<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1998
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------
PHOTON DYNAMICS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 94-3007502
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
------------------
6325 SAN IGNACIO AVENUE
SAN JOSE, CALIFORNIA 95119
(408) 226-9900
(Address, and telephone number, including area code, of registrant's principal
executive offices)
PHOTON DYNAMICS, INC.
1995 STOCK OPTION PLAN AND
1995 EMPLOYEE STOCK PURCHASE PLAN
(Full title of plans)
HOWARD M. BAILEY
CHIEF FINANCIAL OFFICER
6325 SAN IGNACIO AVENUE
SAN JOSE, CALIFORNIA 95119
(408) 226-9900
(Name, address and telephone number of agent of service)
------------------
Copies to:
PATRICK A. POHLEN, ESQ.
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CALIFORNIA 94306-2155
(650) 843-5000
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=========================================================================================================
TITLE OF SECURITIES AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TO BE REGISTERED REGISTERED OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION FEE
SHARE (1) PRICE (1)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Stock Options and 400,000 $4.81 $1,924,000 $568.00
Common Stock
=========================================================================================================
</TABLE>
- ---------------
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(h)(1) and Rule 457(c). The price
per share and aggregate offering price are based upon the average of the
bid and asked prices of Registrant's Common Stock on April 28, 1998 as
reported on the Nasdaq National Market.
================================================================================
<PAGE> 2
PART II
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The Company's Registration Statement on Form S-8 (File No. 333-05283),
filed June 6, 1996, by the Company with the Securities and Exchange Commission
is incorporated by reference into this Registration Statement.
The Company's Current Report on Form 8-K (File No. 0-27234), filed April
8, 1998, by the Company with the Securities and Exchange Commission is
incorporated by reference into this Registration Statement
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
5 Opinion of Cooley Godward LLP
23.1 Consent of Ernst & Young LLP, Independent Auditors
23.2 Consent of Cooley Godward LLP is contained in Exhibit 5 to this Registration
Statement
24 Power of Attorney is contained on the signature page
99.1 1995 Stock Option Plan, as amended on January 27, 1998
99.2 1995 Employee Stock Purchase Plan, as amended on January 27, 1998
</TABLE>
1.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Milpitas, State of California, on April 29,
1998.
PHOTON DYNAMICS, INC.
/s/ Howard M. Bailey
________________________________________
Howard M. Bailey
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Howard M. Bailey and Shauna Gillett
Barker, and each or any one of them, his true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him and in his
name, place and stead, in any and all capacities, to sign any and all amendments
(including post-effective amendments) to this Registration Statement, and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their or his substitutes or substitute, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Vincent Sollitto, Jr. President April 29, 1998
- ---------------------------------
Vincent Sollitto, Jr.
/s/ Howard M. Bailey Chief Financial Officer April 29, 1998
- --------------------------------- (Principal Financial and
Howard M. Bailey Accounting Officer)
/s/ Francois J. Henley Director April 29, 1998
- ---------------------------------
Francois J. Henley
/s/ E. Floyd Kvamme Director April 29, 1998
- ---------------------------------
E. Floyd Kvamme
/s/ Barry L. Cox Director April 29, 1998
- ---------------------------------
Barry L. Cox
/s/ Michael J. Kim Director April 29, 1998
- ---------------------------------
Michael J. Kim
/s/ Steven M. Krausz Director April 29, 1998
- ---------------------------------
Steven M. Krausz
/s/ Malcolm J. Thompson Director April 29, 1998
- ---------------------------------
Malcolm J. Thompson
</TABLE>
3.
<PAGE> 1
Exhibit 5
ATTORNEYS AT LAW San Francisco, CA
415 693-2000
Five Palo Alto Square Menlo Park, CA
3000 El Camino Real 650 843-5000
Palo Alto, CA
94306-2155 San Diego, CA
Main 650 843-5000 619 550-6000
Fax 650 857-0663
Boulder, CO
303 546-4000
Denver, CO
www.cooley.com 303 606-4800
PATRICK A. POHLEN
650 843-5004
[email protected]
================================================================================
April 29, 1998
Photon Dynamics, Inc.
1505 McCarthy Blvd.
Milpitas, California 95035
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing by Photon Dynamics, Inc. (the "Company") of a Registration
Statement on Form S-8 (the "Registration Statement") with the Securities and
Exchange Commission covering the offering of up to an aggregate of 400,000
shares of the Company's Common Stock (the "Shares") pursuant to its 1995 Stock
Option Plan and 1995 Employee Stock Purchase Plan (the "Plans").
In connection with this opinion, we have examined the Registration Statement and
related Prospectus, your Articles of Incorporation and Bylaws, as amended, and
such other documents, records, certificates, memoranda and other instruments as
we deem necessary as a basis for this opinion. We have assumed the genuineness
and authenticity of all documents submitted to us as originals, the conformity
to originals of all documents submitted to us as copies thereof, and the due
execution and delivery of all documents where due execution and delivery are a
prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Plans, the
Registration Statement and the related Prospectus, will be validly issued, fully
paid, and nonassessable (except as to shares issued pursuant to certain deferred
payment arrangements, which will be fully paid and nonassessable when such
deferred payments are made in full).
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
COOLEY GODWARD LLP
/s/ Patrick A. Pohlen
By:_________________________________
Patrick A. Pohlen
<PAGE> 1
EXHIBIT 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
on Form S-8 pertaining to the 1995 Stock Option Plan and 1995 Employee Stock
Purchase Plan of Photon Dynamics, Inc. of our report dated October 24, 1997 with
respect to the consolidated financial statements of Photon Dynamics, Inc.
incorporated by reference in the Annual Report on Form 10-KSB for the year ended
September 30, 1997, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
-----------------------------
San Jose, California
April 29, 1998
<PAGE> 1
EXHIBIT 99.1
PHOTON DYNAMICS, INC.
AMENDED AND RESTATED
1995 STOCK OPTION PLAN
1. Establishment, Purpose, and Definitions.
(a) There is hereby adopted the 1995 Stock Option Plan (the "Plan")
of Photon Dynamics, Inc. (the "Company").
(b) The purpose of the Plan is to provide a means whereby eligible
individuals (as defined in Section 4, below) can acquire Common Stock of the
Company (the "Stock"). The Plan provides employees (including officers and
directors who are employees) of the Company and of its Affiliates an opportunity
to purchase shares of Stock pursuant to options which may qualify as incentive
stock options (referred to as "incentive stock options") under Section 422 of
the Internal Revenue Code of 1986, as amended (the "Code"), and employees,
officers/directors, independent contractors, and consultants of the Company and
of its Affiliates an opportunity to purchase shares of Stock pursuant to options
which are not described in Sections 422 or 423 of the Code (referred to as
"nonqualified stock options").
(c) The term "Affiliates" as used in the Plan means parent or
subsidiary corporations, as defined in Sections 424(e) and (f) of the Code (but
substituting "the Company" for "employer corporation"), including parents or
subsidiaries which become such after adoption of the plan.
2. Administration of the Plan.
(a) The Plan shall be administered by the Board of Directors of the
Company (the "Board"). Subject to Section 2(e) below, the Board may delegate the
responsibility for administering the Plan to a committee, under such terms and
conditions as the Board shall determine (the "Committee"). The Committee shall
consist of two or more members of the Board or such lesser number of members of
the Board as permitted by Rule 16b-3 promulgated under the Securities Exchange
Act of 1934, as amended ("Rule 16b-3"). Except as permitted by Rule 16b-3, none
of the members of the Committee shall receive, while serving on the Committee,
or during the one-year period preceding appointment to the Committee, a grant or
award of equity securities under (i) the Plan or (ii) any other plan of the
Company or its affiliates under which the participants are entitled to acquire
Stock (including restricted Stock), stock options, stock bonuses, related rights
or stock appreciation rights of the Company or any of its affiliates, other than
pursuant to the grant of automatic options provided in Section 7 below and
pursuant to transactions in any such other plan which do not disqualify a
director from being a disinterested person under Rule 16b-3. The limitations set
forth in this Section 2(a) shall automatically incorporate any additional
requirements that may in the future be necessary for the Plan to comply with
Rule 16b-3. Members of the Committee shall serve at the pleasure of the Board.
The Committee shall select one of its members as chairman, and shall hold
meetings at such times and places it may determine. A majority of the Committee
shall constitute a quorum
1.
<PAGE> 2
and acts of the Committee at which a quorum is present, or acts reduced to or
approved in writing by all the members of the Committee, shall be the valid acts
of the Committee. If the Board does not delegate administration of the Plan to
the Committee, then each reference in this Plan to "the Committee" shall be
construed to refer to the Board.
(b) Except for options granted to Non-Employee Directors pursuant to
Section 7, the Committee shall determine which eligible individuals (as defined
in Section 4, below) shall be granted options under the Plan, the timing of such
grants, the terms thereof (including any restrictions on the Stock), and the
number of shares subject to such options.
(c) Except for options granted to Non-Employee Directors pursuant to
Section 7, the Committee may amend the terms of any outstanding option granted
under the Plan, but any amendment which would adversely affect the optionee's
rights under an outstanding option shall not be made without the optionee's
written consent. The Committee may, with the optionee's written consent, cancel
any outstanding stock option or accept any outstanding stock option in exchange
for a new option.
(d) The Committee shall have the sole authority, in its absolute
discretion to adopt, amend, and rescind such roles and regulations as, in its
opinion, may be advisable in the administration of the Plan, to construe and
interpret the Plan, the rules and the regulations, and the instruments
evidencing options or Stock granted under the Plan and to make all other
determinations deemed necessary or advisable for the administration of the Plan.
All decisions, determinations, and interpretations of the Committee shall be
binding on all participants. Notwithstanding the foregoing, the Committee shall
not exercise any discretionary functions with respect to options granted to
Non-Employee Directors pursuant to Section 7.
(e) Notwithstanding the foregoing provisions of this Section 2,
grants of options to any "Covered Employee," as such term is defined by Section
162(m) of the Code shall be made only by a subcommittee of the Committee which,
in addition to meeting other applicable requirements of this Section 2, is
composed solely of two or more "outside directors," within the meaning of
Section 162(m) of the Code and the regulations thereunder (the "Subcommittee")
to the extent necessary to qualify such grants as "performance-based
compensation" under Section 162(m). In the case of such grants to Covered
Employees, references to the "Committee" shall be deemed to be references to the
Subcommittee as specified above.
3. Stock Subject to the Plan.
(a) The aggregate number of shares of Common Stock of the Company
available for grant of options under the Plan initially shall be 810,943 shares.
If an option is surrendered (except surrender for shares of Stock) or for any
other reason ceases to be exercisable in whole or in part, the shares which were
subject to such option but as to which the option had not been exercised shall
continue to be available under the Plan.
2.
<PAGE> 3
(b) If there is any change in the Stock subject to any option granted
under the Plan, through merger, consolidation, reorganization, recapitalization,
reincorporation, stock split, stock dividend (in excess of two percent), or
other change in the capital structure of the Company, appropriate adjustments
shall be made by the Committee in order to preserve but not to increase the
benefits to the individual, including adjustments to the number and kind of
shares and the price per share subject to outstanding options.
4. Eligible Individuals. The persons eligible to participate in the Plan
(other than pursuant to Section 7) are such employees, officers, independent
contractors, and consultants of the Company or an Affiliate as the Committee, in
its discretion, shall designate from time to time. Notwithstanding the
foregoing, only employees of the Company or an Affiliate (including officers and
directors who are bona fide employees) shall be eligible to receive incentive
stock options. Except for grants pursuant to Section 7, Eligible Individuals
shall not include Non-Employee Directors.
5. The Option Price. Except as provided in Section 7, the exercise price
of the each option shall be not less than the per share fair market value of the
Stock subject to such option on the date the option is granted. Notwithstanding
the foregoing, in the case of an incentive stock option granted to a person
possessing more than ten percent of the combined voting power of the Company or
an Affiliate, the exercise price shall be not less than 110 percent of the fair
market value of the Stock on the date the option is granted. The exercise price
of an option shall be subject to adjustment to the extent provided in Section
3(b), above.
6. Terms and Conditions of Options.
(a) Each option granted pursuant to the Plan will be evidenced by a
written Stock Option Agreement executed by the Company and the person to whom
such option is granted.
(b) The Committee shall determine the term of each option granted
under the Plan; provided, however, that (i) the term of each option shall not be
more than 10 years, (ii) in the case of an incentive stock option granted to a
person possessing more than ten percent of the combined voting power of the
Company or an Affiliate, the term of each incentive stock option shall be no
more than five yore's, and (iii) the term of an option granted pursuant to
Section 7 shall be as provided in Section 7.
(c) In the case of incentive stock options, the aggregate fair market
value (determined as of the time such option is granted) of the Stock with
respect to which incentive stock options are exercisable for the first time by
an eligible employee in any calendar year (under this Plan and any other plans
of the Company or its Affiliates) shall not exceed $100,000. If the aggregate
fair market value of stock with respect to which incentive stock options are
exercisable by an optionee for the first time during any calendar year exceeds
$100,000 such options shall be treated as nonqualified options to the extent
required by Section 422 of the Code. The rule set forth in the preceding
sentence shall be applied by taking options into account in the order in which
they were granted.
3.
<PAGE> 4
(d) Except for grants to Non-Employee Directors pursuant to Section
7, which shall be granted on the form of Stock Option Agreement attached hereto
as Exhibit A, the Stock Option Agreement may contain such other terms,
provisions, and conditions as may be determined by the Committee not
inconsistent with this Plan. If an option, or any part thereof is intended to
qualify as an incentive stock option, the Stock Option Agreement shall contain
those terms and conditions which are necessary to so qualify it.
(e) The maximum number of Shares with respect to which options may be
granted to any individual per calendar `year under the Plan shall be 250,000
shares, subject to adjustment pursuant to Section 3(b). To the extent required
by Section 162(m) of the Code or the regulations thereunder, in applying the
foregoing limitation with respect to an employee, if any option is canceled, the
canceled option shall continue to count against the maximum number of shares for
which options may be granted to the employee under this Section 6(e). For this
purpose, the repricing of an option shall be treated as a cancellation of the
existing option and the grant of a new option.
7. Stock Options for Non-Employee Directors.
(a) All grants of options pursuant to this Section 7 shall be
automatic and nondiscretionary and shall be made strictly in accordance with the
provisions of this Section 7. No person shall have any discretion to select
which Non-Employee Directors shall be granted options or to determine the member
of shares of Stock to be covered by options granted to Non-Employee Directors,
the timing of such option grants or the exercise price thereof.
(b) An option to purchase 5,000 shares of Stock shall be granted
("Initial Grant") to each director who is not an officer of the Company or an
affiliate of a five percent (5%) or' greater shareholder (or shareholders) of
the Company ("Non-Employee Director"), such Initial Grant to be made to
Non-Employee Directors elected or appointed to the Board upon the date each such
Non-Employee Director first becomes a Non-Employee Director following the
approval date of the plan by the shareholders. In addition, immediately
following each annual meeting of the Company's stockholders, each Non-Employee
Director who continues as a Non-Employee Director following such annual meeting
shall be granted an option to purchase 2,500 shares of Stock ("Subsequent
Grant"); provided that no Subsequent Grant shah be made to any Non-Employee
Director who has not served as a director of the Company, as of the time of such
annual meeting, for at least one (1) year. Each such Subsequent Grant shall be
made on the date of the annual stockholders' meeting in question. If any option
ceases to be exercisable in whole or in part, the shares which were subject to
such option but as to which the option had not been exercised shall continue to
be available under the Plan. All options granted to Non-Employee Directors shall
be nonqualified stock options.
(c) The exercise price per share of Stock covered by each option
shall be the per-share fair market value of the Stock on the date the option is
granted. The exercise price of an option granted under the Plan shall be subject
to adjustment to the extent provided in Section 3(b) hereof. The term of each
option shall be for ten years.
4.
<PAGE> 5
(d) Each initial Grant shall be fully vested and exercisable as to
5,000 of the shares covered thereby on the date of grant. Each Subsequent Grant
shall become vested as to 8.33% of the shares covered thereby each month
following the date of grant, so that each Subsequent Grant will be fully
exercisable one (1) year after its grant date.
8. Use of Proceeds. Cash proceeds realized from the sale of Stock under
the Plan or pursuant to options granted under the Plan shall constitute general
funds of the Company.
9. Amendment. Suspension or Termination of the Plan.
(a) The Board may at any time amend, suspend or terminate the Plan as
it deems advisable; provided that such amendment, suspension or termination
complies with all applicable requirements of state and federal law, including
may applicable requirement that the Plan or an amendment to the Plan be approved
by the shareholders, and provided further that, except as provided in Section
3(b), above, the Board shall in no event amend the Plan in the following
respects without the consent of stockholders then sufficient to approve the Plan
in the first instance:
(i) To increase the maximum number of shares subject to stock
options issued under the Plan; or
(ii) To change the designation or class of persons eligible to
receive incentive stock options under the Plan.
(b) No option may be granted nor any Stock issued under the Plan
during any suspension or after the termination of the Plan, and no amendment,
suspension, or termination of the Plan shall, without the affected individual's
consent, alter or impair any rights or obligations under any option previously
granted under the Plan. The Plan shall terminate on the tenth anniversary of the
date of adoption of the Plan, unless previously terminated by the Board pursuant
to this Section 9.
(c) Notwithstanding the provisions of Sections 9(a) and 9(b), above,
the provisions set forth in Section 7 of the Plan (and any other sections of the
Plan that affect the formula award terms of option grants to Non-Employee
Directors required to be specified in the Plan by Rule 16b-3) shall not be
amended periodically and in no event more than once every six months, other than
to comport with changes to the Code, the Employee Retirement Income Security Act
of 1974, as amended, or any applicable rules and regulations thereunder.
10. Assignability. To the extent required by Rule 16b-3, no option
granted pursuant to this Plan shall be transferable by the holder except by
operation of law or by will or the laws of descent and distribution; provided,
that, if Rule 16b-3 is amended after the date of the Board's adoption of the
Plan to permit broader transferability of options under that Rule, (i) options
granted under Section 7 to Non-Employee Directors shall be transferable to the
fullest extent permitted by Rule 16b-3 as so amended, (ii) any other option
shall be transferable to the extent provided in the option agreement covering
the option, and the Committee shall have discretion to amend any such
outstanding option to provide for broader transferability of the option as the
Committee may authorize within the limitations of Rule 16b-3. Notwithstanding
the foregoing, if required by the Code, each incentive stock option under the
Plan shall be transferable by the
5.
<PAGE> 6
optionee only by will of the laws of descent and distribution, and, during the
optionee's lifetime, shall be exercisable only by the optionee. In the event of
any Rule 16b-3 permitted transfer of an option hereunder, the transferee shall
be entitled to exercise the option in the same manner and only to the same
extent as the optionee (or his personal representative or the person who would
have acquired the fight to exercise the option by bequest or intestate
succession) would have been entitled to exercise the option under Sections 6, 7
and 11 had the option not been transferred.
11. Payment Upon-Exercise of Options.
(a) Payment of the purchase price upon exercise of any option granted
under this Plan shall be made in cash, by optionee's personal check, a certified
check, bank draft, or postal or express money order payable to the order of the
Company in lawful money of the United States (collectively, "Cash
Consideration'); provided, however, that, except for options granted under
Section 7, the Committee, in its sole discretion, may permit an optionee to pay
the option price in whole or in part (i) with shares of Stock owned by the
optionee or with shares of Stock withheld from the shares otherwise deliverable
to the optionee upon exercise of the option; (ii) by delivery on a form
prescribed by the Committee of an irrevocable direction to a securities broker
approved by the Committee to sell shares of Stock and deliver all or a portion
of the proceeds to the Company in payment for the Stock; (iii) by delivery of
the optionee's promissory' note with such recourse, interest, security, and
redemption provisions as the Committee in its discretion determines appropriate;
or (iv) in any combination of the foregoing. The exercise price of any options
granted under Section 7 shall be paid in Cash Consideration, the consideration
specified in clauses (i) or (ii) of the preceding sentence, or in any
combination thereof. Any Stock used to exercise options shall be valued at its
fair market value on the date of the exercise of the option. In addition, the
Committee, in its sole discretion, may authorize the surrender by an optionee of
all or part of an unexercised option (excluding options granted under Section 7,
above) and authorize a payment in consideration thereof of an amount equal to
the difference between the aggregate fair market value of the Stock subject to
such option and the aggregate option price of such Stock. In the Committee's
discretion, such payment may be made in cash, shares of Stock with a fair market
value on the date of surrender equal to the payment amount, or some combination
thereof.
(b) In the event that the exercise price is satisfied by shares
withheld from the shares of Stock otherwise deliverable to the optionee, the
Committee may issue the optionee an additional option, with terms identical to
the option agreement under which the option was exercised, entitling the
optionee to purchase additional shares of Stock equal to the number of shares so
withheld but at an exercise price equal to the fair market value of the Stock on
the grant date of the new option; provided, however, that no such additional
options may be granted with respect to options granted pursuant to Section 7,
above. Any additional option shall be subject to the provisions of Section
6(e),above.
6.
<PAGE> 7
12. Withholding Taxes.
(a) No Stock shall be delivered under the Plan to any participant
until the participant has made arrangements acceptable to the Committee (or in
the case of exercise of options granted to Named Executives, the Subcommittee)
for the satisfaction of federal, state, and local income and social security tax
withholding obligations, including, without limitation, obligations incident to
the receipt of Stock under the Plan or to the failure to satisfy the conditions
for treatment as incentive stock options under applicable tax law. Upon exercise
of a stock option the Company shall withhold from the optionee an amount
sufficient to satisfy federal, state and local income and social security tax
withholding obligations.
(b) In the event that such tax withholding is satisfied by the
Company or the optionee's employer withholding shares of Stock otherwise
deliverable to the optionee, the Committee may issue the optionee an additional
option, with terms identical to the option agreement under which the option was
exercised, entitling the optionee to purchase additional shares of Stock equal
to the number of shares so withheld but at an exercise price equal to the fair
market value of the Stock on the grant date of the new option; provided,
however, that no such additional options may be granted with respect to options
granted pursuant to Section 7, above. Any additional option shall be subject to
the provisions of Section 6(e), above.
13. Change in Control.
(a) For purposes of this Section 13, a "Change in Control" shall be
deemed to occur upon:
(i) The direct or indirect acquisition by any person or related
group of persons (other than an acquisition from or by the Company or by a
Company-sponsored employee benefit plan or by a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company) of beneficial ownership (within the meaning of Rule 13d-3 of the
Securities Exchange Act of 1934, as amended) of securities possessing more than
fifty percent (50%) of the total combined voting power of the Company's
outstanding Stock;
(ii) A change in the composition of the Board over a period of
thirty-six (36) months or less such that a majority of the Board members cease,
by reason of one or more contested elections for Board membership or by one or
more actions by written consent of stockholders, to be comprised of individuals
who either (A) have been Board members continuously since the beginning of such
period or (B) have been elected or nominated for election as Board members
during such period by at least a majority of the Board members described in
clause (A) who were still in office at the time such election or nomination was
approved by the Board;
(iii) Approval by the Company's stockholders of a merger or
consolidation in which the Company is not the surviving entity, except for a
transaction the principal purpose of which is to change the state in which the
Company is incorporated;
7.
<PAGE> 8
(iv) Approval by the Company's stockholders of (A) the sale,
transfer or other disposition of all or substantially all of the assets of the
Company (including the capital stock of the Company's subsidiary corporations)
or (B) the complete liquidation or dissolution of the Company; or
(v) Approval by the Company's stockholders of any reverse merger
in which the Company survives as an entity but in which securities possessing
more than fifty percent (50%) of the total combined voting power of the
Company's outstanding securities are transferred to a person or persons
different from those who held such securities immediately prior to such merger.
(vi) For the purpose of this Section 13, "Approval by the
Company's Stockholders" shall mean approval by a majority of those shares of
Stock voting at a stockholder's meeting at which a quorum is present, excluding
shares beneficially owned (within the meaning of Rule 13d-3 under the Exchange
Act) by the Non-Employee Directors.
(b) Except for options granted to Non-Employee Directors under
Section 7, the Committee may provide in any stock option agreement (or in an
amendment thereto) that, in the event of any Change in Control, any outstanding
options covered by such an agreement shall be fully vested, nonforfeitable and
become exercisable, as of the date of the Change in Control.
(c) If the Committee determines to incorporate a Change in Control
provision in any option agreement hereunder, the agreement shall provide that,
(i) in the event of a Change in Control described in clauses (i), (ii) and (v)
of paragraph (a) above, the option shall remain exercisable for the remaining
term of the option and (ii) in the event of a Change in Control described in
clauses (iii) or (iv) of paragraph (a) above, the option shall terminate as of
the effective date of the merger, disposition of assets, liquidation or
dissolution described therein.
(d) As to any options granted under Section 7 to Non-Employee
Directors, (i) in the event of a Change in Control described in clauses (i),
(ii) or (v) of paragraph (a) above, any such outstanding options under the Plan
shall become fully vested and remain exercisable for the remaining term of such
options and (ii) in the event of a Change in Control described in clauses (iii)
or (iv) of paragraph (a) above, outstanding options under the Plan shall
terminate as of the effective date of the merger, disposition of assets,
liquidation or dissolution described therein.
(e) Notwithstanding the foregoing provisions of this Section 13, an
outstanding option may not be accelerated under this Section 13 if and to the
extent (i) such option is, in correction with the transaction giving rise to a
Change of Control, either to be assumed by the successor or parent thereof or to
be replaced with a comparable option to purchase shares of the capital stock of
the successor corporation or parent thereof, or (ii) such option is to be
replaced with a cash incentive program of the successor corporation that
preserves the option spread existing at the time of the corporate transaction
giving rise to the Change of Control and provides for subsequent payment in
accordance with the same vesting schedule applicable to such option.
8.
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14. Stockholder Approval. The Plan and any options granted pursuant to
Section 7 and options granted to Covered Employees hereunder shall become
effective only upon approval by the holders of a majority of the Company's
shares voting (in person or by proxy) at a stockholders' meeting held within 12
months of the Board's adoption of the Plan. The Committee may grant stock
options under the Plan prior to the stockholders' meeting, but until stockholder
approval of the Plan is obtained, no such option shall be exercisable. In the
event that stockholder approval is not obtained within the period provided
above, all options described in this Section 14 previously granted above, shall
terminate.
15. Rule 16b-3 Compliance. Transactions under the Plan are intended to
comply with all applicable conditions of Rule 16b-3 or its successors under the
Exchange Act. To the extent any provision of the Plan or action by the Board or
the Committee fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by the Board or the Committee.
Moreover, in the event the Plan does not include a provision required by Rule
16b-3 to be stated therein in order to qualify the grants under Section 7 hereof
as grants under a non-discretionary formula under Rule 16b-3 such provision
(other than one relating to eligibility requirements, or the price and amount of
awards) shall be deemed automatically to be incorporated by reference into the
Plan with respect to grants of options to Non-Employee Directors.
16. Applicable Law. The law of the State of California will govern all
matters relating to this Plan except to the extent it is superseded by the laws
of the United States.
9.
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EXHIBIT 99.2
PHOTON DYNAMICS, INC.
1995 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1995 Employee Stock
Purchase Plan of Photon Dynamics, Inc..
1. Purpose. The purpose of the Plan is to provide employees of the
Company and its Designated Subsidiaries with an opportunity to purchase Common
Stock of the Company through accumulated payroll deductions. It is the intention
of the Company to have the Plan qualify as an "Employee Stock Purchase Plan"
under Section 423 of the Code. The provisions of the Plan, accordingly, shall be
construed so as to extend and limit participation in a manner consistent with
the requirements of that section of the Code.
2. Definitions.
(a) "Accrual Period" shall mean a period of approximately six months,
commencing on February 1 and August 1 of each year and terminating on the next
following July 31 or January 31, respectively; provided, however, that the first
Accrual Period shall commence on the Effective Date and shall end on July 31,
1996.
(b) "Board" shall mean the Board of Directors of the Company.
(c) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(d) "Common Stock" shall mean the common stock of the Company.
(e) "Company" shall mean Photon Dynamics, Inc., a California
corporation.
(f) "Compensation" shall mean an Employee's base salary from the
Company or one or more Designated Subsidiaries, including such amounts of base
salary as are deferred by the Employee (i) under a qualified cash or deferred
arrangement described in Section 401(k) of the Code, or (ii) to a plan qualified
under Section 125 of the Code. Compensation does not include overtime, bonuses,
reimbursements or other expense allowances, fringe benefits (cash or noncash),
moving expenses, deferred compensation, and contributions (other than
contributions described in the first sentence) made on the Employee's behalf by
the Company or one or more Designated Subsidiaries under any employee benefit or
welfare plan now or hereafter established.
(g) "Designated Subsidiaries" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
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(h) "Effective Date" shall mean the effective date of the
Registration Statement relating to the Company's initial public offering of its
Common Stock. However, should any Designated Subsidiary become a Participating
Company in the Plan after such date, then such entity shall designate a separate
Effective Date with respect to its employee-participants.
(i) "Employee" shall mean any individual who is engaged in the
rendition of personal services to the Company or a Designated Subsidiary for
Compensation. For purposes of the Plan, the employment relationship shall be
treated as continuing intact while the individual is on sick leave or other
leave of absence approved by the Company. Where the period of leave exceeds 90
days and the individual's right to reemployment is not guaranteed either by
statute or by contact, the employment relationship will be deemed to have
terminated on the 91st day of such leave.
(j) "Enrollment Date" shall mean the first day of each Purchase
Period.
(k) "Exercise Date" shall mean the last day of each Accrual Period.
(l) "Fair Market Value" shall mean, as of any date, the value of
Common Stock 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 System of the National Association of Securities Dealers,
Inc. Automated Quotation ("NASDAQ") System, its Fair Market Value shall
be the closing selling price for such stock on the principal securities
exchange or national market system on which the Common Stock is at the
time listed for trading. If there are no sales of Common Stock on that
date, then the closing selling price for the Common Stock on the next
preceding day for which such closing selling price is quoted shall be
determinative of Fair Market Value; or,
(2) If the Common Stock is not traded on an exchange or a
national market system, its Fair Market Value shall be determined in good
faith by the Board, and such determination shall be conclusive and
binding on all persons.
(m) "Participant" means an Employee of the Company or Designated
Subsidiary who is actively participating in the Plan.
(n) "Plan" shall mean this Employee Stock Purchase Plan.
(o) "Plan Administrator" shall mean either the Board or a committee
of the Board that is responsible for the administration of the Plan.
(p) "Purchase Period" shall mean a purchase period established
pursuant to paragraph 4 hereof.
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<PAGE> 3
(q) "Purchase Price" shall mean an amount equal to 85% of the Fair
Market Value of a share of Common Stock on the Enrollment Date or on the
Exercise Date, whichever is lower.
(r) "Reserves" shall mean the number of shares of Common Stock
covered by each option under the Plan which have not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but not yet placed under option.
(s) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than 50% of the voting shares are held by the Company or a
Subsidiary, whether or not such corporation now exists or is hereafter organized
or acquired by the Company or a Subsidiary.
3. Eligibility.
(a) General. Any Employee who is employed by the Company on a given
Enrollment Date shall be eligible to participate in the Plan for the Purchase
Period commencing with such Enrollment Date.
(b) Limitations on Grant and Accrual. Any provisions of the Plan to
the contrary notwithstanding, no Employee shall be granted an option under the
Plan (i) if, immediately after the grant, such Employee (taking into account
stock owned by any other person whose stock would be attributed to such Employee
pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding
options to purchase 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
Subsidiary of the Company, or (ii) which permits his or her rights to purchase
stock under all employee stock purchase plans of the Company and its
Subsidiaries to accrue at a rate which exceeds Twenty-Five Thousand Dollars
($25,000) worth of stock (determined at the Fair Market Value of the shares at
the time such option is granted) for each calendar year in which such option is
outstanding at any time. The determination of the accrual of the right to
purchase stock shall be made in accordance with Section 423(b)(8) of the Code
and the regulations thereunder.
(c) Other Limits on Eligibility. Notwithstanding paragraph (a) above,
the following Employees, as defined in paragraph 2, shall not be eligible to
participate in the Plan for any relevant Purchase Period: (i) employees whose
customary employment is 20 hours or less per week; and (ii) employees whose
customary employment is for not more than 5 months in any calendar year.
4. Purchase Periods.
(a) The Plan shall be implemented through overlapping or consecutive
Purchase Periods until such time as (i) the maximum number of shares of Stock
available for issuance under the Plan shall have been purchased or (ii) the Plan
shall have been sooner terminated in accordance with paragraph 19 hereof. The
maximum duration of a Purchase Period shall be twenty-seven months. Initially,
the Plan shall be implemented through overlapping Purchase Periods of
twenty-four months' duration commencing each February 1 and August 1 following
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<PAGE> 4
the Effective Date (except that the initial Purchase Period shall commence on
the Effective Date and shall end on January 31, 1998). The Plan Administrator
shall have the authority to change the length of any Purchase Period subsequent
to the initial Purchase Period by announcement at least thirty (30) days prior
to the commencement of the Purchase Period and to determine whether subsequent
Purchase Periods shall be consecutive or overlapping.
(b) A Participant shall be granted a separate purchase right for each
Purchase Period in which he/she participates. The purchase right shall be
granted on the first day of the Purchase Period and shall be automatically
exercised in successive installments on the last day of each Accrual Period
ending within the Purchase Period.
(c) An Employee may participate in only one Purchase Period at a
time. Accordingly, except as provided in paragraph 4(d), an Employee who wishes
to join a new Purchase Period must withdraw from the current Purchase Period in
which he/she is participating and must also enroll in the new Purchase Period
prior to the commencement date for that period.
(d) If on the first day of any Accrual Period in a Purchase Period in
which an Employee is participating in the Plan, the Fair Market Value of the
Company's Common Stock is less than the Fair Market Value of the Company's
Common Stock on the first day of the first Accrual Period within the Purchase
Period (after taking into account any adjustment during the Purchase Period
pursuant to paragraph 18(a)), the Purchase Period shall be terminated
automatically and the Employee shall be enrolled automatically in the new
Purchase Period which has its first Accrual Period commencing on that date,
provided the Employee is eligible to participate in the Plan on that date and
has not elected to terminate participation in the Plan.
(e) Except as specifically provided herein, the acquisition of Common
Stock through participation in the Plan for any Purchase Period shall neither
limit nor require the acquisition of Common Stock by a Participant in any
subsequent Purchase Period.
5. Participation.
(a) An eligible Employee may become a Participant in the Plan by
completing a subscription agreement authorizing payroll deductions in the form
of Exhibit A to this Plan and filing it with the Company's payroll office at
least fifteen (15) business days prior to the Enrollment Date for the Purchase
Period in which such participation will commence, unless a later time for filing
the subscription agreement is set by the Board for all eligible Employees with
respect to a given Purchase Period.
(b) Payroll deductions for a Participant shall commence with the
first period payroll following the Enrollment Date and shall end on the last
complete payroll period during the Purchase Period, unless sooner terminated by
the Participant as provided in paragraph 10.
6. Payroll Deductions.
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<PAGE> 5
(a) At the time a Participant files his/her subscription agreement,
he/she shall elect to have payroll deductions made on each pay day during the
Offering Period in an amount not exceeding ten percent (10%) of the Compensation
which he/she receives on each pay day during the Offering Period.
(b) All payroll deductions made for a Participant shall be credited
to his/her account under the Plan and will be withheld in whole percentages
only. A Participant may not make any additional payments into such account.
(c) A Participant may discontinue his or her participation in the
Plan as provided in paragraph 10, or may decrease the rate of his/her payroll
deductions during the Purchase Period by completing or filing with the Company a
new subscription agreement authorizing a decrease in payroll deduction rate. The
decrease in rate shall be effective with the first full payroll period following
ten (10) business days after the Company's receipt of the new subscription
agreement unless the Company elects to process a given change in participation
more quickly. A Participant may increase the rate of his/her payroll deductions
for a future Purchase Period by filing with the Company a new subscription
agreement authorizing an increase in payroll deduction rate within ten (10)
business days (unless the Company elects to process a given change in
participation more quickly) before the commencement of the upcoming Purchase
Period. A Participant's subscription agreement shall remain in effect for
successive Purchase Periods unless terminated as provided in paragraph 10. The
Board shall be authorized to limit the number of participation rate changes
during any Purchase Period.
(d) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and paragraph 3(b) herein, a Participant's
payroll deductions may be decreased to 0% at such time during any Accrual Period
which is scheduled to end during the current calendar year (the "Current Accrual
Period") that the aggregate of all payroll deductions which were previously used
to purchase stock under the Plan in a prior Accrual Period which ended during
that calendar year plus all payroll deductions accumulated with respect to the
Current Accrual Period equal $21,250. Payroll deductions shall recommence at the
rate provided in such Participant's subscription agreement at the beginning of
the first Accrual Period which is scheduled to end in the following calendar
year, unless terminated by the Participant as provided in paragraph 10.
7. Grant of Option. On the first day of each Purchase Period, each
eligible Employee participating in such Purchase Period shall be granted an
option to purchase on each Exercise Date of such Purchase Period (at the
applicable Purchase Price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
prior to such Exercise Date and retained in the Participant's account as of the
Exercise Date by the applicable Purchase Price; provided (i) that such purchase
shall be subject to the limitations set forth in paragraphs 3(b) and 12 hereof,
and (ii) the maximum number of shares of Common Stock an Employee shall be
permitted to purchase in any Accrual Period shall be 5,000, subject to
adjustment as provided in paragraph 18 hereof. Exercise of the option shall
occur as provided in paragraph 8, unless the Participant has withdrawn pursuant
to
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<PAGE> 6
paragraph 10, and the option, to the extent not exercised, shall expire on the
last day of the Purchase Period.
8. Exercise of Option. Unless a Participant withdraws from the Plan
as provided in paragraph 10 below, his/her option for the purchase of shares
will be exercised automatically on each Exercise Date, and the maximum number of
full shares subject to option shall be purchased for such Participant at the
applicable Purchase Price with the accumulated payroll deductions in his/her
account. No fractional shares will be purchased; any payroll deductions
accumulated in a Participant's account which are not sufficient to purchase a
full share shall be carried over to the next Purchase Period, if the Participant
elects to participate in the next Purchase Period, or returned to the
Participant. Any amount remaining in a Participant's account following the
purchase of shares on the Exercise Date which exceeds the cost of one full share
of Common Stock on the Exercise Date shall be returned to the Participant and
shall not be carried over to the next Purchase Period. During a Participant's
lifetime, a Participant's option to purchase shares hereunder is exercisable
only by him/her.
9. Delivery. Upon receipt of a request from a Participant after each
Exercise Date on which a purchase of shares occurs, the Company shall arrange
the delivery to such Participant, as appropriate, of a certificate representing
the shares purchased upon exercise of his/her option.
10. Withdrawal; Termination of Employment.
(a) A Participant may withdraw all but not less than all the payroll
deductions credited to his/her account and not yet used to exercise his/her
option under the Plan at any time by giving written notice to the Company in the
form of Exhibit B to this Plan. All of the Participant's payroll deductions
credited to his/her account will be paid to such Participant promptly after
receipt of notice of withdrawal, such Participant's option for the Purchase
Period will be automatically terminated, and no further payroll deductions for
the purchase of shares will be made during the Purchase Period. If a Participant
withdraws from a Purchase Period, payroll deductions will not resume at the
beginning of the succeeding Purchase Period unless the Participant delivers to
the Company a new subscription agreement.
(b) Upon a Participant's ceasing to be an Employee for any reason or
upon termination of a Participant's employment relationship (as described in
paragraph 2(i)), the payroll deductions credited to such Participant's account
during the Purchase Period but not yet used to exercise the option will be
returned to such Participant or, in the case of his/her death, to the person or
persons entitled thereto under paragraph 14, and such Participant's option will
be automatically terminated.
11. Interest. No interest shall accrue on the payroll deductions of a
Participant in the Plan.
12. Stock.
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<PAGE> 7
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be 100,000, subject to
adjustment upon changes in capitalization of the Company as provided in
paragraph 18. If on a given Exercise Date the number of shares with respect to
which options are to be exercised exceeds the number of shares then available
under the Plan, the Company shall make a pro rata allocation of the shares
remaining available for purchase in as uniform a manner as shall be practicable
and as it shall determine to be equitable.
(b) A Participant will have no interest or voting right in shares
covered by his/her option until such shares are actually purchased on the
Participant's behalf in accordance with the applicable provisions of the Plan.
No adjustment shall be made for dividends, distributions or other rights for
which the record date is prior to the date of such purchase.
(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or in the name of the Participant and
his/her spouse.
13. Administration.
(a) Administrative Body. The Plan shall be administered by the Board
of the Company or a committee of members of the Board appointed by the Board.
The Board or its committee shall have full and exclusive discretionary authority
to construe, interpret and apply the terms of the Plan, to determine eligibility
and to adjudicate all disputed claims filed under the Plan. Every finding,
decision and determination made by the Board or its committee shall, to the full
extent permitted by law, be final and binding upon all parties. Members of the
Board who are eligible Employees are permitted to participate in the Plan except
to the extent limited by subparagraph (b) of this paragraph 13.
(b) Rule 16b-3 Limitations. Notwithstanding the provisions of
subparagraph (a) of this paragraph 13, in the event that Rule 16b-3 promulgated
under The Securities Exchange Act of 1934, as amended, or any successor
provision ("Rule 16b-3") provides specific requirements for the administrators
of plans of this type, the Plan shall be only administered by such a body and in
such a manner as shall comply with the applicable requirements of Rule 16b-3.
Unless permitted by Rule 16b-3, no discretion concerning decisions regarding the
Plan shall be afforded to any committee or person that is not "disinterested" as
that term is used in Rule 16b-3.
14. Designation of Beneficiary.
(a) Each Participant will 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 an
Exercise Date on which the option is exercised but prior to delivery to such
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
prior to exercise of the option. If a Participant is married and the designated
beneficiary is not the spouse, spousal consent shall be required for such
designation to be effective.
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<PAGE> 8
(b) Such designation of beneficiary may be changed by the Participant
(and his or her spouse, if any) at any time by written notice. In the event of
the death of a Participant and in the absence of a beneficiary validly
designated under the Plan who is living at the time of such Participant's death,
the Company shall deliver such shares and/or cash to the executor or
administrator of the estate of the Participant, or if no such executor or
administrator has been appointed (to the knowledge of the Company), the Company,
in its discretion, may deliver such shares and/or cash to the spouse or to any
one or more dependents or relatives of the Participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the
Company may designate.
15. Transferability. Neither payroll deductions credited to a
Participant's account nor any rights with regard to the exercise of an option or
to receive shares under the Plan may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 14 hereof) by the Participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds from an Purchase Period in accordance with paragraph 10.
16. Use of Funds. All payroll deductions received or held by the
Company under the Plan may be used by the Company for any corporate purpose, and
the Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each
Participant in the Plan. Statements of account will be given to Participants at
least annually, which statements will set forth the amounts of payroll
deductions, the Purchase Price, the number of shares purchased and the remaining
cash balance, if any.
18. Adjustments Upon Changes in Capitalization, Dissolution; or
Merger or Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the Reserves, as well as the price per share of
Common Stock covered by each option under the Plan which has not yet been
exercised, shall be proportionately adjusted for any increase or decrease in the
number of issued shares of Common Stock resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Such adjustment shall
be made by the Board, whose determination in that respect shall be final,
binding and conclusive. Except as expressly provided herein, no issue by the
Company of shares of stock of any class, or securities convertible into shares
of stock of any class, shall affect, and no adjustment by reason thereof shall
be made with respect to, the number or price of shares of Common Stock subject
to an option. The Board may, if it so determines in the exercise of its sole
discretion, make provision for adjusting the Reserves, as well as the price
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<PAGE> 9
per share of Common Stock covered by each outstanding option, in the event the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock.
(b) Change in Ownership, Dissolution or Liquidation. In the event of
a proposed sale of all or substantially all of the assets of the Company, the
merger of the Company with or into another corporation, in which the Company
will not be the surviving corporation (other than a reorganization effectuated
primarily to change the state in which the Company is incorporated), or a
reverse merger in which the Company is the surviving corporation but in which
securities possessing more than fifty percent (50%) of the total combined voting
power of the Company's outstanding securities are transferred to a person or
persons different from the person or persons holding those securities
immediately prior to the transfer, each option under the Plan shall be assumed
or an equivalent option shall be substituted by such successor corporation or a
parent or subsidiary of such successor corporation, unless the Board determines,
in the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Purchase Period then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Board shortens the Purchase
Period then in progress in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify each Participant in writing, at
least ten (10) days prior to the New Exercise Date, that the Exercise Date for
his/her option has been changed to the New Exercise Date and that his/her option
will be exercised automatically on the New Exercise Date, unless prior to such
date he/she has withdrawn from the Purchase Period as provided in paragraph 10.
For purposes of this paragraph, an option granted under the Plan shall be deemed
to be assumed if, following the sale of assets or merger, the option confers the
right to purchase, for each share of option stock subject to the option
immediately prior to the sale of assets or merger, the consideration (whether
stock, cash or other securities or property) received in the sale of assets or
merger by holders of Common Stock for each share of Common stock held on the
effective date of the transaction (and if such holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding shares of Common Stock); provided, however, that if such
consideration received in the sale of assets or merger was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Board may, with the consent of the successor corporation and
the Participant, provide for the consideration to be received upon exercise of
the option to be solely common stock of the successor corporation or its parent
equal in fair market value to the per share consideration received by holders of
Common Stock in the sale of assets or merger.
19. Amendment or Termination.
(a) The Board of Directors of the Company may at any time and for any
reason terminate or amend the Plan. Except as provided in paragraph 18, no such
termination can affect options previously granted, provided that a Purchase
Period may be terminated by the Board of Directors on any Exercise Date if the
Board determines that the termination of the Plan is in the best interests of
the Company and its shareholders. Except as provided in paragraph 18, no
amendment may make any change in any option theretofore granted which adversely
affects the rights of any Participant. To the extent necessary to comply with
Rule 16b-3 or Section 423 of
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<PAGE> 10
the Code (or any successor rule or provision or any other applicable law or
regulation), the Company shall obtain shareholder approval in such a manner and
to such a degree as required.
(b) Without shareholder consent and without regard to whether any
Participant rights may be considered to have been "adversely affected," the
Board (or its committee) shall be entitled to change the Purchase Periods, limit
the frequency and/or number of changes in the amount withheld during Purchase
Periods, establish the exchange ratio applicable to amounts withheld in a
currency other than U.S. dollars, permit payroll withholding in excess of the
amount designated by a Participant in order to adjust for delays or mistakes in
the Company's processing of properly completed withholding elections, establish
reasonable waiting and adjustment periods and/or accounting and crediting
procedures to ensure that amounts applied toward the purchase of Common Stock
for each Participant properly correspond with amounts withheld from the
Participant's Compensation, and establish such other limitations or procedures
as the Board (or its committee) determines in its sole discretion advisable
which are consistent with the Plan.
20. Notices. All notices or other communications by a Participant to
the Company under or in connection with the Plan shall be deemed to have been
duly given when received in the form specified by the Company at the location,
or by the person, designated by the Company for the receipt thereof.
21. Conditions Upon Issuance of Shares. Shares shall not be issued
with respect to an option unless the exercise of such option and the issuance
and delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance. As a condition to the exercise of an option, the Company may require
the person exercising such option to represent and warrant at the time of any
such exercise that the shares are being purchased only for investment and
without any present intention to sell or distribute such shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned applicable provisions of law. In addition, no purchase rights
shall be exercised or shares issued hereunder before the Plan shall have been
approved by shareholders of the Company as provided in paragraph 24.
22. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board of Directors or its approval by the
shareholders of the Company. It shall continue in effect for a term of ten (10)
years unless sooner terminated under paragraph 19.
23. Additional Restrictions of Rule 16b-3. The terms and conditions
of options granted hereunder to, and the purchase of shares by, persons subject
to Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, such options shall contain,
and the shares issued upon exercise thereof shall be subject to, such additional
conditions and restrictions as may be required by Rule 16b-3 to
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qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
24. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. If such shareholder approval is obtained at
a duly held shareholders' meeting, the Plan must be approved by a majority of
the votes cast at such shareholders' meeting at which a quorum representing a
majority of all outstanding voting stock of the Company is, either in person or
by proxy, present and voting on the Plan. If such shareholder approval is
obtained by written consent, it must be obtained by the written consent of the
holders of a majority of all outstanding voting stock of the Company. However,
approval at a meeting or by written consent may be obtained by a lesser degree
of shareholder approval if the Board determines, in its discretion after
consultation with the Company's legal counsel, that such a lesser degree of
shareholder approval will comply with all applicable laws and will not adversely
affect the qualification of the Plan under Section 423 of the Code.
25. No Employment Rights. The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by the Company,
and it shall not be deemed to interfere in any way with the Company's right to
terminate, or otherwise modify, an employee's employment at any time.
26. Effect of Plan. The provisions of the Plan shall, in accordance
with its terms, be binding upon, and inure to the benefit of, all successors of
each employee participating in the Plan, including, without limitation, such
employee's estate and the executors, administrators or trustees thereof, heirs
and legatees, and any receiver, trustee in bankruptcy or representative of
creditors of such employee.
27. Applicable Law. The law of the State of California will govern
all matters relating to this Plan except to the extent it is superseded by the
laws of the United States.
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