<PAGE>
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 of Incorporation) (I.R.S. Employer Identification No.)
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
PHOTON DYNAMICS, INC. 1995 EMPLOYEE STOCK PURCHASE PLAN
CR TECHNOLOGY, INC. 1983 STOCK OPTION PLAN
CR TECHNOLOGY, INC. 1991 STOCK OPTION PLAN
(Full title of plans)
RICHARD L. DISSLY
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:
MATTHEW W. SONSINI, ESQ.
COOLEY GODWARD LLP
FIVE PALO ALTO SQUARE
3000 EL CAMINO REAL
PALO ALTO, CALIFORNIA 94306-2155
(650) 843-5000
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Maximum Proposed Maximum
Title of Securities Amount to be Offering Price Aggregate Offering Amount of
to be Registered Registered Per Share (1) Price (1) Registration Fee
---------- ------------- --------- ----------------
<S> <C> <C> <C> <C>
Stock Options and 843,986 $0.196-$61.50 $44,152,016.46 $11,656.13
Common Stock
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(h). The offering price per share
and aggregate offering price are based upon the average high and low
price of Registrant's Common Stock on January 25, 2000 as reported on
the Nasdaq National Market.
The chart below details the calculations of the registration fee:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
OFFERING PRICE PER AGGREGATE OFFERING
SECURITIES NUMBER OF SHARES SHARE PRICE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares issuable under the PDI 1995
Stock Option Plan 3,924 $29.385 $115,306.74
- ----------------------------------------------------------------------------------------------------
Shares reserved for future issuance
under the PDI 1995 Stock Option plan 346,076 $61.500 $21,283,674.00
- ----------------------------------------------------------------------------------------------------
Shares reserved for future issuance
under the PDI 1995 Employee Stock
Purchase Plan 250,000 $61.500 $15,375,000.00
- ----------------------------------------------------------------------------------------------------
Shares Issuable under the CRT 1983
Stock Option Plan 95,058 $0.196 $18,631.37
- ----------------------------------------------------------------------------------------------------
Shares reserved for future issuance
under the CRT 1983 Stock Option Plan 86,355 $61.500 $5,310,832.50
- ----------------------------------------------------------------------------------------------------
Shares issuable under the CRT 1991
Stock Option Plan 29,481 $0.455 $13,413.85
- ----------------------------------------------------------------------------------------------------
Shares reserved for future issuance
pursuant to the CRT 1991 Stock Option
Plan 33,092 $61.500 $2,035,158.00
- ----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PART II. INFORMATION REQUIRED IN THIS REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.
The following documents filed by Photon Dynamics, Inc. (the "Company") with the
Securities and Exchange Commission are incorporated by reference into this
Registration Statement:
(a) The Company's latest Annual Report on Form 10-KSB for the fiscal
year ended September 31, 1999, filed with the Securities Exchange
Commission (the "SEC") on October 27, 1999, pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act");
(b) All other reports filed by the Company pursuant to Sections 13(a)
or 15(d) of the Exchange Act since the end of the fiscal year covered
by the Annual Report on Form 10-KSB referred to in clause (a) above;
(c) The description of the Company's Common Stock which is contained in
the Registration Statement on Form 8-A filed with the SEC on November
14, 1995, under the Exchange Act, including any amendment or report
filed for the purpose of updating such description;
(d) The Company's Registration Statement on Form S-8 filed with the SEC
on February 22, 1999.
All reports and other documents subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act prior to the filing of a
post-effective amendment which indicates that all securities offered have been
sold or which deregisters all securities then remaining unsold, shall be deemed
to be incorporated by reference herein and to be a part of this registration
statement from the date of the filing of such reports and documents.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Our Bylaws provide that we will indemnify our directors and officers to the
fullest extent not prohibited by California law. We are also empowered under our
Articles of Incorporation and Bylaws to enter into indemnification contracts
with our directors, officers, employees and agents and to purchase insurance on
behalf of any person whom we are required or permitted to indemnify. Pursuant to
this provision, we have entered into indemnity agreements with each of our
directors and officers.
In addition, our Articles of Incorporation provide that, to the fullest extent
permitted by California law, our directors will not be liable for monetary
damages for breach of the directors' fiduciary duty of care to us and our
shareholders. This provision in the Articles of Incorporation does not eliminate
the duty of care, and in appropriate circumstances, equitable remedies such as
an injunction or other forms of non-monetary relief would remain available under
California law. Each director will continue to be subject to liability for
breach of the director's duty of loyalty to us, for acts or omissions not in
good faith or involving intentional misconduct or knowing and culpable
violations of law, that the director believes to be contrary to the best
interests of PDI or our shareholders, involving a reckless disregard for the
director's duty to PDI or our shareholders when the director was aware or should
have been aware of a risk of serious injury to PDI or our shareholders, or an
unexcused pattern of inattention that amounts to an abdication of the director's
duty to PDI or our shareholders, for improper transactions between the director
and PDI and for improper distributions to shareholders and loans to directors
and officers or for acts or omissions by the director as an officer. This
provision also does not affect a director's responsibilities under any other
laws, such as the federal securities laws or state or federal environmental
laws.
There is no pending litigation or proceeding involving a director, officer,
employee or other agent of PDI as to which indemnification is being sought, nor
is PDI aware of any pending or threatened litigation that may result in claims
for indemnification by any director, officer, employee or other agent.
<PAGE>
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
5.1 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 Photon Dynamics, Inc. 1995 Stock Option Plan, as amended
99.2* Photon Dynamics, Inc. 1995 Employee Stock Purchase Plan, as
amended
99.3 CR Technology, Inc. 1983 Stock Option Plan
99.4 CR Technology, Inc. 1991 Stock Option Plan
</TABLE>
* Incorporated by reference to the Company's Registration Statement on Form S-8
filed with the SEC on February 22, 1999.
ITEM 9. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the SEC pursuant to Rule 424(b)
(Section 230.424(b) of this chapter) if, in the aggregate, the
changes in volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in
the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement.
Provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
issuer pursuant to section 13 or section 15(d) of the Exchange Act that
are incorporated by reference herein.
(b) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of determining
any liability under the Securities Act, each filing of the registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange SEC such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in
<PAGE>
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
<PAGE>
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 San Jose, State of California, on January 27, 2000.
PHOTON DYNAMICS, INC.
/s/ Richard L. Dissly
---------------------
Richard L. Dissly
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Vincent F. Sollitto, Jr. and Richard L. Dissly,
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 SEC, 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 F. Sollitto, Jr. Chief Executive Officer and President January 27, 2000
- -------------------------------- (Principle Executive Officer)
Vincent F. Sollitto, Jr.
/s/ Richard L. Dissly Chief Financial Officer January 27, 2000
- -------------------------------- (Principle Financial and Accounting Officer)
Richard L. Dissly
/s/ Francois J. Henley Director January 27, 2000
- --------------------------------
Francois J. Henley
/s/ E. Floyd Kvamme Director January 27, 2000
- --------------------------------
E. Floyd Kvamme
/s/ Barry L. Cox Director January 27, 2000
- --------------------------------
Barry L. Cox
/s/ Michael J. Kim Director January 27, 2000
- --------------------------------
Michael J. Kim
/s/ Malcolm J. Thompson Director January 27, 2000
- --------------------------------
Malcolm J. Thompson
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------
<S> <C>
5.1 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 Photon Dynamics, Inc. 1995 Stock Option Plan, as amended
99.2* Photon Dynamics, Inc. 1995 Employee Stock Purchase Plan, as
amended
99.3 CR Technology, Inc. 1983 Stock Option Plan
99.4 CR Technology, Inc. 1991 Stock Option Plan
</TABLE>
* Incorporated by reference to the Company's Registration Statement on Form S-8
filed with the SEC on February 22, 1999.
<PAGE>
January 27, 2000
Photon Dynamics, Inc.
6325 San Ignacio Avenue
San Jose, California 95119
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 843,986
shares of the Company's Common Stock (the "Shares"). These Shares include; (a)
350,000 Shares issuable pursuant to the Company's 1995 Stock Option Plan, (b)
250,000 Shares issuable pursuant to the Company's 1995 Employee Stock Purchase
Plan, (c) 181,413 Shares issuable pursuant to the CR Technology, Inc. 1983 Stock
Option Plan, and (4) 62,573 Shares issuable pursuant to the CR Technology, Inc.
1991 Stock Option Plan.
In connection with this opinion, we have examined the Registration Statement and
the Company's Amended and Restated Articles of Incorporation and By-laws, 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 referenced
above and the Registration Statement, 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/ Matthew W. Sonsini
- ----------------------
Matthew W. Sonsini
<PAGE>
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to Photon Dynamics, Inc.'s 1995 Stock Option Plan,
Photon Dynamics, Inc.'s 1995 Employee Stock Purchase Plan, CR Technology,
Inc.'s 1983 Stock Option Plan and CR Technology, Inc.'s 1991 Stock Option
Plan of our report dated October 18, 1999 with respect to the consolidated
financial statements of Photon Dynamics, Inc. included in the Annual Report
on Form 10-KSB for the year ended September 30, 1999 filed with the
Securities and Exchange Commission.
San Jose, California
January 24, 2000
<PAGE>
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 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"). The Plan also permits the Company
to grant employees (other than officers and directors),
independent contractors, and consultants of the Company and its
Affiliates stock bonus awards pursuant to Section 8 below.
(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 parent 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
<PAGE>
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 for 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 as it may determine. A majority of the
Committee shall constitute a quorum and acts 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 or stock bonus awards 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 or stock
bonus awards.
(c) Except for options granted to Non-Employee Directors pursuant to
Section 7, the Committee may amend the terms of any outstanding
option or stock bonus award granted under this Plan, but any
amendment which would adversely affect the recipient's rights
under an outstanding option or stock bonus award shall not be made
without the recipient's written consent. The Committee may, with
the recipient's written consent, cancel any outstanding stock
option or accept any outstanding stock option in exchange for a
new option. Notwithstanding the foregoing, the Committee may (i)
reduce the exercise price of outstanding options, (ii) cancel
outstanding options and replace them with options with a lower
exercise price or (iii) accept outstanding stock options in
exchange for new options with a lower exercise price only with the
prior approval of the Company's stockholders.
(d) The Committee shall have the sole authority, in its absolute
discretion to adopt, amend, and rescind such rules 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 intruments evidencing options, Stock or stock
bonus awards granted under 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
<PAGE>
"Subcommittee") to the extent necessary to qualify such grants as
"performance-based compensation" under Section 162(m). In 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 and stock bonus awards 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.
(b) If there is any change in the Stock subject to any option or stock
bonus award 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 and stock bonus awards.
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, (i) 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 and (ii) only employees who are not also
officers or directors, independent contractors and consultants of the
Company or an Affiliate shall be eligible to receive stock bonus awards
pursuant to Section 8. 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 each stock option
shall not be less than per share fair market value of the Stock subject
to such option on the date the option 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 the
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
<PAGE>
(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 combined voting
power of the Company or an Affiliate, the term of each incentive
stock option shall be no more than five years, 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
clear 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 the 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 proceeding
sentence shall be applied by taking options into account in order
in which they were granted.
(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 the
Section 6(e). For this purpose, the pricing of an option shall be
treated as a cancellation of the existing option and 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 number of
<PAGE>
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 shall 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 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 be for ten years.
(d) Each Initial Grant shall vested and exercisable as to 5,000 of the
shares covered thereby on the date of the grant. Each Subsequent
Grant shall become vested as to 8.33% of the shares covered
thereby each month following the date of the grant, so that each
Subsequent Grant will fully exercisable one (1) year after its
grant date.
8. TERMS OF STOCK BONUS AWARDS
(a) Each stock bonus award agreement shall be in such form and shall
contain such terms and conditions as the Board shall deem
appropriate. The terms and conditions of stock bonus award
agreements may change from time to time, and the terms and
conditions of separate stock bonus award agreements need not be
identical, but each stock bonus award agreement shall include
(through incorporation of provisions hereof by reference in the
agreement or otherwise) the substance of each of the following
provisions:
(i) A stock bonus may be awarded in consideration for past
services actually rendered to the Company or an Affiliate
for its benefit.
<PAGE>
(ii) Shares of Stock granted under the stock bonus award
agreement may, but need not, be subject to a share
repurchase option in favor of the Company in accordance
with a vesting schedule to be determined by the Board.
(iii) In the event a stock bonus award recipient's service with
the Company and all of its Affiliates terminates, the
Company may reacquire any or all of the shares of Stock
held by the recipient that have not vested as of the date
of termination under the terms of the applicable stock
bonus award agreement.
(iv) Rights to acquire shares of Stock under a stock bonus award
agreement shall be transferable by the recipient only upon
such terms and conditions as are set forth in the stock
bonus award agreement, as the Board shall determine in its
discretion, so long as Stock awarded under the stock bonus
agreement remains subject to the terms of the stock bonus
award agreement.
9. 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.
10. 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 the state
and federal law, including any 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 and stock bonus awards 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 or stock bonus award 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 options or stock bonus awards
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 10.
<PAGE>
(c) Notwithstanding the provisions of Section 10(a) and 10(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.
11. ASSIGNABILITY OF OPTIONS
To the extent required by Rule 16b-3, no option granted pursuant to this
Plan shall be transferable by the holder except by the 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 the Rule, options
granted under Section 7 to Non-Employee Directors 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
authorized 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 optionee only will or 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 right to exercise the option by bequest or
intestate succession) would have been entitled to exercise the option
Sections 6, 7 and 12 had the option not been transferred.
12. 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, 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 exercise 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
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
<PAGE>
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 of an option 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 purchased
additional shares of Stock equal to the number 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. 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 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 or grant
or vesting (as appropriate) of a stock bonus award, the Company
shall withhold from the recipient an amount sufficient to satisfy
federal, state and local income and social security tax
withholding obligations.
(b) In the case of an option, 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
with respect to options granted pursuant to Section 7, above. Any
additional option shall be subject to the provisions of Section
6(e), above.
14. CHANGE IN CONTROL
(a) For purpose of this Section 14, a "Change in Control" shall be
deemed to occur upon:
<PAGE>
(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 the Board membership or by one or more
actions by written consent of stockholders, to be comprised
of individuals who either (A) 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 are still in office at the time such
election or nomination was approved by the Board;
(iii) Approved by the Company's stockholders of a merger or
consolidation in which the Company is not the surviving
entity, except for a transaction the principle purpose of
which is to change the state in which the Company is
incorporated;
(iv) Approval by the Company's stockholders of (A) the sale,
transfer or other disposition of all or substantially all
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.
(b) Except for options granted to Non-Employee Directors under Section
7, the Committee may provide in any stock option agreement or
stock bonus award agreement (or in an amendment thereto) that, in
the event of any Change in Control, any outstanding options or
stock bonus awards covered by such an agreement shall be fully
vested, nonforfeitable and become exercisable (if applicable), as
of the date of the Change in Control.
(c) If the Committee determines in incorporate a Change in Control
provision in any option agreement or stock bonus award 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 or stock bonus award shall remain
exercisable (if applicable) for the remaining term of the
<PAGE>
option or stock bonus award and (ii) in the event of a Change in
Control described in clauses (iii) or (iv) of paragraph (a) above,
the option or stock bonus award 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 14, an
outstanding option or stock bonus award may not be accelerated
under this Section 14 if and to the extent (i) such option or
stock bonus award is, in connection 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 or stock bonus award is to
be replaced with a cash incentive program for the successor
corporation that preserves the option spread or value of the stock
bonus award 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 or stock bonus award.
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 stockholder's meeting, but until stockholder
approval of the Plan is 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 thereof as grants under a nondiscretionary formula under Rule
16b-3 such provision (other than one relating to eligibility
requirements, or the price and amount of awards)
<PAGE>
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.
<PAGE>
CR TECHNOLOGY, INC.
1983 STOCK OPTION PLAN
1. PURPOSE
The Plan is intended to provide incentive to key employees and directors
of the Corporation and its Subsidiaries and to key consultants, to
encourage proprietary interest in the Corporation, to encourage such key
employees to remain in the employ of the corporation and its Subsidiaries
and to attract new employees with outstanding qualifications.
2. DEFINITIONS
(a) "BOARD" shall mean the Board of Directors of the Corporation.
(b) "CODE" shall mean the Internal Revenue Code of 1954, as amended.
(c) "COMMITTEE" shall mean the committee appointed by the Board in
accordance with Section 4 of the Plan.
(d) "COMMON STOCK" shall mean the no par value Common Stock of the
Corporation.
(e) "CORPORATION" shall mean CR Technology, Inc., a California
corporation.
(f) "DISABILITY" shall mean the condition of an Employee who is unable
to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or which has lasted or can be expected
to last for a continuous period of not less than twelve (12)
months.
(g) "EMPLOYEE" shall mean an individual who is employed (within the
meaning of Code Section 3401 and the regulations thereunder) by
the Corporation or a Subsidiary.
(h) "EXERCISE PRICE" shall mean the price per Share of Common Stock,
determined by the Committee, at which an Option may be exercised.
(i) "FAIR MARKET VALUE" shall mean the value of one (1) Share of
Common Stock, determined as follows:
(i) If the Shares are traded on an exchange, the price at which
Shares traded at the close of business on the date of
valuation;
(ii) If the Shares are traded over-the-counter on the NASDAQ
System, the mean between the bid and asked prices on said
System at the close of business on the date of valuation;
and
(iii) If neither (1) nor (2) applies, the fair market value as
determined by the Committee by taking into account (i) the
price at which securities of reasonably comparable
corporations are being traded, subject to appropriate
adjustments for the dissimilarities between such
corporations and the Corporation, and (ii) the earnings,
history, book value and prospects of the Corporation in
light of market conditions generally. Such determination
shall be conclusive and binding on all persons.
(j) "INCENTIVE STOCK OPTION" shall mean an option described in Section
422A(b) of the Code.
(k) "NON-STATUTORY STOCK OPTION" shall mean an option not described in
Section 422(b), 422A(b), 423(b) or 424(b) of the Code.
(l) "OPTION" shall mean any stock option granted pursuant to the Plan.
(m) "OPTIONEE" shall mean an Employee who has received an Option.
(n) "PLAN" shall mean this CR Technology, Inc. Stock Option Plan, as
it may be amended from time to time.
(o) "PURCHASE PRICE" shall mean the Exercise Price times the number of
Shares with respect to which an Option is exercised.
(p) "RETIREMENT" shall mean the voluntary termination of employment by
an Employee upon the attainment of age sixty-five (65) and the
completion of not less than twenty (20) years of service with the
Corporation or a Subsidiary.
<PAGE>
(q) "SHARE" shall mean one (1) share of Common Stock, adjusted in
accordance with Section 11 of the Plan (if applicable).
(r) "SUBSIDIARY" shall mean any corporation at least fifty percent
(50%) of the total combined voting power of which is owned by the
Corporation or by another Subsidiary.
3. EFFECTIVE DATE
The Plan was adopted by the Board effective December 14, 1983, subject to
the approval of the Corporation's stockholders pursuant to Section 16
hereof.
4. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall be
appointed by the Board and shall consist of not less than three (3)
members of the Board. The Board may from time to time remove members
from, or add members to, the Committee. Vacancies on the Committee,
however caused, shall be filled by the Board. The Board shall appoint
one of the members of the Committee as Chairman. The Committee shall
hold meetings at such times and places as it may determine. Acts of a
majority of the Committee at which a quorum is present, or acts reduced
to or approved in writing by a majority of the members of the Committee,
shall be the valid acts of the Committee.
The Committee shall from time to time at its discretion select the
Employees, directors and consultants who are to be granted Options,
determine the number of Shares to be optioned to each Optionee and
designate such Options as Incentive Stock Options or Non-statutory Stock
Options, except that no Incentive Stock Option may be granted to a
non-Employee director or a non-Employee consultant. A Committee member
shall in no event participate in any determination relating to Options
held by or to be granted to such Committee member. The interpretation and
construction by the Committee of any provisions of the Plan or of any
Option granted thereunder shall be final. No member of the Committee
shall be liable for any action or determination made in good faith with
respect to the Plan or any Option granted thereunder.
5. PARTICIPATION
(a) ELIGIBILITY
The Optionees shall be such persons as the Committee may select
from among the following classes of persons, subject to the terms
and conditions of (b) below:
(i) Employees (who may be officers, whether or not they are
directors);
(ii) Directors of the Corporation or of a Subsidiary; and
(iii) Consultants engaged by the Corporation or a Subsidiary.
For purposes of this Plan, an Optionee who is a director or a
consultant shall be deemed to be an Employee, and service as a
director or consultant shall be deemed to be employment, except
that no Incentive Stock Option may be granted to a non-Employee
director or non-Employee consultant.
(b) TEN-PERCENT SHAREHOLDERS
Any shareholder who owns more than ten percent (10%) of the total
combined voting power of all classes of outstanding stock of the
Corporation and who is eligible to receive an Option under the
Plan, its parent or any of its Subsidiaries shall not be eligible
to receive an Option unless (i) the Exercise Price of the Shares
subject to such Option is at least one hundred ten percent (110%)
of the Fair Market Value of such Shares on the date of grant and
(ii) in the case of an Incentive Stock option, such Option by its
terms is not exercisable after the expiration of five (5) years
from the date of grant.
(c) STOCK OWNERSHIP
For purposes of (b) above, in determining stock ownership, an
Employee shall be considered as owning the stock owned, directly
or indirectly, by or for his or her brothers and sisters, spouse,
ancestors and lineal descendants. Stock owned, directly or
indirectly, by or for a corporation, partnership, estate or trust
shall be considered as being owned proportionately by or for its
shareholders, partners or beneficiaries. Stock with respect to
which such Employee holds an Option shall not be counted.
(d) OUTSTANDING STOCK
For purposes of (b) above, "outstanding stock" shall include all
stock actually issued and outstanding immediately after the grant
of the Option to the Optionee. "Outstanding stock" shall not
include shares authorized for issue under outstanding Options held
by the Optionee or by any other person.
<PAGE>
6. STOCK
The stock subject to Options granted under the Plan shall be Shares of
the Corporation's authorized but unissued or reacquired Common Stock.
The aggregate number of Shares which may be issued upon exercise of
Options under the Plan shall not exceed one hundred ninety-two thousand,
nine hundred, ninety four (192,994)(1). The number of Shares subject to
Options outstanding at any time shall not exceed the number of Shares
remaining available for issuance under the Plan. In the event that any
outstanding Option for any reason expires or is terminated, the Shares
allocable to the unexercised portion of such Option may again be made
subject to an Option. Any Shares which are the subject of an Option
granted pursuant to this Plan shall vest at the rate of at least twenty
percent (20%) over a five year period from the date the Option is
granted. Any Option granted pursuant to this Plan may become exercisable
over a shorter period then five years, but must vest, in any event, at
the rate of at least twenty percent (20%) per year. In the event that
any Shares are reacquired upon exercise of the Corporation's right of
repurchase under Section 12 hereof or the Corporation's right of first
refusal under Section 13 hereof, such Shares may again be made subject to
an Option. The limitations established by this Section 6 shall be
subject to adjustment in the manner provided in Section 10 hereof upon
the occurrence of an event specified therein.
7. TERMS AND CONDITIONS OF OPTIONS
(a) STOCK OPTION AGREEMENTS
Options shall be evidenced by written stock option agreements in
such form as the Committee shall from time to time determine.
Such agreements shall comply with and be subject to the terms and
conditions set forth below.
(b) NUMBER OF SHARES
Each Option shall state the number of Shares to which it pertains
and shall provide for the adjustment thereof in accordance with
the provisions of Section 10 hereof.
(c) EXERCISE PRICE
Each Option shall state the Exercise Price. The Exercise Price in
the case of any Incentive Stock Option shall not be less than the
Fair Market Value on the date of grant and, in the case of an
Incentive Stock Option or Non-statutory Stock Option granted to an
Optionee described in Section 5(b) hereof, shall not be less than
one hundred ten percent (110%) of the Fair Market Value on the
date of grant. The Exercise Price in the case of any Non-statutory
Stock Option shall not be less than 85% of the Fair Market Value
on the date of grant or 85% of the Fair Market Value on the day
the Non-statutory Stock Option is exercised.
(d) MEDIUM AND TIME OF PAYMENT
The Purchase Price shall be payable in full in United States
dollars upon the exercise of the Option; provided, however, that
if the applicable Option Agreement so provides the Purchase Price
may be paid (i) by the surrender of Shares in good form for
transfer, owned by the person exercising the Option and having a
Fair Market Value on the date of exercise equal to the Purchase
Price, or in any combination of cash and Shares, as long as the
sum of the cash so paid and the Fair Market Value of the Shares so
surrendered equals the Purchase Price, or (ii) with a full
recourse promissory note executed by the Optionee. The interest
rate and other terms and conditions of such note shall be
determined by the Committee; provided, however, that such note
shall have a term of not more than five (5) years and shall bear
interest at a rate of not less than nine percent (9%) per annum.
The Committee may require that the Optionee pledge his or her
Shares to the Corporation for the purpose of securing the payment
of such note, and the Corporation may retain possession of the
stock certificate(s) representing such Shares in order to perfect
its security interest.
In the event the Corporation determines that it is required to
withhold state or Federal income tax as a result of the exercise
of an Option, as a condition to the exercise thereof, an Employee
may be required to make arrangements satisfactory to the
Corporation to enable it to satisfy such withholding requirements.
(e) TERM AND NON-TRANSFERABILITY OF OPTIONS
Each Option shall state the time or times when all or part thereof
becomes exercisable. No Option shall be exercisable after the
expiration of ten (10) years from the date it was granted, and no
Incentive Stock Option granted to an Optionee described in Section
5(b) hereof shall be exercisable after the expiration of five (5)
years from the date it was granted. During the lifetime of the
Optionee, the Option shall be exercisable only by the Optionee and
shall not be assignable or transferable. In the event of the
Optionee's death, the Option shall not be transferable by the
Optionee other than by will or the laws of descent and
distribution.
(f) TERMINATION OF EMPLOYMENT (EXCEPT BY DEATH, DISABILITY OR
RETIREMENT)
- ------------------
(1) As constituted following the conversion of CR Technology stock options into
Photon Dynamics stock options using an exchange ratio of 1.203343 shares for
each share of CR Technology.
<PAGE>
If an Optionee ceases to be an Employee for any reason other than
his or her death, Disability or Retirement, such Optionee shall
have the right, subject to the restrictions of (e) above, to
exercise the Option at any time within three (3) months after
termination of employment, but only to the extent that, at the
date of termination of employment, the Optionee's right to
exercise such Option had accrued pursuant to the terms of the
applicable option agreement and had not previously been exercised;
provided, however, that if the Optionee was terminated for cause
(as defined in the applicable option agreement) any Option not
exercised in full prior to such termination shall be cancelled.
For this purpose, the employment relationship shall be treated as
continuing intact while the Optionee is on military leave, sick
leave or other bona fide leave of absence (to be determined in the
sole discretion of the Committee). The foregoing notwithstanding,
in the case of an Incentive Stock Option, employment shall not be
deemed to continue beyond the ninetieth (90th) day after the
Optionee ceased active employment, unless the Optionee's
reemployment rights are guaranteed by statute or by contract.
(g) DEATH OF OPTIONEE
If an Optionee dies while an employee, or after ceasing to be an
Employee but during the period while he or she could have
exercised the Option under this Section 7, and has not fully
exercised the Option, then the Option may be exercised in full,
subject to the restrictions of (e) above, at any time within
twelve (12) months after the Optionee's death by the executors or
administrators of his or her estate or by any person or persons
who have acquired the Option directly from the Optionee by bequest
or inheritance, but only to the extent that, at the date of death,
the Optionee's right to exercise such Option had accrued and had
not been forfeited pursuant to the terms of the applicable Option
Agreement and had not previously been exercised.
(h) DISABILITY OF OPTIONEE
If an Optionee ceases to be an Employee by reason of Disability,
such Optionee shall have the right, subject to the restrictions of
(e) above, to exercise the Option at any time within twelve (12)
months after termination of employment, but only to the extent
that, at the date of termination of employment, the Optionee's
right to exercise such Option had accrued pursuant to the terms of
the applicable option agreement and had not previously been
exercised.
(i) RETIREMENT OF OPTIONEE
If an Optionee ceases to be an Employee by reason of Retirement,
such Optionee shall have the right, subject to the restrictions of
(e) above, to exercise the Option at any time within three (3)
months after termination of employment, but only to the extent
that, at the date of termination of employment, the Optionee's
right to exercise such Option had accrued pursuant to the terms of
the applicable option agreement and had not previously been
exercised.
(j) RIGHTS AS A STOCKHOLDER
An Optionee, or a transferee of an Optionee, shall have no rights
as a stockholder with respect to any Shares covered by his or her
Option until the date of the issuance of a stock certificate for
such Shares. No adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property),
distributions or other rights for which the record date is prior
to the date such stock certificate is issued, except as provided
in Section 10 hereof.
(k) INFORMATION TO OPTIONEES
So long as any Options are outstanding or any Employee holds
Common Stock received upon the exercise of an Option, the
Corporation shall provide all Optionees and all Employees who have
exercised such Options, on an annual basis, financial and other
information concerning the Corporation and shall provide all
Employees who receive Options the opportunity to discuss the
business prospects of the Corporation with an executive officer of
the Corporation.
(l) MODIFICATION, EXTENSION AND RENEWAL OF OPTIONS
Within the limitations of the Plan, the Committee may modify,
extend or renew outstanding Options or accept the cancellation of
outstanding Options (to the extent not previously exercised) for
the granting of new Options in substitution therefor. The
foregoing notwithstanding, no modification of an Option shall,
without the consent of the Optionee, alter or impair any rights or
obligations under any Option previously granted.
(m) SEQUENTIAL EXERCISE
An Incentive Stock Option (the "New Option") shall not be
exercisable with respect to all or any part of the Shares subject
thereto while there is outstanding any other Incentive Stock
Option, granted to the Optionee (under this Plan or otherwise)
prior to the grant of the New Option, to purchase any stock in the
Corporation, in a parent or Subsidiary of the Corporation, or in
any predecessor corporation. For purposes of the preceding
sentence, an Incentive Stock Option shall be treated as
"outstanding" until such Option is exercised in full or expires by
reason of the lapse of time.
(n) OTHER PROVISIONS
<PAGE>
The stock option agreements authorized under the Plan may contain
such other provisions not inconsistent with the terms of the Plan
(including, without limitation, restrictions upon the exercise of
the Option) as the Committee shall deem advisable.
8. LIMITATION ON ANNUAL AWARDS
(a) GENERAL RULE
The aggregate Fair Market Value (determined as of the date an
option is granted) of the stock for which any Optionee may be
granted Incentive Stock Options in any calendar year under this
Plan and all other plans maintained by the Corporation, its parent
or its Subsidiaries shall not exceed the sum of (i) $100,000 plus
(ii) any unused limit carryover(s) to such year.
(b) CARRYOVERS
For purposes of (a) above, an "unused limit carryover" shall arise
only in a calendar year commencing after December 31, 1980, and
shall be equal to one-half of the excess of (i) $100,000 over (ii)
the aggregate Fair Market Value (determined as of the date an
Option is granted) of the stock for which the Optionee is granted
Incentive Stock Options in such year under this Plan or under any
other plan maintained by the Corporation, its parent or any
Subsidiary. The unused limit carryover arising in any calendar
year may be carried over to any of the three (3) consecutive
calendar years next following such year, but only to the extent
not used in an earlier calendar year. The value of the Shares for
which Options are granted in any calendar year shall be applied
first against the basic $100,000 limit for such year and then
against any unused limit carryovers which may be carried over to
such year in the order of the calendar years in which such
carryovers arose.
9. TERM OF PLAN
Options may be granted pursuant to the Plan until the expiration of the
Plan on December 14, 1993.
10. RECAPITALIZATIONS
Subject to any required action by stockholders, the number of Shares
covered by the Plan as provided in Section 6 hereof, the number of Shares
covered by each outstanding Option and the Exercise Price thereof shall
be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a subdivision or consolidation of Shares or
the payment of a stock dividend (but only of Common Stock) or any other
increase or decrease in the number of issued Shares effected without
receipt of consideration by the Corporation.
Subject to any required action by stockholders, if the Corporation is the
surviving corporation in any merger or consolidation, each outstanding
Option shall pertain and apply to the securities to which a holder of the
number of Shares subject to the Option would have been entitled. If the
Corporation is not the surviving corporation in any merger or
consolidation, then any outstanding Options shall be fully vested and
exercisable until five days prior to merger or consolidation (but shall
terminate thereafter) unless provisions are made in connection with such
transaction for the continuance of the Plan and the assumption or the
substitution for outstanding Options or new options covering the stock of
a successor employer corporation, or a parent or subsidiary thereof, with
appropriate adjustments as to the number and kind of shares and prices.
A liquidation or dissolution of the Corporation shall cause each
outstanding Option to terminate.
To the extent that the foregoing adjustments relate to securities of the
Corporation, such adjustments shall be made by the Committee, whose
determination shall be conclusive and binding on all persons.
Except as expressly provided in this Section 10, the Optionee shall have
no rights by reason of any subdivision or consolidation of shares of
stock of any class, the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class or by
reason of any dissolution, liquidation, merger or consolidation or
spin-off of assets or stock of another corporation, and any issue by the
Corporation of shares of stock of any class, or securities convertible
into shares of stock of any class, shall not affect, and no adjustment by
reason thereof shall be made with respect to, the number or Exercise
Price of Shares subject to an Option.
The grant of an Option pursuant to the Plan shall not affect in any way
the right or power of the Corporation to make adjustments,
reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
11. SECURITIES LAW REQUIREMENTS
(a) LEGALITY OF ISSUANCE
No Shares shall be issued upon the exercise of any Option unless
and until the Corporation has determined that:
(i) it and the Optionee have taken all actions required to
register the Shares under the Securities Act of 1933, as
amended (the "Act"), or to perfect an exemption from the
registration requirements thereof;
(ii) any applicable listing requirement of any stock exchange on
which the Common Stock is listed has been satisfied; and
<PAGE>
(iii) any other applicable provision of state or Federal law has
been satisfied.
(b) RESTRICTIONS ON TRANSFER; REPRESENTATIONS OF OPTIONEE; LEGENDS
Regardless of whether the offering and sale of Shares under the
Plan has been registered under the Act or has been registered or
qualified under the securities laws of any state, the Corporation
may impose restrictions upon the sale, pledge or other transfer of
such Shares (including the placement of appropriate legends on
stock certificates) if, in the judgment of the Corporation and its
counsel, such restrictions are necessary or desirable in order to
achieve compliance with the provisions of the Act, the securities
laws of any state or any other law. In the event that the sale of
Shares under the Plan is not registered under the Act but an
exemption is available which requires an investment representation
or other representation, each Optionee shall be required to
represent that such Shares are being acquired for investment, and
not with a view to the sale or distribution thereof, and to make
such other representations as are deemed necessary or appropriate
by the Corporation and its counsel. Stock certificates evidencing
Shares acquired under the Plan pursuant to an unregistered
transaction shall bear the following restrictive legend and such
other restrictive legends as are required or deemed advisable
under the provisions of any applicable law:
"THE SALE OF THE SECURITIES REPRESENTED
HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 ('ACT'). ANY TRANSFER
OF SUCH SECURITIES WILL BE INVALID UNLESS A
REGISTRATION STATEMENT UNDER THE ACT IS IN
EFFECT AS TO SUCH TRANSFER OR IN THE OPINION
OF COUNSEL FOR THE ISSUER SUCH REGISTRATION
IS UNNECESSARY IN ORDER FOR SUCH TRANSFER TO
COMPLY WITH THE ACT."
The Corporation shall also place legends on stock certificates
representing its right of first refusal and its right of
repurchase contained in Sections 13 and 12 hereof (where
applicable). Any determination by the Corporation and its counsel
in connection with any of the matters set forth in this Section 11
shall be conclusive and binding on all persons.
(c) REGISTRATION OR QUALIFICATION OF SECURITIES
The Corporation may, but shall not be obligated to, register or
qualify the sale of Shares under the Act or any other applicable
law. The Corporation shall not be obligated to take any
affirmative action in order to cause the sale of Shares under the
Plan to comply with any law.
(d) EXCHANGE OF CERTIFICATES
If, in the opinion of the Corporation and its counsel, any legend
placed on a stock certificate representing Shares sold under the
Plan is no longer required, the holder of such certificate shall
be entitled to exchange such certificate for a certificate
representing the same number of Shares but without such legend.
12. THE CORPORATION'S RIGHT OF REPURCHASE
At the Committee's discretion, shares issued under the Plan may be
subject to a right, but not an obligation, of repurchase by the
Corporation ("Right of Repurchase"), if the Optionee ceases to be an
Employee within such amount of time, as shall be determined by the
Committee, of the grant of the Option pursuant to which such Shares were
issued. The Right of Repurchase of the Corporation or its assignees must
be exercised within ninety (90) days after the cessation of employment.
Shares issued by the Corporation shall not be transferable by the
Optionee during the period during which the Right of Repurchase applies,
and the Corporation may take such steps as it deems necessary to ensure
compliance with this restriction. The Right of Repurchase shall take
such form and contain such provisions including, without limitation, the
price per Share at which the Corporation may exercise the Right of
Repurchase (which shall not be less than the price paid by the Optionee),
and the procedure pursuant to which the Right of Repurchase may be
exercised, as may be determined by the Committee. The Right of
Repurchase must be exercised by the Corporation as to all of the Shares,
not a portion thereof, subject to the Right of Repurchase. The Right of
Repurchase shall be exercisable by the Corporation at a price per Share
equal to the greater of the original exercise price per Share or the
present Fair Market Value per Share. The price to be paid by the
Corporation shall be paid in cash or by check of the Corporation. The
Right of Repurchase with respect to different Optionees may be subject to
different terms, conditions and restrictions in the discretion of the
Committee.
13. THE CORPORATION'S RIGHT OF FIRST REFUSAL
At the discretion of the Committee, in the event that an Optionee
proposes to sell, pledge or otherwise transfer any Shares acquired under
the Plan, or any interest in such Shares, to any person or entity, the
Corporation may have a right of first refusal (the "Right of First
Refusal") with respect to such Shares. The Right of First Refusal shall
be exercised at a price equal to the price offered to the Optionee by a
third party bona fide purchaser, or on the same terms as those offered by
a third party bona fide transferee, if the proposed transfer does not
involve a sale. The Right of First Refusal must be exercised in whole,
and not in part, within thirty (30) days of the receipt of notice by the
Corporation of the proposed sale, pledge or transfer. The Right of First
Refusal shall take such form and contain such provisions as may be
determined by the Committee. The Right of First Refusal with respect to
different Optionees, or with respect to the same Optionee at different
times, may be subject to different terms, conditions and restrictions in
the discretion of the Committee.
14. AMENDMENT OF THE PLAN
<PAGE>
The Board may from time to time, with respect to any Shares at the time
not subject to Options, suspend or discontinue the Plan or revise or
amend it in any respect whatsoever except that, without the approval of
the Corporation's stockholders, no such revision or amendment shall:
(a) Increase the number of Shares subject to the Plan;
(b) Change the designation in Section 5 hereof with respect to the
classes of persons eligible to receive Options; or
(c) Amend this Section 14 to defeat its purpose.
15. APPLICATION OF FUNDS
The proceeds received by the Corporation from the sale of Common Stock
pursuant to the exercise of an Option will be used for general corporate
purposes.
16. APPROVAL OF STOCKHOLDERS
The Plan shall be subject to approval by the affirmative vote of the
holders of a majority of the outstanding shares present and entitled to
vote at the first annual meeting of stockholders of the Corporation
following the adoption of the Plan, and in no event later than December
14, 1984. Prior to such approval, Options may be granted but shall not
be exercisable. Any amendment described in Section 14 shall also be
subject to approval by the Corporation's stockholders.
17. EXECUTION
To record the adoption of the Plan by the Board on December 14, 1983, the
Corporation has caused its authorized officers to affix the corporate
name and seal hereto.
<PAGE>
CR TECHNOLOGY, INC.
1991 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN
The purpose of this 1991 Stock Option Plan (the "Plan") of CR Technology,
Inc., a California (the "Company"), are (a) to insure the retention of
the services of existing executive personnel, key employees and
non-employee directors of the Company or its affiliates; (b) to attract
and retain competent new executive personnel and key employees; (c) to
provide incentive to all such personnel, employees and non-employee
directors to devote their utmost effort and skill to the advancement and
betterment of the Company, by permitting them to participate in the
ownership of the Company and thereby in the success and increased value
of the Company; and (d) to allow consultants, business associates and
others with important business relationships with the Company the
opportunity to participate in the ownership of the Company and thereby
have an interest in the success and increased value of the Company.
2. SHARES SUBJECT TO THE PLAN
The shares of stock subject to the incentive options having the terms and
conditions set forth in Section 6 below (hereinafter "incentive options")
and/or nonqualified options having the terms and conditions set forth in
Section 7 below (hereinafter "nonqualified options") and other provisions
of the Plan shall be shares of the Company's authorized but unissued or
reacquired common stock (herein sometimes referred to as the "Common
Stock"). The total number of shares of the Common Stock of the Company
which may be issued under the Plan shall not exceed, in the aggregate,
180,501 shares (1). The limitations established by the preceding
sentence shall be subject to adjustment as provided in Section 8 below.
In the event that any outstanding incentive option or nonqualified option
granted under the Plan can no longer under any circumstances be
exercised, or in the event that any shares purchased pursuant to the Plan
are reacquired by the Company, for any reason, the shares of Common Stock
allocable to the unexercised portion of such incentive option or
nonqualified option, or the shares reacquired, as the case may be, may
again be subject to grant or issuance under the Plan.
3. ELIGIBILITY
(a) INCENTIVE OPTIONS. Officers and other key employees of the
Company or of any subsidiary corporation (including directors if
they are also employees of the Company or a subsidiary), as may be
determined by the Board or the Committee, who qualify for
incentive stock options under the applicable provisions of the
Internal Revenue Code, will be eligible for selection to receive
incentive options under the Plan. An employee who has been
granted an incentive option may, if otherwise eligible, be granted
a nonqualified option or options or an additional incentive option
or options if the Board or Committee shall so determine.
(b) NONQUALIFIED OPTIONS. Officers and other key employees of the
company or of any subsidiary corporation, any member of the Board
of Directors of the Company, whether or not he or she is employed
by the Company, or consultants, business associates or others with
important business relationships with the Company, will be
eligible to receive nonqualified options under the Plan. An
individual who had been granted a nonqualified option may, if
otherwise eligible, be granted an incentive option or options (if
otherwise eligible) or an additional nonqualified option or
options if the Board or Committee shall so determine.
(c) DIRECTORS. Notwithstanding any provision hereof to the contrary,
in the event shares of the Company's Common Stock are registered
under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), no director of the Company shall be eligible to
receive any option under the Plan, unless (A) if granted by action
of the Board of Directors, a majority of the Board and a majority
of the directors acting in the matter are at the date of such
section "disinterested persons," or (B) if granted by action of
the committee, all members of the Committee are at the date of
such action "disinterested persons." For the purposes hereof, a
"disinterested person" shall mean a person so defined in Rule
16b-3 promulgated pursuant to the Securities Exchange Act of 1934
as the same may be in effect from time to time, or any successor
rule or provision thereto.
4. ADMINISTRATION OF THE PLAN
(a) This Plan shall be administered by the Board of Directors of the
Company (the "Board") or by a committee (the "committee")
consisting of three (3) or more persons, at least two of whom
shall be directors of the Company, who shall be appointed by, and
serve at the pleasure of, the Board of Directors. No person
serving as a member of the Board or the Committee shall act on any
matter relating solely to such person's own interests under the
Plan or any option thereunder. For purposes of the Plan, the term
"Administrator" shall mean the Board, or if the Board delegates
responsibility for any matter to the Committee, the Committee.
The Administrator may from time to time, in its discretion,
determine which persons shall be granted incentive options or
nonqualified options under the Plan, the terms thereof, and the
number of shares for which an incentive option or options or
nonqualified option or options shall be granted.
(b) The Administrator shall have full and final authority to determine
the persons to whom, and the time or times at which, incentive
options or nonqualified options shall be granted, the number of
shares to be represented by each incentive option and nonqualified
option and the consideration to be received by the Company upon
the exercise thereof; to interpret the Plan; to amend and rescind
rules and regulations relating to the Plan; to determine the form
and content of the incentive options or nonqualified options to be
granted under the Plan; to determine the identity or capacity of
any persons who may be entitled to exercise a participant's rights
under any incentive option or nonqualified option under the Plan;
to correct any defect or supply
- ----------------------
(1) As constituted following the conversion of CR Technology stock options into
Photon Dynamics stock options using an exchange ratio of 1.203343 shares for
each share of CR Technology.
<PAGE>
any omission or reconcile any inconsistency in the Plan or in any
incentive option or nonqualified option in the manner and to the
extent the Board or Committee deems desirable to carry the Plan,
incentive option or nonqualified option into effect; to accelerate
the exercise date of any incentive option or nonqualified option;
to provide for an option to the company to repurchase any shares
issued upon exercise of any option upon termination of employment;
and to make all other determinations necessary or advisable for
the administration of the Plan, but only to the extent not
contrary to the express provisions of the Plan. Any action,
decision, interpretation or determination by the Administrator
with respect to the application or administration of the Plan
shall be final and binding on all participants and prospective
participants.
5. OPTION PRICE OF SHARES
(a) INCENTIVE OPTIONS. The exercise price of the shares of Common
Stock covered by each incentive option granted under the Plan
shall not be less than the fair market value of such shares on the
date the incentive option is granted; provided, however, that the
exercise price shall not be less than 110% of the fair market
value if the person to whom such options are granted owns 10% or
more of the total combined voting power of all classes of stock of
the Company or of its parent or subsidiary corporation.
(b) NONQUALIFIED OPTIONS. The exercise price of the shares of Common
Stock covered by each nonqualified option granted under the Plan
shall not be less than eighty-five percent (85%) of the fair
market value of such shares on the date the nonqualified option is
granted.
(c) FAIR MARKET VALUE. For purposes of this Section 5, fair market
value shall, if the Common Stock is not listed or admitted to
trading on a stock exchange or the NASDAQ National Market System
on the over-the-counter market, be the average of the closing bid
price and asked price of the Common Stock in the over-the-counter
market on the date the incentive option or nonqualified option is
granted or, if the Common Stock is then listed or admitted to
trading on any stock exchange or the NASDAQ National market
System, the closing sale price on such day on the principal stock
exchange on which the Common Stock is then listed or admitted to
trading or the NASDAQ National Market System, as the case may be.
If no closing bid and asked prices are quoted on such day, or if
no sale takes place on such day on such principal exchange or on
the NASDAQ National Market System, then the average of the closing
bid and asked prices on the next preceding day on which such
prices were quoted, or closing sale price of the common Stock on
such principal exchange or the NASDAQ National Market System on
the next preceding day on which a sale occurred, as the case may
be, shall be deemed to be the fair market value of the Common
Stock. During such times as there is not a market price
available, the fair market value of the Company's Common Stock
shall be determined by the Administrator, which shall consider,
among other facts which it considers to be relevant, the book
value of such stock and the earnings of the Company. The exercise
price shall be subject to adjustment as provided in Section 8
below.
6. TERMS AND CONDITIONS OF INCENTIVE OPTIONS
Each incentive option granted pursuant to this Plan shall be evidenced by
a written incentive Option Agreement which shall specify that the options
subject thereto are incentive options within the meaning of Section 422A
of the Internal Revenue Code of 1986, as amended. The granting of an
incentive option shall take place only when a written Incentive Option
Agreement shall have been duly executed and delivered by or on behalf of
the Company to the optionee to whom such incentive option shall be
granted. Neither anything contained in the Plan nor in any resolution
adopted or to be adopted by the Administrator shall constitute the
granting of any incentive option. The Incentive Option Agreement shall
be in such form as the Administrator shall, from time to time, recommend,
but shall comply with and be subject to the following terms and
conditions:
(a) MEDIUM AND TIME OF PAYMENT. The exercise price of an incentive
option shall be payable (i) in United States dollars payable in
cash, certified check, or bank draft; (ii) subject to any legal
restrictions on the acquisition or purchase of its shares by the
Company, by the delivery of shares of Common Stock which shall be
deemed to have a value to the Company equal to the aggregate fair
market value of such shares determined at the date of such
exercise in accordance with the provisions of Section 5 above;
(iii) in the discretion of the Administrator, by the issuance of a
promissory note in a form acceptable to the Administrator, or (iv)
any combination of (i), or (ii) or (iii) above.
(b) NUMBER OF SHARES. The incentive option shall state the total
number of shares to which it pertains.
(c) TERM OF INCENTIVE OPTION. Each incentive option granted under the
Plan shall expire within a period of not more than ten (10) years
from the date the incentive option is granted; provided, however,
that the incentive option shall expire within a period of not more
than ten (10) years from the date the incentive option is granted;
provided, however, that the incentive option shall expire within a
period of not more than five (5) years if granted to a person who
owns more than 10% of the combined voting power of all classes of
stock of the Company or of its parent or subsidiary corporation.
(d) DATE OF EXERCISE. The Administrator may, in its discretion,
provide that an incentive option may be exercised immediately or
that it may not be exercised in whole or in part for any specified
period or periods of time or subject to the completion of
specified projects, the fulfillment of specified duties or
responsibilities or the fulfillment of specified duties or
responsibilities or the fulfillment of specified financial or
other objectives. Except as may be so provided, any incentive
option may be exercised in whole at any time or in part from time
to time during its term.
<PAGE>
(e) TERMINATION OF ASSOCIATION EXCEPT UPON DEATH OR DISABILITY. In
the event of an optionee's termination of association with the
Company (as hereinafter defined) for any reason other than his
death or disability, (i) all incentive options granted to any such
optionee pursuant to this Plan which are not exercisable at the
date of such termination of association shall terminate
immediately and become void and of no effect, and (ii) all
incentive options granted to any such optionee pursuant to this
Plan which are exercisable at the date of such termination of
association may be exercised (but only to the extent such options
were exercisable as of the date of such termination of
association) at any time within three (3) months of the date of
such termination of association, but in any event no later than
the date of expiration of the incentive option period, and if not
so exercised within such time shall become void and of no effect
at the end of such time. For purposes of this Plan, the term
"termination of association" with the Company shall mean (i) for
any person who is an employee of the Company or a subsidiary of
the Company but not also a director of the Company, the cessation
of such person's employment with the Company or a subsidiary of
the Company, or any corporation or a parent or subsidiary of a
corporation issuing and assuming an option in a transaction to
which Section 425(a) of the Internal Revenue Code applies
(collectively, an "Affiliate"), (ii) for any person who is both a
director of the company and an employee of the company or a
subsidiary or Affiliate of the Company, the cessation of both the
employment and status as a director of such person, and (iii) for
any person who is a consultant to the Company and is not an
employee or director of the Company, the termination of such
person's consulting relationship with the Company.
(f) DEATH OR DISABILITY OF OPTIONEE. In the event of an optionee's
termination of association with the Company by reason of his or
her death or disability, (i) all incentive options granted to such
person pursuant to this Plan which are not exercisable at the date
of such termination of association shall terminate immediately and
become void and of no effect, and (ii) all incentive options
granted to such person pursuant to this Plan which are exercisable
at the date of such termination of association may be exercised
(but only to the extent they were exercisable as of the date of
such termination of association) at any time within one (1) year
after the optionee's termination of association as a result of
such death or disability, but in any event no later than the date
of expiration of the incentive option period, by such optionee, or
in the event of death, by the executors or administrators of the
optionee's estate or by any person or persons who shall have
acquired the incentive option directly from the optionee by
bequest or inheritance. At the end of such one (1) year period,
all incentive options held by such optionee, to the extent they
remain unexercised, shall terminate and become void and of no
effect.
(g) RIGHTS AS A SHAREHOLDER. An optionee or a transferee of an
incentive option shall have no rights as a shareholder with
respect to any shares of Common Stock covered by his or her
incentive option until the date of the issuance of a share
certificate to him or her for such shares. No adjustment shall be
made for dividends or distributions or other rights for which the
record date is prior to the date such share certificate is issued.
(h) NONASSIGNABILITY OF RIGHTS. No incentive option shall be
assignable or transferable by the person receiving same except by
will or the laws of descent and distribution. During the life of
such person, the incentive option shall be exercisable only by him
or her.
(i) LIMITATION. Notwithstanding any other provisions of the Plan, the
aggregate fair market value (determined in accordance with the
provisions of Section 5 above as of the time the incentive option
is granted) of the shares of Common Stock with respect to which
incentive stock options are exercisable for the first time by the
optionee during any calendar year (under all such plans of the
Company and its parent and subsidiary corporations) shall not
exceed $100,000.
(j) OTHER PROVISIONS. Any Incentive Option Agreement may contain such
other terms, provisions and conditions as may be determined by the
Administrator, which are not inconsistent with the provisions of
Section 422A of the Internal Revenue Code of 1986, as amended,
including the option of the Company to repurchase any shares
issued upon the exercise of an option upon termination of
employment. Incentive options granted to different persons, or to
the same person at different times, may be subject to terms,
conditions and restrictions which differ from each other.
7. TERMS AND CONDITIONS OF NONQUALIFIED OPTIONS
Each nonqualified option granted pursuant to this Plan shall be evidenced
by a written Nonqualified Option Agreement which shall specify that the
options subject thereto are nonqualified options. The granting of a
nonqualified option shall take place only when this written Nonqualified
Option Agreement shall have been duly executed and delivered by or on
behalf of the Company to the optionee to whom such nonqualified options
shall be granted. Neither anything contained in the Plan nor in any
resolution adopted or to be adopted by the Administrator shall constitute
the granting of any nonqualified option. The Nonqualified Option
Agreement shall be in such form as the Administrator shall, from time to
time, recommend, but shall comply with and be subject to the following
terms and conditions:
(a) MEDIUM AND TIME OF PAYMENT. The nonqualified option price shall
be payable (i) in United States dollars payable in cash, certified
check, or bank draft; (ii) subject to any legal restrictions on
the acquisition or purchase of its shares by the Company, by the
delivery of shares of Common Stock which shall be deemed to have a
value to the Company equal to the aggregate fair market value of
such shares determined at the same of such exercise in accordance
with the provisions of Section 5 above; (iii) in the discretion of
the Administrator, by the issuance of promissory note in a form
acceptable to the Administrator; or (iv) any combination of (i),
(ii) or (iii) above.
(b) NUMBER OF SHARES. The nonqualified option shall state the total
number of shares to which it pertains.
<PAGE>
(c) TERM OF NONQUALIFIED OPTION. Each nonqualified option granted
under the Plan shall expire within a period of not more than ten
(10) years from the date the nonqualified option is granted.
(d) DATE OF EXERCISE. The Administrator may, in its discretion,
provide that a nonqualified option may be exercised immediately or
that it may not be exercised in whole or in part for any specified
period or periods of time or subject to the completion of
specified projects, the fulfillment of specified duties or
responsibilities or the fulfillment of specified financial or
other objectives. Except as may be so provided, any nonqualified
option may be exercised in whole at any time or in part from time
to time during its term.
(e) TERMINATION OF ASSOCIATION EXCEPT UPON DEATH OR DISABILITY. In
the event of an optionee's termination of association with the
Company or any subsidiary or Affiliate of the Company, for any
reason other than his or her death or disability, (i) all
nonqualified options granted to any such optionee pursuant to this
Plan which are not exercisable at the date of such termination of
association shall terminate immediately and become void and of no
effect, and (ii) all nonqualified options granted to any such
optionee pursuant to this Plan which are exercisable at the date
of such termination of association may be exercised (but only to
the extent they were exercisable as of the date of the termination
of association) at any time within three (3) months of the date of
such termination of association, but in any event no later than
the date of expiration of the nonqualified option period, and if
not so exercised within such time shall become void and of no
effect at the end of such time.
(f) DEATH OR DISABILITY OF OPTIONEE. In the event of an optionee's
termination of association with the Company by reason of his or
her death or disability, (i) all nonqualified options granted to
such optionee pursuant to this Plan which are not exercisable at
the date of such termination of association shall terminate
immediately and become void and of no effect, and (ii) all
nonqualified options granted to such optionee pursuant to this
Plan which are exercisable at the date of such termination of
association may be exercised (but only to the extent they were
exercisable as of the date of the termination of association) at
any time within one (1) year after the optionee's death or
disability, but in any event no later than the date of expiration
of the nonqualified option period, by such optionee, or in the
event of death, by the executors or administrators of the
optionee's estate or by any person or persons who shall have
acquired the nonqualified option directly from the optionee by
bequest or inheritance. At the end of such one (1) year period,
all nonqualified options held by such optionee, to the extent they
remain unexercised, shall terminate and become void and of no
effect.
(g) RIGHTS AS A SHAREHOLDER. An optionee or an offeree or a
transferee of a nonqualified option shall have no rights as a
shareholder with respect to any shares of Common Stock covered by
his or her nonqualified option until the date of the issuance of a
share certificate to such optionee for such shares. No adjustment
shall be made for dividends or distributions or other rights for
which the record date is prior to the date such share certificate
is issued.
(h) NONASSIGNABILITY OF RIGHTS. No nonqualified option shall be
assignable or transferable by the person receiving same except by
will or the laws of descent and distribution. During the life of
such person, the nonqualified option shall be exercisable by him
or her.
(i) OTHER PROVISIONS. Any Nonqualified Option Agreement may contain
such other terms, provisions and conditions as may be determined
by the Administrator. Nonqualified Options granted to different
persons, or to the same person at different times, may be subject
to terms, conditions and restrictions which differ from each
other.
8. CHANGES IN CAPITAL STRUCTURE
In the event that the outstanding shares of Common Stock of the Company
are hereafter increased or decreased or changed into or exchanged for a
different number or kind of shares or other securities of the Company by
reason of merger, consolidation or reorganization in which the Company is
the surviving corporation or of a recapitalization, stock split,
combination of shares, reclassification, reincorporation, stock dividend
(in excess of 2%), or other change in the corporate structure of the
Company, appropriate adjustments shall be made by the Board of Directors
in the aggregate number and kind of shares subject to this Plan, and the
number and kind of shares and the price per share subject to outstanding
incentive options and non qualified options in order to preserve, but not
to increase, the benefits to persons then holding incentive options
and/or nonqualified options.
In the event that the Company at any time proposes to (i) merge into,
consolidate with or to enter into any other reorganization (including the
sale of substantially all of its assets) in which the Company is not the
surviving corporation, or (ii) enter into a merger or other
reorganization as a result of which the outstanding shares of Common
Stock of the Company will be changed into or exchanged for shares of the
capital stock or other securities of another corporation or for cash or
property, then the Plan and all unexercised incentive options and
nonqualified options granted hereunder shall terminate, unless provision
is made in writing in connection with such transaction for the
continuance of the Plan and for the assumption of incentive options and
nonqualified options theretofore granted, or the substitution for such
incentive options and nonqualified options of new options covering shares
of a successor corporation, with appropriate adjustments as to number and
kind of shares and prices, in which event the Plan and the incentive
options and nonqualified options theretofore granted, or the new
incentive options and nonqualified options substituted therefor, shall
continue in the manner and under the terms so provided. If such
provision is not made in such transaction for the continuance of the Plan
and the assumption of incentive options and nonqualified options
theretofore granted or the substitution for such incentive options and
nonqualified options of new incentive options and nonqualified options
covering the shares of a successor corporation, then the Administrator
shall cause persons holding incentive options or nonqualified options not
less than 30 days prior to the anticipated effective date of the proposed
transaction, and all incentive options and
<PAGE>
nonqualified options shall be accelerated and, concurrent with the
effective date of the proposed transaction, such person shall have the
right to exercise incentive options and nonqualified options in respect
of any or all shares then subject thereto.
9. AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors of the Company may from time to time alter, amend,
suspend or terminate the Plan in such respects as the Board of Directors
may deem advisable; provided, however, that no such alteration,
amendment, suspension or termination shall substantially affect or impair
the rights of any person under any incentive option and nonqualified
option theretofore granted to such person without his or her consent;
provided further, however, that no amendment which would (i) materially
increase the benefits accruing to participants under the Plan, (ii)
materially increase the number of securities which may be issued under
the Plan, or (iii) materially modify the requirements as to eligibility
for participation in the Plan, shall be made except with the approval of
the Company's shareholders. Without limiting the generality of the
foregoing, to the extent permitted by applicable law, the Board of
Directors of the Company may alter or amend the Plan to comply with
requirements under the Internal Revenue Code relating to restricted stock
options, incentive options, qualified options or other options which give
the optionee more favorable tax treatment than that applicable to options
granted under this Plan as of the date of its adoption. Upon any such
alteration or amendment, to the extent permitted by applicable law, any
outstanding option granted hereunder shall be subject to the more
favorable tax treatment afforded to an optionee pursuant to such terms
and conditions as the Administrator may determine.
Unless the Plan shall theretofore have been terminated, the Plan shall be
effective on December 1991 and shall terminate on December 2001.
10. APPLICATION OF FUNDS
The proceeds received by the Company from the sale of Common Stock
pursuant to incentive options and nonqualified options will be used for
general corporate purposes.
11. NO OBLIGATION TO EXERCISE OPTION
The granting of an incentive option and nonqualified option shall impose
no obligation upon the optionee to exercise such incentive option or
nonqualified option.
12. CONTINUANCE OF EMPLOYMENT OR STATUS AS DIRECTOR
The Plan or the granting of any incentive option and nonqualified option
thereunder shall not impose any obligation on the Company or its
shareholders to continue the employment of any optionee who is an
employee, or to retain as a director any optionee who is a director.
13. INFORMATION TO OPTIONEES
The Company shall provide to each holder of an outstanding option under
the Plan a copy of the Company's financial statements for each fiscal
year of the Company within a reasonable time after such financial
statements are prepared and approved by the Company's management. The
Company shall also provide each holder of an outstanding option under the
Plan with a copy of any annual or other report generally distributed by
the Company to its shareholders.
14. TAX WITHHOLDING
Whenever shares are to be issued under the Plan, the Company or any
subsidiary of the Company employing the recipient shall have the right to
deduct from the recipient's compensation or require the recipient to
remit to the employer corporation, prior to the issuance of the shares,
an amount sufficient to satisfy federal, state and local withholding tax
requirements.
15. GENERAL PROVISIONS
Notwithstanding any other provision of this Plan or agreements made
pursuant thereto, the Company shall not be required to issue or deliver
any certificate or certificates for shares of stock upon the exercise of
options granted under this Plan prior to fulfillment of all of the
following conditions:
(a) Any registration or other qualification of such shares under any
state or federal law or regulation, or the maintaining in effect
of any such registration or other qualification which the
Administrator shall, in its absolute discretion, deem necessary or
advisable;
(b) The obtaining of any other consent, approval or permit from any
state or federal governmental agency which the Administrator
shall, in its absolute discretion, determine to be necessary or
advisable; and
(c) The execution and delivery to the Company by the recipient of an
investment representation letter containing such assurances and/or
representations as the Administrator shall, in its absolute
discretion, determine to be necessary or advisable to satisfy the
requirements for exemptions from registration and qualification
under applicable state and federal securities laws.
