration Date (as defined in
the Facing Page), unless terminated earlier as provided herein or in the Plan.
2. EXERCISE OF OPTION.
(a) The Facing Page shall set forth the rate at which the
Option Shares shall become subject to purchase by Optionee.
(b) "Cause," as that term is used in the Facing Page,
shall mean misconduct, including: (i) conviction of any felony or any crime
involving moral turpitude or dishonesty; (ii) participation in a fraud or act of
dishonesty against the Company; (iii) willful breach of the Company's policies;
(iv) intentional damage to the Company's property; (v) material breach of
Optionee's employment agreement or Optionee's Proprietary Information and
Inventions Agreement; or (vi) conduct by Optionee which in the good faith and
reasonable determination of the Board demonstrates unacceptable job performance
or gross unfitness to serve. Physical or mental disability shall not constitute
Cause. "Good Reason," as that term is used in the Facing Page, shall mean (i)
substantial reduction of Optionee's rate of compensation as in effect as the
date hereof (except to the extent that substantially all other officers of the
Company are similarly affected); (ii) failure to provide a package of welfare
benefit plans which, taken as a whole, provide substantially similar benefits to
those in which the Optionee is entitled to participate as of the date hereof
(except that employee contributions may be raised to the extent of any cost
increases imposed by third parties) or any action by the Company which would
adversely affect Optionee's participation or substantially reduce Optionee's
benefits under any of such plans (except to the extent that substantially all
other officers of the Company are similarly affected); (iii) change in
Optionee's employment responsibilities, authority, title or office resulting in
diminution of position, excluding for this purpose an isolated, insubstantial
and inadvertent action not taken in bad faith which is remedied by the Company
promptly after notice thereof is given by Optionee; or (iv) requirement that
Optionee relocate his current residence, unless Optionee accepts the request of
the Company to make such relocation.
1.
<PAGE> 3
(c) Optionee shall exercise the Option to the extent
exercisable, in whole or in part, by sending written notice to the Company in
the form attached hereto as Exhibit A of his intention to purchase Option
Shares hereunder. Optionee shall not exercise the Option at any one time with
respect to less than the minimum number of Option Shares as is set forth on the
Facing Page.
(d) Payment of the exercise price per share is due in
full upon exercise of all or any part of each installment which has accrued to
the Optionee. The Optionee may elect, to the extent permitted by applicable
statutes and regulations, to make payment of the exercise price under one of
the following alternatives.
(i) Payment of the exercise price per Option
Share in cash (including check) at the time of exercise;
(ii) Payment pursuant to a program developed in
compliance with regulations promulgated by the Federal Reserve Board which,
prior to the issuance of the Option Shares, results in either the receipt of
cash (or check) by the Company or the receipt of irrevocable instructions to a
qualified broker that sufficient Option Shares to pay the aggregate exercise
price be sold immediately and that the exercise price be delivered to the
Company from the sales proceeds; or
(iii) Payment by a combination of the above methods
of payment.
(e) Optionee agrees to complete and execute any
additional documents which the Company reasonably requests that Optionee
complete in order to comply with applicable federal, state and local securities
laws, rules and regulations.
(f) Subject to the Company's compliance with all
applicable laws, rules and regulations relating to the issuance of such Option
Shares and Optionee's compliance with all the terms and conditions of the
Option Agreement and these Terms and Conditions, the Company shall promptly
deliver the Option Shares to the Optionee.
(g) Except as otherwise provided herein, the Option may
be exercised during the lifetime of the Optionee only by the Optionee.
3. OPTION NOT TRANSFERABLE. The Option granted hereunder shall
not be transferable in any manner other than upon the death of Optionee. More
particularly (but without limiting the foregoing), the Option may not be
assigned, transferred (except as expressly provided herein), pledged or
hypothecated in any way, shall not be assignable by operation of law and shall
not be subject to execution, attachment or similar process. Any attempted
assignment, transfer, pledge, hypothecation or other disposition of the Option
contrary to the provisions hereof, or the levy of any execution, attachment or
similar process upon the Option, shall be null and void and without effect.
4. TERMINATION OF OPTION.
(a) To the extent not previously exercised, the Option
shall terminate on the Expiration Date; provided, however, that except as
otherwise provided in this Section 5 the Option may not be exercised more than
thirty (30) days after the termination of Optionee's continuous status as an
employee, director or consultant for any reason (other than upon Optionee's
death or
2.
<PAGE> 4
disability). Within such thirty (30) day period, Optionee may exercise the
Option only to the extent the same was exercisable on the date of such
termination of Optionee's continuous status as an employee, director or
consultant, and said right to exercise shall terminate at the end of such
period.
(b) In the event of a termination of Optionee's
continuous status as an employee, director or consultant as a result of
Optionee's disability, the Option shall be exercisable for a period of twelve
(12) months from the date of such termination of Optionee's Continuous status
as an employee, director or consultant, but in no event later than the
Expiration Date and only to the extent that the Option was exercisable on the
date of such termination.
(c) In the event of a termination of Optionee's
continuous status as an employee, director or consultant as a result of
Optionee's death, the Option shall be exercisable by the Optionee's estate (or
by the person who acquires the right to exercise the Option by will or by the
laws descent and distribution or by designation) for a period of twelve (12)
months from the date of such termination, but in no event later than the
Expiration Date and only to the extent that the Optionee was entitled to
exercise the Option on the date of death.
(d) Notwithstanding anything herein to the contrary, no
portion of any Option which is not exercisable by the Optionee upon a
termination of Optionee's continuous status as an employee, director or
consultant shall thereafter become exercisable, regardless of the reason for
such termination.
5. NO RIGHT TO CONTINUED EMPLOYMENT. The Option does not confer
upon Optionee any right to continue in his or her capacity as an employee,
consultant or director of the Company, nor does it limit in any way the right
of the Company to terminate Optionee's service relationship with the Company at
any time, with or without cause.
6. NOTICE OF TAX ELECTION. If Optionee makes any tax election
relating to the treatment of the Option Shares under the Internal Revenue Code
of 1986, as amended, Optionee shall promptly notify the Company of such
election.
7. ACKNOWLEDGMENTS OF OPTIONEE. Optionee acknowledges and
agrees that Optionee and his or her transferees shall have no rights as a
shareholder with respect to any Option Shares until the date of the issuance of
a stock certificate (or such other means of issuance of the Option Shares as
provided by the Company evidencing such Option Shares. No adjustment shall be
made for dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights for which the record date is
prior to the date such stock certificate is issued.
8. WITHHOLDING TAXES. Whenever Option Shares are to be issued
under the Option Agreement, the Company shall have the right to require Optionee
to remit to the Company an amount sufficient to satisfy federal, state and local
withholding tax requirements prior to issuance and/or delivery of any
certificate or certificates for such Option Shares.
3.
<PAGE> 5
9. MISCELLANEOUS.
(a) The Option Agreement shall bind and inure to the
benefit of the parties' heirs, legal representatives, successors and permitted
assigns.
(b) The Option shall be administered by the Compensation
Committee of the Company's Board of Directors (the "Committee"), which shall
have the power to construe and interpret the Option and otherwise to exercise
such authority with respect to the Option as it possesses as to options granted
under the TriTeal Corporation 1995 Stock Option Plan (the "Plan"). To the
extent practical, the option shall be administered and interpreted in a manner
consistent with nonstatutory options granted under the Plan.
(c) Subject to Section 9(b) above, the Option Agreement
and these Terms and Conditions constitute the entire agreement between the
parties pertaining to the subject matter contained herein and they supersede
all prior and contemporaneous agreements, representations and understandings of
the parties. No supplement, modification or amendment of the Option Agreement
shall be binding unless executed in writing by all of the parties. No waiver
of any of the provisions of the Option Agreement shall be deemed or shall
constitute a waiver of any other provisions, whether or not similar, nor shall
any waiver constitute a continuing waiver. No waiver shall be binding unless
executed in writing by the party making the waiver.
(d) Should any portion of the Option Agreement or these
Terms and Conditions be declared invalid and unenforceable, then such portion
shall be deemed to be severable from the Option Agreement and shall not affect
the remainder hereof.
(e) All notices to be sent hereunder shall be delivered
in person or sent by United States Mail, certified and postage prepaid, to
Optionee at the address set forth on the Facing Page of the Option Agreement or
to the Company at its principal place of business, Attention: Chief Financial
Officer. Any change in the address to which notices shall be sent under the
Option Agreement to the Optionee shall be made by the Optionee upon ten (10)
days' written notice to the Company.
(f) The prevailing party in any court action brought to
interpret or enforce any provision of the Option Agreement shall be entitled to
recover, as an element of the costs of suit, and not as damages, an award of
reasonable attorneys' fees, to be fixed by the court. Such award may be made
as part of a judgment by default or as part of a judgment after trial or after
appeal.
4.
<PAGE> 6
EXHIBIT A
NOTICE OF EXERCISE OF NONSTATUTORY STOCK OPTION
(NON-PLAN OPTION)
To: TriTeal Corporation
2011 Palomar Airport Road
Carlsbad, CA 92009-1432
I, a resident of the State of _____________________, hereby exercise
my nonstatutory stock option granted by TRITEAL CORPORATION, a Delaware
corporation (the "Company"), pursuant to a Nonstatutory Stock Option Agreement
dated __________, 199__, subject to all the terms and provisions thereof and
notify the Company of my desire to purchase _____ shares of Common Stock of the
Company at the exercise price of _______________ Dollars ($_______) per share
pursuant to said option.
I agree to complete and execute any additional documents which the
Company may request that I complete in order to comply with applicable federal,
state and local securities laws, rules and regulations.
Dated: _______________________
_______________________________ _______________________________
Social Security or [Name]
Taxpayer I.D. Number
Address:
_______________________________
_______________________________
_______________________________
<PAGE> 1
EXHIBIT 10.40
AGREEMENT BETWEEN TRITEAL CORPORATION AND
ARMANDO VITERI REGARDING CONTINUED EMPLOYMENT
This Agreement is made between TriTeal Corporation ("TriTeal") and Armando
Viteri ("Viteri") is based on the following facts:
A. Viteri has been a valued employee of TriTeal.
B. TriTeal and Viteri have agreed it is in their mutual best interests to
sever their relationship, and wish to accomplish the termination of their
relationship on mutually agreed upon terms.
C. Therefore, TriTeal and Viteri have agreed that Viteri's employment with
TriTeal will terminate on the terms and conditions set forth below, and
they accordingly agree as follows:
1. Viteri agrees to continue his employment with TriTeal until 06/30/97.
From the date of the execution of this agreement until 06/30/97, TriTeal may
only terminate Viteri's employment for Good Cause. "Good Cause" means dishonesty
or gross misconduct in the performance of Viteri's job duties, material
violation of company policy, or the failure to perform significant job duties
after notice and a reasonable opportunity to improve.
2. Provided that as of 06/30/97 Viteri has neither voluntarily resigned nor
been terminated for Good Cause:
(1) TriTeal agrees to continue to employ Viteri from 06/30/97 until
05/31/98. From 06/30/97 to 05/31/98. Viteri's duties shall be limited to
providing assistance to TriTeal as requested by TriTeal's Chief Executive
Officer or his designee on SoftNC. For the period 06/30/97 to 05/31/98, the
total compensation TriTeal will pay to Viteri will be $90,000 for the period
07/01/97 to 12/31/97 and $50,393 for the period 01/01/98 to 05/31/98. TriTeal
shall satisfy this obligation by making bi-weekly payments through the noted
period. Viteri shall be entitled to no other compensation, bonuses, stock
options, or other benefits during this period. After 05/31/98, continued
employment of Viteri by TriTeal will be on terms that are mutually agreed upon
by the parties, and in the absence of a written agreement to the contrary, any
continued employment of Viteri by TriTeal after 05/31/98 will be strictly on an
"at-will" basis, meaning that either TriTeal or Viteri may terminate the
relationship any at any time, with or without good cause, and notice, without
any liability to the other party; and
(2) TriTeal irrevocably agrees to waive as of 05/31/98 any and all
rights that it may have to repurchase any shares of stock issued to Viteri
pursuant to the two Founder's Stock Purchase Agreements, each dated as of July
26, 1995 between TriTeal and Viteri and the Incentive Stock Option Agreement
dated December 31, 1995. TriTeal agrees to cooperate fully with Viteri to remove
all appropriate legends from Viteri's stock certificates
<PAGE> 2
(3) Viteri agrees not to consult with, assist, advise, or work for any
company that competes directly with TriTeal.
3. Upon the written approval of TriTeal's Chief Executive Officer, Viteri
may join the Board of Directors of a company other than TriTeal provided that
company does not compete with TriTeal.
4. In exchange for TriTeal's promises as contained in this agreement,
Viteri agrees to irrevocably release and discharge, TriTeal, its officers,
directors, employees, and agents from any and all claims, causes of action or
liabilities of any kind relating to or arising from any transactions between
them or any other occurrences from the beginning of their relationship until the
date this agreement is executed. This release is intended by the parties to be a
general release of claims that is to be interpreted as broadly as possible, and
to release and discharge all known or unknown claims, including claims arising
from Viteri's employment, the termination of his employment, and issues relating
to Viteri's compensation or benefits, and also to include claims covered by
California Civil Code section 1542, which provides that "A GENERAL RELEASE DOES
NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE GENERAL RELEASE, WHICH IF KNOWN BY HIM MUST
HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR."
5. This agreement contains the entire agreement between Viteri and TriTeal
with respect to the subjects it addresses. All prior or contemporaneous
agreements on these subjects are merged in this document. This agreement can
only be modified by a writing signed by Viteri and an officer of TriTeal.
Dated: March 31, 1997 /s/ Armando Viteri
--------------------------
Armando Viteri
TRITEAL CORPORATION
Dated: March 31, 1997 By: /s/ Jeff Witous
--------------------------
Jeff Witous
Chief Executive Officer
-2-
<PAGE> 1
EXHIBIT 10.41
AGREEMENT BETWEEN TRITEAL CORPORATION AND RAND SCHULMAN
REGARDING CONTINUED EMPLOYMENT
TriTeal Corporation ("TriTeal") and Rand Schulman ("Schulman") agree as
follows:
1. Schulman agrees to continue his employment with TriTeal until
12/31/97, performing responsibilities as assigned at the direction of the Vice
President of Business Development. From the date of the execution of this
agreement until 12/31/97, TriTeal may only terminate Schulman's employment for
Good Cause. "Good Cause" means dishonesty or gross misconduct in the performance
of his job duties, material violation of company policy, or the failure to
perform significant job duties after notice and a reasonable opportunity to
improve. Schulman and TriTeal agree that Schulman's employment with TriTeal will
terminate on 12/31/97.
2. Provided that as of 12/31/97 Schulman has neither voluntarily
resigned, nor been terminated for Good Cause:
a) From the time this agreement is signed until 12/31/97, Schulman
shall continue to be compensated at a biweekly rate of $5,769.23. Schulman will
remain eligible for the Executive Performance Incentive Plan and will continue
to receive his current benefits package until December 31, 1997.
b) All eligibility for bonus plans and any entitlement to benefits
will terminate on December 31, 1997. Any rights to stock options which have not
previously vested will also terminate on December 31, 1997. Furthermore,
Schulman agrees to reimburse TriTeal for any outstanding travel advances which
have been made to Schulman on or before 12/31/97. All accrued and unused Paid
Time Off will be paid to Schulman on 12/31/97.
c) Although his employment with TriTeal will terminate on December
31, 1997, Schulman shall receive compensation at his regular base rate of pay
through July 31, 1998. This sum will be paid in three equal installments of
$29,166.67. These payments will be made on January 1, 1998, April 1, 1998 and
July 1, 1998. In consideration for this payment, Schulman will not directly or
indirectly own, manage, operate, control or work for any competitor of TriTeal
through July 31, 1998. If Schulman begins work for any competitor prior to July
31, 1998, payment of any and all remaining compensation will cease immediately .
<PAGE> 2
d) Nothing in this agreement is intended to, nor does relieve
Schulman from any insider trading restrictions to which he may be subject under
applicable state and/or federal law, with respect to information he may have
obtained as an officer or employee of this company.
3. Schulman acknowledges that during the course of his employment with
TriTeal he has had access to confidential information with regard to the
business of TriTeal, including, but not limited to, trade secrets, customer
lists, details of client or consultant contracts, pricing policies, operational
methods, marketing plans and strategies, product development techniques and
plans, business acquisitions plans, ideas, discoveries, designs, computer
programs, processes, procedures, formulas, improvements or other proprietary or
intellectual property of TriTeal. Schulman acknowledges that disclosure or
improper use of such Trade Secrets could cause serious and irreparable injury to
TriTeal. Accordingly, Schulman agrees not to disclose such Trade Secrets to any
party without TriTeal's prior written consent, or to use such information in
competition with TriTeal.
4. In exchange for TriTeal's promises as contained in this agreement
Schulman agrees to irrevocably release and discharge TriTeal, its officers,
directors, employees and agents from any and all claims, causes of action or
liabilities of any kind relating to or arising from any transactions between
them or any other occurrences from the beginning of their relationship until the
date this agreement is executed. This release is a general release of all claims
and is intended to include claims covered by California Civil Code section 1542,
which provides that "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE GENERAL RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
Schulman acknowledges that he may discover facts in addition to
those now known or believed with respect to the claims he is releasing, but
nonetheless agrees that this release will remain in effect.
5. This Agreement is intended to release and discharge any and all claims
Schulman may have against TriTeal as set forth in paragraph 4, including but not
limited to any claims arising under the Age Discrimination in Employment Act, 29
U.S.C. Section 621 et seq. It is the intent of Schulman and TriTeal that this
Agreement satisfy the requirements of the Older Workers Benefit Protection Act,
Public Law 101- 433, codified at 29 U.S.C. Section 626(f). The following general
provisions, along with the other provisions of this Agreement, are agreed to for
this purpose:
a. Schulman acknowledges and agrees that he has read and understands the
terms of this Agreement.
b. Schulman acknowledges that he has been given a full opportunity to
consult with his own lawyer with respect to the matters referenced in this
Agreement, and that he
-2-
<PAGE> 3
has obtained and considered such legal counsel as he deems necessary, such that
he is entering into this Agreement freely, knowingly, and voluntarily.
c. Schulman acknowledges that he has been given at least twenty-one days
in which to consider whether or not to enter this Agreement.
d. This Agreement shall not become effective or enforceable until seven
days after Schulman signs this Agreement.
6. All disputes of any kind and nature arising under, or by virtue of this
Agreement, shall be resolved by submission to final and binding arbitration
before the American Arbitration Association located in San Diego, California.
The rules of the American Arbitration Association shall govern the arbitration
process. However, nothing in this paragraph is intended to apply to actions
solely for temporary restraining orders, preliminary injunctions and permanent
injunctions. The parties agree that arbitration must be initiated within one
year after any claimed breach has occurred and that the failure to initiate the
arbitration within the one-year period constitutes an absolute bar to the
institution of new proceedings, unless the breach was concealed by the party
against which the breach is claimed, in which case the one-year period shall
commence upon reasonable discovery of the breach.
7. This agreement contains the entire agreement between Schulman and
TriTeal with respect to the subjects it addresses. All prior or contemporaneous
agreements on these subjects are merged in this document. This agreement can
only be modified by a writing signed by Schulman and an officer of TriTeal.
Dated: August 7, 1997 /s/ Rand Schulman
-----------------------------
Rand Schulman
Dated: August 7, 1997 /s/ David Y. Chen
-----------------------------
David Y. Chen
President and COO
TriTeal Corporation
-3-
<PAGE> 1
EXHIBIT 10.42
SEVERANCE AGREEMENT AND GENERAL RELEASE OF CLAIMS BETWEEN
TRITEAL CORPORATION AND ROBERT D. RUHE
TriTeal Corporation ("TriTeal") and Robert D. Ruhe ("Employee") agree as
follows:
1. By mutual agreement, Employee submits, and TriTeal accepts, Employee's
resignation on October 1, 1997 effective September 30, 1998.
2. Subject to the provisions of paragraph 3, Employee shall receive the
following severance benefits from TriTeal. Employee acknowledges that he is not
entitled to receive these benefits, and accordingly, these benefits are being
provided to Employee in exchange for the promises and representations of
Employee contained in this agreement.
a. TriTeal agrees to pay Employee compensation at his regular base rate of
pay for a period of six (6) months. Payments will be made in equal bi-weekly
installments of $5,384.62 on TriTeal's regularly scheduled pay dates.
Additionally, Employee will continue to be eligible for the Executive
Performance Incentive Plan for the two periods ending December 31, 1997 and
March 31, 1998, which is $17,500.00 per period. Employee will be paid an
incentive bonus in accordance with the Plan.
b. TriTeal agrees to pay Employee on April 1, 1998, a lump sum equal to six
(6) months of Employee's regular base rate of pay, that is, $70,000.60.
c. TriTeal will pay the premiums for COBRA coverage for up to eighteen
months following the Employee's termination date provided that Employee is
eligible for an elects COBRA coverage. Any life insurance or other deductions
selected by Employee shall continue unchanged until March 31, 1998, unless
otherwise directed by Employee.
d. TriTeal will pay to Employee the sum of $50,000.00 upon execution of
this Agreement, which will be included in Employee's W-2.
e. Employee shall draft a reference statement which will be reviewed,
approved, and signed by David Y. Chan, President and COO of TriTeal. No other
references will be provided by TriTeal without the prior approval of Employee.
f. Stock options previously granted will continue to vest until September
30, 1998. Employees right to exercise these options will be pursuant to the plan
or plans under which they were granted except that the exercise period shall be
up to October 31, 1998.
3. In consideration for the severance benefits provided for in paragraph 2,
Employee agrees as follows:
a. Employee shall not, for a period of one year beginning October 1, 1997,
directly or indirectly own, manage, operate, control, consult, or work for any
competitor of TriTeal. If Employee begins performing services for any competitor
during this time period, TriTeal's obligation to make any further payments under
this paragraph shall cease immediately, with no further obligation on the part
of TriTeal. Employee shall be responsible for notifying TriTeal in writing of
any actions by Employee which would relieve TriTeal of its obligation to
continue to provide him with severance benefits pursuant to this paragraph. If
Employee fails to so notify TriTeal, Employee shall be obligated to repay
TriTeal, with interest at the legal rate, any amounts paid to him after he
begins performing services for any competitor prior to September 30, 1998, plus
any attorneys' fees and costs incurred by TriTeal in connection with such claim,
without affecting the enforceability of the release of claims in favor of
TriTeal.
b. Employee shall not, for a period of one year following the termination
of his employment with TriTeal, directly or indirectly solicit any employee of
TriTeal to leave TriTeal's employment to perform services for remuneration for
any other business or entity. Any knowing breach of the provisions of this
paragraph will entitle TriTeal to the return of all amounts paid under this
agreement, plus any attorneys' fees
TRITEAL PROPRIETARY ROBERT D. RUHE
CONFIDENTIAL NEED TO KNOW SEPTEMBER 5, 1997
PAGE 1
<PAGE> 2
and costs incurred by TriTeal in connection with such claim, without affecting
the enforceability of the release of claims in favor of TriTeal.
4. Nothing in this agreement is intended to, nor does relieve Employee from
any insider trading restrictions to which he may be subject under applicable
state and/or federal law, with respect to information he may have obtained as an
officer or employee of this company.
5. Employee acknowledges that during the course of his employment with
TriTeal he has had access to confidential information with regard to the
business of TriTeal, including, but not limited to, trade secrets, customer
lists, details of client or consultant contracts, pricing policies, operational
methods, marketing plans and strategies, product development techniques and
plans, business acquisitions plans, ideas, discoveries, designs, computer
programs, processes, procedures, formulas, improvements or other proprietary or
intellectual property of TriTeal ("Trade Secrets"). Employee acknowledges that
disclosure or improper use of such Trade Secrets could cause serious and
irreparable injury to TriTeal. Accordingly, Employee agrees not to disclose such
Trade Secrets to any party without TriTeal's prior written consent, or to use
such information in competition with TriTeal at any time.
6. In exchange for TriTeal's promises as contained in this agreement
Employee agrees to irrevocably release and discharge TriTeal, its officers,
directors, employees and agents from any and all claims, causes of action or
liabilities of any kind relating to or arising from any transactions between
them or any other occurrences from the beginning of their relationship until the
date this agreement is executed. This release is a general release of all claims
and is intended to include claims covered by California Civil Code section 1542,
which provides that "A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING
THE GENERAL RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
Employee acknowledges that he may discover facts in addition to those now
known or believed with respect to the claims he is releasing, but nonetheless
agrees that this release will remain in effect.
7. This Agreement is intended to release and discharge any and all claims
Employee may have against TriTeal as set forth in paragraph 6, including but not
limited to any claims arising under the Age Discrimination in Employment Act, 29
U.S.C. ss. 621 et seq. It is the intent of Employee and TriTeal that this
Agreement satisfy the requirements of the Older Workers Benefit Protection Act,
Public Law 101-433, codified at 29 U.S.C. ss. 626(f). The following general
provisions, along with the other provisions of this Agreement, are agreed to for
this purpose:
a. Employee acknowledges and agrees that he has read and understands the
terms of this Agreement.
b. Employee acknowledges that he has been given a full opportunity to
consult with his own lawyer with respect to the matters referenced in this
Agreement, and that he has obtained and considered such legal counsel as he
deems necessary, such that he is entering into this Agreement freely, knowingly,
and voluntarily.
c. Employee acknowledges that he has been given at least twenty-one days in
which to consider whether or not to enter this Agreement.
d. This Agreement shall not become effective or enforceable until seven
days after Employee signs this Agreement.
8. All disputes of any kind and nature arising under, or by virtue of this
Agreement, shall be resolved by submission to final and binding arbitration
before the American Arbitration Association located in San Diego, California.
The rules of the American Arbitration Association shall govern the arbitration
process. However, nothing in this paragraph is intended to apply to actions
solely for temporary restraining orders,
TRITEAL PROPRIETARY ROBERT D. RUHE
CONFIDENTIAL NEED TO KNOW SEPTEMBER 5, 1997
PAGE 2
<PAGE> 3
preliminary injunctions and permanent injunctions. The parties agree that
arbitration must be initiated within one year after any claimed breach has
occurred and that the failure to initiate the arbitration within the one year
period constitutes an absolute bar to the institution of new proceedings, unless
the breach was concealed by the party against which the breach is claimed, in
which case the one-year period shall commence upon reasonable discovery of the
breach. In the event of arbitration, any money due Employee shall be paid into
an escrow account selected by the arbitrator and dispensed with in accordance
with the arbitration decision.
9. This agreement contains the entire agreement between Employee and
TriTeal with respect to the subjects it addresses. All prior or contemporaneous
agreement son these subjects are merged in this document. This agreement can
only be modified by a writing signed by Employee and an officer of TriTeal.
Dated: September 7, 1997 /s/ Robert D. Ruhe
------------------------
Robert D. Ruhe
Dated: September 7, 1997 /s/ David Y Chen
------------------------
David Y. Chen
President and COO
TriTeal Corporation
TRITEAL PROPRIETARY ROBERT D. RUHE
CONFIDENTIAL NEED TO KNOW SEPTEMBER 5, 1997
PAGE 3
<PAGE> 1
EXHIBIT 11.1
TRITEAL CORPORATION
STATEMENT REGARDING CALCULATION OF NET LOSS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- ----------------------
1997 1996 1997 1996
-------- -------- -------- --------
(Amounts in thousands, except per share data)
<S> <C> <C> <C> <C>
Net loss ........................................ $ (8,235) $ (253) $ (8,011) $ (1,247)
======== ======== ======== ========
Average common shares outstanding .............. 10,952 6,517 10,896 5,015
Adjustments to reflect requirements of the
Securities and Exchange Commission
(Effect of SAB 83) .......................... -- 1,138 -- 1,811
Effect of assumed conversion of Series A
convertible preferred shares from date of
issuance .................................... -- 332 -- 528
-------- -------- -------- --------
Adjusted shares outstanding .................... 10,952 7,987 10,896 7,354
======== ======== ======== ========
Net loss per share ............................. $ (.75) $ (.03) $ (.74) $ (.17)
======== ======== ======== ========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,958,640
<SECURITIES> 27,751,551
<RECEIVABLES> 8,244,947
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 44,114,660
<PP&E> 1,828,183
<DEPRECIATION> 0
<TOTAL-ASSETS> 48,401,830
<CURRENT-LIABILITIES> 7,829,300
<BONDS> 0
0
0
<COMMON> 11,033
<OTHER-SE> 40,561,497
<TOTAL-LIABILITY-AND-EQUITY> 48,401,830
<SALES> 744,037
<TOTAL-REVENUES> 744,037
<CGS> 433,113
<TOTAL-COSTS> 433,113
<OTHER-EXPENSES> 9,039,246
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,235,075)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,235,075)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,235,075)
<EPS-PRIMARY> (.75)
<EPS-DILUTED> 0
</TABLE>
