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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Award Software International, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box)
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
_____________________________________________________________________
2. Aggregate number of securities to which transaction applies:
_____________________________________________________________________
3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
_____________________________________________________________________
4. Proposed maximum aggregate value of transaction:
_____________________________________________________________________
5. Total fee paid:
_____________________________________________________________________
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
_____________________________________________________________________
2. Form, Schedule or Registration Statement No.:
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3. Filing Party:
_____________________________________________________________________
4. Date Filed:
_____________________________________________________________________
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AWARD SOFTWARE INTERNATIONAL, INC.
777 E. MIDDLEFIELD ROAD
MOUNTAIN VIEW, CA 94043
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 4, 1997
TO THE SHAREHOLDERS OF AWARD SOFTWARE INTERNATIONAL, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Award
Software International, Inc., a California corporation (the "Company"), will
be held on Wednesday, June 4, 1997, at 9:00 a.m. (local time), at Sunnyvale
Hilton Inn, 1250 Lakeside Drive, Sunnyvale, California 94086, for the
following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are duly elected and qualified.
2. To approve the Company's 1997 Equity Incentive Plan.
3. To ratify the selection of Price Waterhouse LLP as independent
accountants of the Company for its fiscal year ending December 31, 1997.
4. To transact such other business as may properly come before the meeting
or any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
The Board of Directors has fixed the close of business on April 25, 1997, as
the record date for the determination of shareholders entitled to notice of
and to vote at this Annual Meeting and at any adjournment or postponement
thereof.
By Order of the Board of Directors
/s/ GEORGE C. HUANG
George C. Huang
Chairman of the Board, President
and Chief Executive Officer
Mountain View, California
May 5, 1997
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING IN PERSON.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING, PLEASE COMPLETE, DATE, SIGN
AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE IN ORDER TO ENSURE YOUR
REPRESENTATION AT THE MEETING. A RETURN ENVELOPE (WHICH IS POSTAGE PREPAID IF
MAILED IN THE UNITED STATES) IS ENCLOSED FOR THAT PURPOSE. EVEN IF YOU HAVE
GIVEN YOUR PROXY, YOU MAY STILL VOTE IN PERSON IF YOU ATTEND THE MEETING.
PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY A BROKER, BANK
OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST OBTAIN FROM THE
RECORD HOLDER A PROXY ISSUED IN YOUR NAME.
<PAGE>
AWARD SOFTWARE INTERNATIONAL, INC.
777 E. MIDDLEFIELD ROAD
MOUNTAIN VIEW, CA 94043
PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
JUNE 4, 1997
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of Award
Software International, Inc., a California corporation (the "Company"), for
use at the Annual Meeting of Shareholders to be held on Wednesday, June 4,
1997, at 9:00 a.m. (local time) (the "Annual Meeting"), or at any adjournment
or postponement thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Shareholders. The Annual Meeting will
be held at Sunnyvale Hilton Inn, 1250 Lakeside Drive, Sunnyvale, California
94086. The Company intends to mail this proxy statement and accompanying proxy
card and its Annual Report for the year ended December 31, 1996 on or about
May 5, 1997, to all shareholders entitled to vote at the Annual Meeting.
SOLICITATION
The Company will bear the entire cost of solicitation of proxies, including
preparation, assembly, printing and mailing of this proxy statement, the proxy
and any additional information furnished to shareholders. Copies of
solicitation materials will be furnished to banks, brokerage houses,
fiduciaries and custodians holding in their names shares of Common Stock
beneficially owned by others to forward to such beneficial owners. The Company
may reimburse persons representing beneficial owners of Common Stock for their
costs of forwarding solicitation materials to such beneficial owners. Original
solicitation of proxies by mail may be supplemented by telephone, telegram or
personal solicitation by directors, officers or other regular employees of the
Company or, at the Company's request, Corporate Investors Communications, Inc.
("CIC"). No additional compensation will be paid to directors, officers or
other regular employees for such services, but CIC will be paid its customary
fee, estimated to be about $1,200, if it renders solicitation services.
VOTING RIGHTS AND OUTSTANDING SHARES
Only holders of record of Common Stock at the close of business on April 25,
1997 will be entitled to notice of and to vote at the Annual Meeting. At the
close of business on April 25, 1997 the Company had outstanding and entitled
to vote 6,603,013 shares of Common Stock.
Each holder of record of Common Stock on such date will be entitled to one
vote for each share held on all matters to be voted upon at the Annual
Meeting.
All votes will be tabulated by the inspector(s) of election appointed for
the meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Abstentions will be counted towards the
tabulation of votes cast on proposals presented to the shareholders and will
have the same effect as negative votes. Except for Proposals 2 and 3,
abstentions and broker non-votes are counted towards a quorum but are not
counted for any purpose in determining whether a matter is approved.
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REVOCABILITY OF PROXIES
Any person giving a proxy pursuant to this solicitation has the power to
revoke it at any time before it is voted. It may be revoked by filing with the
Secretary of the Company at the Company's principal executive office, 777 E.
Middlefield Road, Mountain View, California, 94043, a written notice of
revocation or a duly executed proxy bearing a later date, or it may be revoked
by attending the meeting and voting in person. Attendance at the meeting will
not, by itself, revoke a proxy.
SHAREHOLDER PROPOSALS
Proposals of shareholders that are intended to be presented at the Company's
1998 Annual Meeting of Shareholders must be received by the Company not later
than Wednesday, December 31, 1997 in order to be included in the proxy
statement and proxy relating to that Annual Meeting.
PROPOSAL 1
ELECTION OF DIRECTORS
There are seven nominees for the seven Board positions presently authorized
in the Company's Bylaws. Each director to be elected will hold office until
the next annual meeting of shareholders and until his successor is duly
elected and qualified, or until such director's earlier death, resignation or
removal. Each nominee listed below is currently a director of the Company, six
directors having been elected by the shareholders at the Company's last annual
meeting. Mr. Willy Weck was appointed by the Board to fill the vacancy created
by Mr. Theodor L. Lieven's resignation.
Shares represented by executed proxies will be voted, if authority to do so
is not withheld, for the election of the nominees named below. In the event
that any nominee should be unavailable for election as a result of an
unexpected occurrence, such shares will be voted for the election of such
substitute nominee as management may propose. Each person nominated for
election has agreed to serve if elected and management has no reason to
believe that any nominee will be unable to serve.
The seven candidates receiving the highest number of affirmative votes cast
at the meeting will be elected directors of the Company.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF EACH NAMED NOMINEE.
NOMINEES
The names of the nominees and certain information about them are set forth
below:
<TABLE>
<CAPTION>
NAME AGe PRINCIPAL OCCUPATION/ POSITION HELD WITH THE COMPANY
---- --- ----------------------------------------------------
<S> <C> <C>
George C. Huang......... 55 Chairman of the Board of Directors, President, Chief
Executive Officer and Director of the Company
Cheng Ming Lee.......... 54 President and Chief Executive Officer, Taiwan Venture
Capital Corporation and Fidelity Venture Capital Corporation
and Director of the Company
David S. Lee............ 59 Chairman, CMC Industries, Inc. and Director of the Company
Masami Maeda............ 63 President and Chief Executive Officer, Sun Corporation and
Director of the Company
Anthony Sun............. 44 General Partner, Venrock Associates and Director of the
Company
William P. Tai.......... 34 General Partner, Walden Group and Director of the Company
Willy Weck.............. 45 Finance Manager and Chief Financial Officer, Vobis
Microcomputer AG and Director of the Company
</TABLE>
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GEORGE C. HUANG has served as Chairman of the Board of Directors, President,
Chief Executive Officer and Director since July 1993. From January 1984 to the
present, Dr. Huang has served as Chairman of the Board of Directors of GCH
Systems, Inc. ("GCH"), a company that develops and markets embedded
controllers, Application Specific Integrated Circuits and PC Systems, and from
January 1984 until November 1994, he also served as Chief Executive Officer of
GCH. From February 1987 to the present, Dr. Huang has served as a Director of
GCH-Sun Systems Company Ltd. ("GSS"), a subsidiary of GCH. From January 1990
to May 1996, Dr. Huang served as a Director of Fidelity Venture Capital
Corporation ("FVCC"), a shareholder of GCH and the Company. Dr. Huang received
a B.S. from National Taiwan University, an M.S. from Washington State
University and a Ph.D. in Electrical Engineering from the University of
Washington. Dr. Huang and Lyon T. Lin, an executive officer of the Company,
are brothers-in-law.
CHENG MING LEE has served as a director since July 1993. From April 1987 to
the present, Dr. Lee has served as the President and Chief Executive Officer
of Taiwan Venture Capital Corporation ("TVCC") and FVCC, both of which are
shareholders of the Company. Dr. Lee serves on the Board of Directors of
Taiwan Opportunities Fund Limited and CNET Technology Corp. Dr. Lee received a
B.S. from National Taiwan University, an M.S. from Stanford University and a
Ph.D. in Chemical Engineering from the University of Houston.
DAVID S. LEE has served as a director since December 1994. From May 1995 to
the present, Mr. Lee has served as the Chairman of CMC Industries, Inc., a
contract manufacturing company. From November 1985 to August 1994, Mr. Lee
served as the President and Chief Executive Officer of DTC Data Technology
Corporation (formerly Qume Corporation), a manufacturer of disk controller and
communication peripherals. Mr. Lee serves on the Board of Directors of Linear
Technology Corporation, Photonics Corporation and Centigram Communications
Corporation. In addition, Mr. Lee is a member of the Board of Regents of the
University of California. Mr. Lee holds an Honorary Doctorate of Engineering
and a B.S. in Mechanical Engineering from Montana State University and an M.S.
in Mechanical Engineering from North Dakota State University.
MASAMI MAEDA has served as a director since January 1995. From April 1971 to
the present, Mr. Maeda has served as President and Chief Executive Officer of
Sun Corporation, a manufacturer of electronic devices. He is also a member of
the Board of Directors of GCH and GSS.
ANTHONY SUN has served as a director since October 1995. From 1979 to the
present, Mr. Sun has been a general partner at Venrock Associates, a venture
capital firm. Previously, Mr. Sun was employed by Hewlett-Packard, TRW and
Caere Corporation. Mr. Sun is a director of Centura Software Corporation, a
client/server software company, Cognex Corporation, a computer systems
company, Conductus, Inc., a superconductive electronics company, Fractal
Design Corporation, a multimedia software tools company, Inference
Corporation, a client/server internet help desk software company, Komag, Inc.,
a computer storage component company, and Worldtalk Communications
Corporation, a software application router company. Mr. Sun holds S.B.E.E.,
S.M.E.E. and Advanced Engineer degrees from the Massachusetts Institute of
Technology and an M.B.A from Harvard University.
WILLIAM P. TAI has served as a director since June 1995. From September 1991
to the present, Mr. Tai has been affiliated with the Walden Group of Venture
Capital Funds, most recently as general partner. Concurrently, from August
1995 to the present, he has been Chairman of AUNET Corporation, an Asia-based
affiliate of UUNET Technologies, Inc. From August 1987 to September 1991, Mr.
Tai served as Vice President of Alex. Brown & Sons, Inc., where he was
responsible for the firm's efforts in the semiconductor industry. Mr. Tai
serves on the Board of Directors of Network Peripherals Inc. Mr. Tai holds a
B.S. with Honors in Electrical Engineering from the University of Illinois and
an M.B.A. from Harvard University.
WILLY WECK has served as a director since April 30, 1997. From December 1993
to the present, Mr. Weck has served as Finance Manager and Chief Financial
Officer of Vobis Microcomputer AG, a computer and peripherals retailing and
production company. From January 1992 to December 1993, Mr. Weck served as
head of the Controlling Department of Vobis Microcomputer AG. For a
description of the voting agreement relating to Mr. Weck and Vobis
Microcomputer AG, see "Certain Transactions."
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BOARD COMMITTEES AND MEETINGS
During the year ended December 31, 1996, the Board of Directors held eight
meetings. During the year ended December 31, 1996, all directors except Dr.
Cheng Ming Lee and Mr. Masami Maeda attended at least 75% of the meetings of
the Board, and of the committees on which they served, held during the period
for which they were a director or committee member, respectively. The Board
has an Audit Committee and a Compensation Committee.
The Audit Committee meets with the Company's independent accountants at
least annually to review the results of the annual audit and to discuss the
financial statements; recommends to the Board the independent accountants to
be retained; and receives and considers the accountants' comments as to
controls, adequacy of staff and management performance and procedures in
connection with audit and financial controls. The Audit Committee is composed
of two non-employee directors: Messrs. David S. Lee and William P. Tai. It met
once during such year.
The Compensation Committee makes recommendations concerning salaries and
incentive compensation, awards stock options to employees and consultants
under the Company's stock option plans and otherwise determines compensation
levels and performs such other functions regarding compensation as the Board
may delegate. The Compensation Committee is composed of three non-employee
directors: Messrs. David S. Lee, Anthony Sun and William P. Tai. It met three
times during such year.
PROPOSAL 2
APPROVAL OF 1997 EQUITY INCENTIVE PLAN
In April 1997, the Board of Directors adopted the Company's 1997 Equity
Incentive Plan (the "1997 Plan"). No awards have been made under the 1997
Plan. Shareholders are requested in this Proposal 2 to approve the 1997 Plan.
If the shareholders fail to approve this Proposal 2, options granted under the
1997 Plan after the Annual Meeting will not qualify as performance-based
compensation and, in some circumstances, the Company may be denied a business
expense deduction for compensation recognized in connection with the exercise
of these stock options. The affirmative vote of the holders of a majority of
the shares present in person or represented by proxy and voting at the meeting
will be required to approve the 1997 Plan, as amended.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 2.
The essential features of the 1997 Plan are outlined below:
GENERAL
The 1997 Plan provides for the grant of both incentive and nonstatutory
stock options. Incentive stock options granted under the 1997 Plan are
intended to qualify as "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
Nonstatutory stock options granted under the 1997 Plan are intended not to
qualify as incentive stock options under the Code. See "Federal Income Tax
Information" for a discussion of the tax treatment of incentive and
nonstatutory stock options.
PURPOSE
The 1997 Plan was adopted to provide a means by which selected officers and
employees of and consultants to the Company and its affiliates could be given
an opportunity to purchase stock in the Company, to assist in retaining the
services of employees holding key positions, to secure and retain the services
of persons capable of filling such positions and to provide incentives for
such persons to exert maximum efforts for the success of the Company. All of
the Company's employees and consultants are eligible to participate in the
1997 Plan.
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ADMINISTRATION
The 1997 Plan is administered by the Board of Directors of the Company. The
Board has the power to construe and interpret the 1997 Plan and, subject to
the provisions of the 1997 Plan, to determine the persons to whom and the
dates on which options will be granted, the number of shares to be subject to
each option, the time or times during the term of each option within which all
or a portion of such option may be exercised, the exercise price, the type of
consideration and other terms of the option. The Board of Directors is
authorized to delegate administration of the 1997 Plan to a committee composed
of not fewer than two members of the Board who may, in the discretion of the
Board, be non-employee directors within the meaning of Rule 16b-3 promulgated
under the Securities Act of 1934, as amended ("Rule 16b-3"). The Board has
delegated administration of the 1997 Plan to the Compensation Committee of the
Board. As used herein with respect to the 1997 Plan, the "Board" refers to the
Compensation Committee as well as to the Board of Directors itself.
Regulations under Section 162(m) of the Code require that the directors who
serve as members of such committee must be "outside directors." The
applicability of the 1997 Plan provides that, in the Board's discretion,
directors serving on any such committee will also be "outside directors"
within the meaning of Section 162(m). This limitation would exclude from the
committee (i) current employees of the Company, (ii) former employees of the
Company receiving compensation for past services (other than benefits under a
tax-qualified retirement plan), (iii) current and former officers of the
Company and (iv) directors currently receiving direct or indirect remuneration
from the Company in any capacity (other than as a director), unless any such
person is otherwise considered an "outside director" for purposes of Section
162(m).
ELIGIBILITY
Incentive stock options may be granted under the 1997 Plan to all employees
(including officers) of the Company and its affiliates. All employees
(including officers) and consultants are eligible to receive nonstatutory
stock options under the 1997 Plan.
No option may be granted under the 1997 Plan to any person who, at the time
of the grant, owns (or is deemed to own) stock possessing more than 10% of the
total combined voting power of the Company or any affiliate of the Company,
unless the option exercise price is at least 110% of the fair market value of
the stock subject to the option on the date of grant, and the term of the
option does not exceed five years from the date of grant. For incentive stock
options granted under the 1997 Plan after 1997, the aggregate fair market
value, determined at the time of grant, of the shares of Common Stock with
respect to which such options are exercisable for the first time by an
optionee during any calendar year (under all such plans of the Company and its
affiliates) may not exceed $100,000.
No person shall be eligible to be granted options covering more than 250,000
shares of the Company's Common Stock in any calendar year. The purpose of this
limitation is generally to permit the Company to continue to be able to deduct
for tax purposes the ordinary income attributable to the options granted under
the 1997 Plan.
STOCK SUBJECT TO THE 1997 PLAN
There are 700,000 shares of the Company's Common Stock authorized for
issuance under the 1997 Plan. If options granted under the 1997 Plan expire or
otherwise terminate without being exercised, the Common Stock not purchased
pursuant to such options again becomes available for issuance under the 1997
Plan.
TERMS OF OPTIONS
The following is a description of the permissible terms of options under the
1997 Plan. Individual option grants may be more restrictive as to any or all
of the permissible terms described below.
Exercise Price; Payment. The exercise price of incentive stock options under
the 1997 Plan may not be less than the fair market value of the Common Stock
subject to the option on the date of the option grant, and in
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some cases (see "Eligibility" above), may not be less than 110% of such fair
market value. The exercise price of nonstatutory options under the 1997 Plan
may not be less than 85% of the fair market value of the Common Stock subject
to the option on the date of the option grant. However, if options were
granted with exercise prices below market value, deductions for compensation
attributable to the exercise of such options could be limited by Section
162(m). See "Federal Income Tax Information." At March 31, 1997, the closing
price of the Company's Common Stock as reported on the Nasdaq National Market
was $11.50 per share.
In the event of a decline in the value of the Company's Common Stock, the
Board has the authority to offer employees the opportunity to replace
outstanding higher priced options, whether incentive or nonstatutory, with new
lower priced options. The Company has provided that opportunity to employees
in the past. To the extent required by Section 162(m), an option repriced
under the 1997 Plan is deemed to be cancelled and a new option granted. Both
the option deemed to be cancelled and the new option deemed to be granted will
be counted against the 250,000 share limitation.
The exercise price of options granted under the 1997 Plan must be paid
either: (a) in cash at the time the option is exercised; or (b) at the
discretion of the Board, (i) by delivery of other Common Stock of the Company,
(ii) pursuant to a deferred payment arrangement; or (c) in any other form of
legal consideration acceptable to the Board.
Option Exercise. Options granted under the 1997 Plan may become exercisable
in cumulative increments ("vest") as determined by the Board. Shares covered
by options to be granted under the 1997 Plan may be subject to different
vesting terms but will typically vest at the rate of 25% on the first
anniversary of the date of grant with 1/48th per month thereafter (25% per
year) during the optionee's employment or services as a consultant. The Board
has the power to accelerate the time during which an option may be exercised.
In addition, options granted under the 1997 Plan may permit exercise prior to
vesting, but in such event the optionee may be required to enter into an early
exercise stock purchase agreement that allows the Company to repurchase shares
not yet vested at their exercise price plus an interest factor should the
optionee leave the employ of the Company before vesting. To the extent
provided by the terms of an option, an optionee may satisfy any federal, state
or local tax withholding obligation relating to the exercise of such option by
a cash payment upon exercise, by authorizing the Company to withhold a portion
of the stock otherwise issuable to the optionee, by delivering already-owned
stock of the Company or by a combination of these means.
Term. The maximum term of options under the 1997 Plan is ten years, except
that in certain cases (see "Eligibility") the maximum term is five years.
Options under the 1997 Plan terminate three months after termination of the
optionee's employment or relationship as a consultant or director of the
Company or any affiliate of the Company, unless (a) such termination is due to
such person's permanent and total disability (as defined in the Code), in
which case the option may be exercised at any time within twelve months of
such termination; (b) the optionee dies while employed by or serving as a
consultant or director of the Company or any affiliate of the Company, or
within a period specified in the option after termination of such
relationship, in which case the option may be exercised (to the extent the
option was exercisable at the time of the optionee's death) within eighteen
months of the optionee's death by the person or persons to whom the rights to
such option pass by will, by the laws of descent and distribution, by
beneficiary designation; or (c) the option by its terms specifically provides
otherwise. Individual options by their terms may provide for exercise within a
longer or shorter period of time following termination of employment or the
consulting relationship. The option term may also be extended in the event
that exercise of the option within these periods is prohibited for specified
reasons.
ADJUSTMENT PROVISIONS
If there is any change in the stock subject to the 1997 Plan or subject to
any option granted under the 1997 Plan (through merger, consolidation,
reorganization, recapitalization, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or otherwise), the 1997 Plan and
options outstanding thereunder will be appropriately adjusted as to the class
and the maximum number of shares subject to such plan, the maximum number of
shares which may be granted to an employee during any calendar year, and the
class, number of shares and price per share of stock subject to such
outstanding options.
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EFFECT OF CERTAIN CORPORATE EVENTS
The 1997 Plan provides that, in the event of a dissolution or liquidation of
the Company, specified type of merger or other corporate reorganization or a
change in ownership of 50% of the combined voting power of the Company's
capital stock, to the extent permitted by law, any surviving corporation will
be required to either assume options outstanding under the 1997 Plan or
substitute similar options for those outstanding under such plan, or such
outstanding options will continue in full force and effect. In the event that
any surviving corporation declines to assume or continue options outstanding
under the 1997 Plan, or to substitute similar options, then the voting of such
options and the time during which such options may be exercised will be
accelerated and the options terminated if not exercised during such time.
DURATION, AMENDMENT AND TERMINATION
The Board may suspend or terminate the 1997 Plan without shareholder
approval or ratification at any time or from time to time. Unless sooner
terminated, the 1997 Plan will terminate on the day before the tenth
anniversary of the date the Plan was approved by the Board or approved by the
shareholders, whichever is earlier.
The Board may also amend the 1997 Plan at any time or from time to time.
However, no amendment will be effective unless approved by the shareholders of
the Company to the extent shareholder approval is required to comply with Rule
16b-3, Section 422 of the Code or any Nasdaq or securities exchange listing
requirements. The Board may submit any other amendment to the 1997 Plan for
shareholder approval, including, but not limited to, amendments intended to
satisfy the requirements of Section 162(m) of the Code regarding the exclusion
of performance-based compensation from the limitation on the deductibility of
compensation paid to certain employees.
RESTRICTIONS ON TRANSFER
Under the 1997 Plan, an incentive stock option may not be transferred by the
optionee otherwise than by will or by the laws of descent and distribution and
during the lifetime of the optionee, may be exercised only by the optionee. A
nonstatutory stock option may not be transferred except by will or by the laws
of descent and distribution or pursuant to a domestic relations order, unless
otherwise provided in a stock option agreement. In any case, the optionee may
designate in writing a third party who may exercise the option in the event of
the optionee's death. In addition, shares subject to repurchase by the Company
under an early exercise stock purchase agreement may be subject to
restrictions on transfer which the Board deems appropriate.
FEDERAL INCOME TAX INFORMATION
Incentive Stock Options. Incentive stock options under the 1997 Plan are
intended to be eligible for the favorable federal income tax treatment
accorded "incentive stock options" under the Code.
Generally, there are no federal income tax consequences to the optionee or
the Company by reason of the grant or exercise of an incentive stock option.
However, the exercise of an incentive stock option may increase the optionee's
alternative minimum tax liability, if any.
If an optionee holds stock acquired through exercise of an incentive stock
option for at least two years from the date on which the option is granted and
at least one year from the date on which the shares are transferred to the
optionee upon exercise of the option, any gain or loss on a disposition of
such stock will be long-term capital gain or loss. Generally, if the optionee
disposes of the stock before the expiration of either of these holding periods
(a "disqualifying disposition"), at the time of disposition, the optionee will
realize taxable ordinary income equal to the lesser of (a) the excess of the
stock's fair market value on the date of exercise over the exercise price, or
(b) the optionee's actual gain, if any, on the purchase and sale. The
optionee's additional gain, or any loss, upon the disqualifying disposition
will be a capital gain or loss, which will be long-term or short-term
depending on whether the stock was held for more than one year. Long-term
capital gains currently are generally subject to lower tax rates than ordinary
income.
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To the extent the optionee recognizes ordinary income by reason of a
disqualifying disposition, the Company will generally be entitled (subject to
the requirement of reasonableness, the provisions of Section 162(m) of the
Code and the satisfaction of a tax reporting obligation) to a corresponding
business expense deduction in the tax year in which the disqualifying
disposition occurs.
Nonstatutory Stock Options. Nonstatutory stock options granted under the
1997 Plan generally have the following federal income tax consequences:
There are no tax consequences to the optionee or the Company by reason of
the grant of a nonstatutory stock option. Upon exercise of a nonstatutory
stock option, the optionee normally will recognize taxable ordinary income
equal to the excess of the stock's fair market value on the date of exercise
over the option exercise price. Generally, with respect to employees, the
Company is required to withhold from regular wages or supplemental wage
payments an amount based on the ordinary income recognized. Subject to the
requirement of reasonableness, the provisions of Section 162(m) of the Code
and the satisfaction of a tax reporting obligation, the Company will generally
be entitled to a business expense deduction equal to the taxable ordinary
income realized by the optionee. Upon disposition of the stock, the optionee
will recognize a capital gain or loss equal to the difference between the
selling price and the sum of the amount paid for such stock plus any amount
recognized as ordinary income upon exercise of the option. Such gain or loss
will be long or short-term depending on whether the stock was held for more
than one year. Slightly different rules may apply to optionees who acquire
stock subject to certain repurchase options or who are subject to Section
16(b) of the Exchange Act.
Potential Limitation on Company Deductions. Section 162(m) of the Code
denies a deduction to any publicly held corporation for compensation paid to
certain employees in a taxable year to the extent that compensation exceeds
$1,000,000 for a covered employee. It is possible that compensation
attributable to awards under the 1997 Plan, when combined with all other types
of compensation received by a covered employee from the Company, may cause
this limitation to be exceeded in any particular year.
Certain kinds of compensation, including qualified "performance-based
compensation," are disregarded for purposes of the deduction limitation. In
accordance with Treasury regulations issued under Section 162(m) of the Code,
compensation attributable to stock options will qualify as performance-based
compensation, provided that: (i) the stock option plan contains a per-employee
limitation on the number of shares for which stock options may be granted
during a specific period; (ii) the per-employee limitation is approved by the
shareholders; (iii) the award is granted by a compensation committee comprised
solely of "outside directors"; and (iv) the exercise price of the option is no
less than the fair market value of the stock on the date of grant. Options
granted under the 1997 Plan that have an exercise price at least equal to the
fair market value of the Company's Common Stock on the date of grant should
qualify as performance-based compensation that is exempt from the $1,000,000
deduction limitation.
8
<PAGE>
PROPOSAL 3
RATIFICATION OF SELECTION OF INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP as the Company's
independent accountants for the fiscal year ending December 31, 1997 and has
further directed that management submit the selection of independent
accountants for ratification by the shareholders at the Annual Meeting. Price
Waterhouse LLP audited the Company's financial statements in 1996.
Representatives of Price Waterhouse LLP are expected to be present at the
Annual Meeting, will have an opportunity to make a statement if they so desire
and will be available to respond to appropriate questions.
Shareholder ratification of the selection of Price Waterhouse LLP as the
Company's independent accountants is not required by the Company's Bylaws or
otherwise. However, the Board is submitting the selection of Price Waterhouse
LLP to the shareholders for ratification as a matter of good corporate
practice. If the shareholders fail to ratify the selection, the Audit
Committee and the Board will reconsider whether or not to retain that firm.
Even if the selection is ratified, the Audit Committee and the Board in their
discretion may direct the appointment of different independent accountants at
any time during the year if they determine that such a change would be in the
best interests of the Company and its shareholders.
The affirmative vote of the holders of a majority of the shares present in
person or represented by proxy and voting at the Annual Meeting will be
required to ratify the selection of Price Waterhouse LLP.
THE BOARD OF DIRECTORS RECOMMENDS
A VOTE IN FAVOR OF PROPOSAL 3.
9
<PAGE>
SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the ownership
of the Company's Common Stock as of March 31, 1997 by: (i) each director and
nominee for director; (ii) each of the executive officers named in the Summary
Compensation Table employed by the Company in that capacity on March 31, 1997;
(iii) all executive officers and directors of the Company as a group; and (iv)
all those known by the Company to be beneficial owners of more than five
percent of its Common Stock.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP
(1)
--------------------
NUMBER OF PERCENT OF
BENEFICIAL OWNER SHARES TOTAL
---------------- --------- ----------
<S> <C> <C>
Vobis Microcomputer AG (2)............................ 989,441 14.26%
Carlo-Schmid-Str. 12
D-52146 Wurselen Germany
George C. Huang (3)................................... 548,713 8.26%
Award Software International, Inc.
777 East Middlefield Road
Mountain View, CA 94043
Sun Corporation....................................... 424,797 6.24%
250 Asahi, Kochino-Cho
Konan City, Aichi 483 Japan
Venrock Associates (4)................................ 416,666 6.32%
30 Rockfeller Plaza, #5508
New York, NY 10112
Taiwan Venture Capital Corporation.................... 350,285 5.31%
6th Floor, No. 143, Sec. 2,
Ming-Shen East Road
Taipei, Taiwan R.O.C.
Willy Weck (2)........................................ 989,441 14.26%
Cheng Ming Lee (5).................................... 631,429 9.58%
Masami Maeda (6)...................................... 446,672 6.78%
Anthony Sun (4)(7).................................... 428,705 6.41%
Lyon T. Lin (8)....................................... 150,819 2.27%
William P. Tai (9).................................... 147,312 2.22%
David S. Lee (10)..................................... 73,500 1.11%
Ann P. Shen (11)...................................... 31,181 *
Kevin J. Berry (12)................................... 18,489 *
Maurice W. Bizzarri (13).............................. 16,405 *
All directors and executive officers as a group (12
persons) (14)........................................ 3,514,696 48.21%
</TABLE>
- --------
* Less than one percent.
(1) This table is based upon information supplied by officers, directors and
principal shareholders and Schedule 13D and 13G filed with the Securities
and Exchange Commission ("SEC"). Unless otherwise indicated in the
footnotes to this table and subject to community property laws where
applicable, the Company believes that each of the shareholders named in
this table has sole voting and investment power with respect to the
shares indicated as beneficially owned. Applicable percentages are based
on 6,590,513 shares outstanding on March 31, 1997, adjusted as required
by rules promulgated by the SEC.
10
<PAGE>
(2) Mr. Weck is a nominee for director. Includes (i) 272,394 shares issuable
pursuant to a warrant exercisable within 60 days of March 31, 1997 and
(ii) 75,845 shares issuable pursuant to exercise of Vobis' Catch-up
Right. See "Certain Transactions." Mr. Weck disclaims beneficial
ownership of such shares held by Vobis.
(3) Includes (i) 13,609 shares held by Margaret Huang and (ii) 14,727 shares
held by Dwight Huang, Dr. Huang's wife and son, respectively. Also
includes 44,479 and 11,666 shares issuable pursuant to options
exercisable within 60 days of March 31, 1997 by Dr. Huang and his wife,
respectively. Dr. Huang disclaims beneficial ownership of shares held by
his wife and son.
(4) Includes (i) 229,302 shares held by Venrock Associates, (ii) 104,031
shares held by Venrock Associates II, L.P. and (iii) 57,325 and 26,008
shares issuable pursuant to warrants exercisable within 60 days of
March 31, 1997 by Venrock Associates and Venrock Associates II, L.P.,
respectively. Mr. Sun, a director of the Company, is a general partner of
Venrock Associates. Mr. Sun disclaims beneficial ownership of shares held
by such entities, except to the extent of his pecuniary interest therein.
(5) Includes (i) 375,285 shares held by Taiwan Venture Capital Corporation,
(ii) 318,445 shares held by Fidelity Venture Capital Corporation and
(iii) 14,211 shares held by Hwaxing Capital Corporation. Dr. Lee, a
director of the Company, is deemed to have voting power over the shares
held by such entities. He disclaims beneficial ownership of the shares
held by such entities.
(6) Includes (i) 424,797 shares held by Sun Corporation and (ii) 1,563 shares
issuable pursuant to options exercisable within 60 days of March 31,
1997. Mr. Maeda, a director of the Company, is President, Chief Executive
Officer and majority shareholder of Sun Corporation.
(7) Includes 12,039 shares issuable pursuant to options exercisable within 60
days of March 31, 1997.
(8) Includes (i) 6,500 shares held by Anne Lin, (ii) 5,000 shares held by
each of Christine Lin and Eric Lin, Mr. Lin's wife and children,
respectively, and (iii) 34,582 and 4,375 shares issuable pursuant to
options exercisable within 60 days of March 31, 1997 by Mr. Lin and his
wife, respectively. Mr. Lin disclaims beneficial ownership of shares held
by his wife and children.
(9) Includes (i) 72,917 shares held by Walden Capital Partners II, L.P., (ii)
10,416 shares held by Walden Technology Ventures II, L.P. and (iii)
35,000 and 5,000 shares issuable pursuant to warrants exercisable within
60 days of March 31, 1997. Also includes 11,979 shares issuable pursuant
to options exercisable within 60 days of March 31, 1997. Mr. Tai, a
director of the Company, is a general partner of The Walden Group. Mr.
Tai disclaims beneficial ownership of shares held by such entities,
except to the extent of his pecuniary interest therein.
(10) Includes 43,500 shares issuable pursuant to options exercisable within 60
days of March 31, 1997.
(11) Includes 17,226 shares issuable pursuant to options exercisable within 60
days of March 31, 1997.
(12) Includes 18,489 shares issuable pursuant to options exercisable within 60
days of March 31, 1997.
(13) Includes 16,405 shares issuable pursuant to options exercisable within 60
days of March 31, 1997.
(14) Includes 228,333, 395,727 and 75,845 shares issuable pursuant to options,
warrants and other rights, respectively, to purchase shares exercisable
within 60 days of March 31, 1997 by executive officers and directors as a
group.
11
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF DIRECTORS
During the fiscal year ended December 31, 1996, the Company's directors did
not receive any cash compensation for service on the Board of Directors or any
committee thereof, or reimbursement of any expenses in connection with
attendance at Board and committee meetings.
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY OF COMPENSATION
The following table shows for the fiscal year ended December 31, 1996,
compensation awarded or paid to, or earned by, the Company's Chief Executive
Officer and its other four most highly compensated executive officers at
December 31, 1996 (the "Named Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY($) BONUS($) COMPENSATION($) OPTIONS(#) COMPENSATION($)
- ------------------------ ---- --------- -------- --------------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C>
George C. Huang 1996 $133,503 $ 52,650 -- 35,000 --
Chairman of the Board, 1995 $ 92,986 -- -- -- --
President and Chief
Executive Officer
Kevin J. Berry(1) 1996 $ 87,885 $ 32,063 -- 17,500 --
Vice President,
Finance,
Chief Financial
Officer,
Treasurer and Secretary
Maurice W. Bizzarri(1) 1996 $114,231 $ 30,000 -- 17,500 --
Vice President,
Engineering
Lyon T. Lin 1996 $ 94,500 $150,285(2) -- 20,000 --
General Manager, 1995 $110,618 $ 62,703(3) -- -- --
Taiwan,
President, Award
Software
Hong Kong Limited
Ann P. Shen 1996 $ 91,461 $ 65,967(3) -- 7,500 --
Vice President, 1995 $ 85,000 $ 32,090(3) -- -- --
Sales and Marketing
</TABLE>
- --------
(1) Total annual compensation for 1995 did not exceed $100,000.
(2) Represents sales commissions earned of $141,458 and cash bonus of $8,827.
(3) Represents sales commissions earned.
STOCK OPTION GRANTS AND EXERCISES
The Company grants options to its executive officers under its 1995 Stock
Option Plan (the "1995 Plan"). In March 1997, the Company increased the number
of shares of Common Stock issuable under the 1995 Plan by 268,446 shares for
option grants made to existing and newly hired employees of the Company, none
of whom
12
<PAGE>
were executive officers. As of March 31, 1997, options to purchase a total of
1,406,396 shares were outstanding under the 1995 Plan and 9,000 options to
purchase shares remained available for grant thereunder.
The following tables show, for the fiscal year ended December 31, 1996,
certain information regarding options granted to, exercised by, and held at
year end by, the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATE OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(4)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) FISCAL YEAR(2) ($/SH)(3) DATE 5% ($) 10% ($)
---- ------------- -------------- ----------- ---------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
George C. Huang......... 35,000 10.64% $11.00 04/29/07 $71,120 $341,320
Kevin J. Berry.......... 17,500 5.32% $10.00 04/29/07 $53,060 $188,160
Maurice W. Bizzarri..... 17,500 5.32% $10.00 04/29/07 $53,060 $188,160
Lyon T. Lin............. 20,000 6.08% $10.00 04/29/07 $60,640 $215,040
Ann P. Shen............. 7,500 2.28% $10.00 04/29/07 $22,740 $ 80,640
</TABLE>
- --------
(1) Options granted generally become exercisable at the rate of 25% on the
first anniversary date of grant and 1/48th monthly thereafter. The term of
the option is ten years.
(2) Based on aggregate of 329,000 options granted to employees of, consultants
to and directors of the Company during fiscal year ended December 31,
1996, including the Named Executive Officers.
(3) The exercise price per share of each option is equal to the fair market
value of the Common Stock on the date of grant, except for the option
granted to George C. Huang which is 110% of the fair market value of the
Common Stock on the date of grant. As permitted by rules promulgated by
the Securities and Exchange Commission, the Company is using its initial
public offering price ($8.00) as a measure of market price for purposes of
calculating the potential realizable value of the above-referenced
options, which options were granted six months prior to the initial public
offering.
(4) The potential realizable value is calculated based on the term of the
option at its time of grant (ten years). It is calculated by assuming that
the stock price on the date of grant appreciates at the indicated annual
rate compounded annually for the entire term of the option and that the
option is exercised and sold on the last day of its term for the
appreciated stock price. No gain to the optionee is possible unless the
stock price increases over the option term, which will benefit the
shareholder.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
12/31/96 (#) 12/31/96 ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE(1)
---- --------------- ------------ ------------- -----------------
<S> <C> <C> <C> <C>
George C. Huang......... -- -- 28,750/66,250 $251,563/$229,688
Kevin J. Berry.......... -- -- 11,666/30,834 $102,078/$112,298
Maurice W. Bizzarri..... -- -- 9,583/27,917 $83,851/$86,774
Lyon T. Lin............. -- -- 23,958/46,042 $209,633/$222,868
Ann P. Shen............. -- -- 12,482/21,068 $109,218/$116,845
</TABLE>
- --------
(1) Based on the fair market value of the Common Stock of the Company as of
December 31, 1996 ($9.75), minus the exercise price, multiplied by the
number of shares underlying the option.
13
<PAGE>
EMPLOYMENT AGREEMENTS
Except for its employees in Germany, none of the Company's employees is
party to an employment agreement with the Company.
REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
ON EXECUTIVE COMPENSATION
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors ("Committee") is
composed of Messrs. David S. Lee, Anthony Sun and William P. Tai, none of whom
are currently officers or employees of the Company. The Committee is
responsible for establishing the Company's compensation programs for all
employees, including executives. For executive officers, the Committee
evaluates performance and determines compensation policies and levels.
COMPENSATION PHILOSOPHY
The goals of the compensation program are to align compensation with
business objectives and performance and to enable the Company to attract,
retain and reward executive officers and other key employees who contribute to
the long-term success of the Company and to motivate them to enhance long-term
shareholder value. Key elements of this philosophy are:
. Total compensation should be sufficiently competitive with other high-
growth companies in the software industry so that the Company can attract
and retain qualified executives.
. The Company maintains annual incentive opportunities sufficient to provide
motivation to achieve specific operating goals and to generate rewards
that bring total compensation to competitive levels.
. The Company provides significant equity-based incentives for executives
and other key employees to ensure that they are motivated over the long-
term to respond to the Company's business challenges and opportunities as
owners and not just as employees.
BASE SALARY. The Committee annually reviews each executive officer's base
salary. When reviewing base salaries, the Committee considers individual and
corporate performance, levels of responsibility, prior experience, breadth of
knowledge and competitive pay practices.
ANNUAL INCENTIVE. The bonus targets for executive officers are individually
based. The Committee determines the amount targeted for the chief executive
officer and the chief executive officer recommends to the Committee the bonus
targets for the remainder of the executive officers. The amount of the bonus
earned has historically been tied to the Company's sales and operating income.
Specific financial and business objectives established under the bonus program
are confidential commercial and business information and, as such, need not be
disclosed pursuant to instruction 2 to Item 402(k) of Regulation S-K.
As a percent of total cash compensation (percentage determined by dividing
the target bonus by the sum of base salary and target bonus), 1996 target
bonuses for the Named Executive Officers, who were all of the executive
officers who earned incentive bonuses with respect to 1996, ranged from 21% to
61% with an average of 42%.
The annual bonus is a variable pay program for officers and other senior
managers of the Company to earn additional annual compensation (the "Bonus
Plan"). The actual bonus award earned depends on the extent to which Company
and individual performance objectives are achieved. At the start of each year,
the Committee reviews and approves the annual performance objectives for the
Company and individual officers. The Company
14
<PAGE>
objectives consist of operating, strategic and financial goals that are
considered to be critical to the Company's fundamental long-term goal--
building shareholder value. With respect to officers and senior management
other than the chief executive officer, the Committee places considerable
weight on the recommendations of the chief executive officer.
LONG-TERM INCENTIVES. The Company's long-term incentive program consists of
the 1995 Stock Option Plan. The option program utilizes vesting periods
(generally four years) to encourage key employees to continue in the employ of
the Company. Through option grants, executives receive significant equity
incentives to build long-term shareholder value. Grants are made at 100% of
fair market value on the date of grant. Executives receive value from these
grants only if the Company's Common Stock appreciates over the long-term. The
size of option grants is determined based on competitive practices at leading
companies in the software development industry and the Company's philosophy of
significantly linking executive compensation with shareholder interests. In
1996, the Committee granted executive stock options that will vest over a
four-year period.
CORPORATE PERFORMANCE AND CHIEF EXECUTIVE OFFICER COMPENSATION
Dr. Huang's base salary at the beginning of 1996 as President and Chief
Executive Officer was $133,503. In setting this amount, the Committee took
into account (i) the scope of Dr. Huang's responsibility and (ii) the Board's
confidence in Dr. Huang to lead the Company's continued development.
Considering these factors, Dr. Huang was granted an option to purchase 35,000
shares of Common Stock (representing less than 1% of the Company's fully
diluted equity) as an incentive for future performance, an amount the
Committee determined was consistent with competitive practices.
During 1996, the Company achieved all of its corporate objectives. The
Committee rated Dr. Huang's individual performance as successful primarily
reflecting the Company's initial public offering in 1996, as well as the
Company's achievement of its financial and other strategic goals determined at
the beginning of 1996. This performance level resulted in a cash bonus of
$52,650 for 1996 or 28% of his total cash compensation.
CONCLUSION
Through the plans described above, a significant portion of the Company's
compensation program and Dr. Huang's compensation are contingent on Company
performance, and realization of benefits is closely linked to increases in
long-term shareholder value. The Company remains committed to this philosophy
of pay for performance, recognizing that the competitive market for talented
executives and the volatility of the Company's business may result in highly
variable compensation for a particular time period.
COMPENSATION COMMITTEE
David S. Lee, Anthony Sun and William P. Tai
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. David S. Lee, Anthony Sun and
William P. Tai. No member of the Compensation Committee of the Company serves
as a member of the board of directors or compensation committee of any entity
that has one or more executive officers serving as a member of the Company's
Board of Directors or Compensation Committee. For a description of
transactions and relationships involving the Company and members of the
Compensation Committee, see "Certain Transactions."
15
<PAGE>
PERFORMANCE MEASUREMENT COMPARISON(1)
The following performance graph assumes an investment of $100 on October 25,
1996, the date of the Company's initial public offering, and compares the
change to December 31, 1996 in the market price of the Common Stock with a
broad market index (S&P 500) and an industry index (S&P Computers (Software &
Services)). The Company paid no dividends during the periods shown; the
performance of the indexes is shown on a total return (dividend reinvestment)
basis. The graph lines merely connect the prices on the dates indicated and do
not reflect fluctuations between those dates.
COMPARISON OF 2 MONTH CUMULATIVE TOTAL RETURN
<TABLE>
<CAPTION>
AWARD
Measurement Period SOFTWARE S&P S & P
(Fiscal Year Covered) INTL., INC. 500 INDEX COMPUTERS
- ------------------- ----------- --------- ---------
<S> <C> <C> <C>
Measurement Pt-10/25/96 $100 $100 $100
FYE 12/31/96 $122 $108 $111
</TABLE>
(1) This section is not "soliciting material", is not being filed with the
Securities and Exchange Commission, and is not to be incorporated by
reference into any filing of the Company under the Securities Act or the
Exchange Act whether made before or after the date hereof and irrespective
of any general incorporation language in such filing.
16
<PAGE>
CERTAIN TRANSACTIONS
FINANCINGS
In January 1996, Vobis Microcomputer AG ("Vobis") purchased 570,033 shares
of Common Stock at $12.28 per share and a warrant (the "Vobis Warrant") at
$0.02 per warrant share to purchase 272,394 shares of Common Stock with an
exercise price of $12.28 per share. Pursuant to that certain Investors' Rights
Agreement, dated as of January 12, 1996, among the Company, Vobis and the
other parties thereto (the "Investors Rights Agreement"), Vobis may elect in
respect of future issuances of the Company's equity securities to purchase
that number of shares as is necessary to maintain its ownership interest (in
no event to exceed 17.5% assuming the exercise of the Vobis, Walden and
Venrock Warrants) in the Company existing immediately prior to such future
issuances, subject to certain restrictions (the "Catch-up Right"). Pursuant to
the Catch-up Right, Vobis has the right until May 11, 1997 to purchase (a) up
to 73,488 shares at a per share price of $10.625 and (b) up to 2,357 shares at
a per share price of $6.75. The Catch-up Right expires and terminates in
accordance with its terms upon the earlier of (i) the date upon which Vobis
owns less than 8% of the Company's Common Stock assuming the exercise of the
Vobis, Walden and Venrock Warrants or (ii) completion of an offering of shares
of the Company's Common Stock under the Securities Act with an aggregate
offering price to the public of at least $10,000,000 and a per share price of
at least $13.60 (a "Qualified Public Offering"). In July 1996 and December
1996, Vobis acquired 41,169 and 30,000 shares at a per share price of $10.00
and $8.00, respectively, pursuant to its Catch-up Right.
In connection with Vobis' investment, the Company entered into a voting
agreement with Vobis, Walden Capital Partners II, L.P. and Walden Technology
Ventures II, L.P (collectively, "Walden"), Venrock Associates and Venrock
Associates II, L.P. (collectively, "Venrock") and the Company's Chief
Executive Officer pursuant to which such shareholders agreed not to reduce the
number of directors of the Board of Directors below five and to elect a person
designated by Vobis to the Company's Board of Directors. Presently, Mr. Willy
Weck is Vobis' designee to the Company's Board of Directors. This agreement
will terminate upon the earlier of (i) January 12, 1999, (ii) a change of
control of the Company, (iii) the date upon which Vobis owns less than 8% of
the Company's outstanding shares of Common Stock assuming the exercise of the
Vobis, Walden and Venrock Warrants, or (iv) completion of a Qualified Public
Offering.
The Vobis, Walden and Venrock Warrants contain a net exercise provision and
expire upon the earlier of (i) September 30, 2000 or (ii) completion of a
Qualified Public Offering. The holders of these warrants are entitled to
certain rights with respect to the registration of the shares of Common Stock
issuable upon exercise thereof under the Securities Act. Under the Investors'
Rights Agreement, Vobis, Walden and Venrock have the right to purchase equity
securities of the Company in respect of certain future issuances thereof,
which right terminates upon a Qualified Public Offering.
In January 1996, the Company repurchased 123,549 shares of the Company's
Common Stock for an aggregate amount of $1,235,495, or $10.00 per share, from
Intra Electronics Co., Ltd. ("Intra Electronics"), an affiliate of FVCC, TVCC
and Dr. Cheng Ming Lee. Dr. Lee, a director of the Company, was a director of
Intra Electronics at the time of repurchase. Dr. Lee disclaims beneficial
ownership of any such shares held by Intra Electronics. This repurchase was
made in order to minimize the dilution to the Company's remaining shareholders
resulting from prior financing activities.
SELLING SHAREHOLDERS
Certain of the Selling Shareholders who are relatives of Dr. Huang sold
45,000 shares of Common Stock in the Company's initial public offering
effected on October 25, 1996 ("IPO"). Dr. Huang disclaims beneficial ownership
of any of such shares held by his relatives.
Certain of the Selling Shareholders who are relatives of Mr. Lin sold 45,000
shares of Common Stock in the IPO. Mr. Lin disclaims beneficial ownership of
any of such shares held by his relatives.
17
<PAGE>
Sun Corporation sold 47,500 shares of Common Stock as a Selling Shareholder
in the IPO.
TVCC and FVCC sold 25,000 and 75,000 shares of Common Stock, respectively,
as Selling Shareholders in the IPO.
MISCELLANEOUS
The Company leases its office space in Taipei, Taiwan from Sun Corporation
("Sun") of which Mr. Maeda, a director of the Company, is President, Chief
Executive Officer, director and majority shareholder, and GSS, an affiliate of
Dr. George C. Huang, Dr. Cheng Ming Lee, Masami Maeda and Lyon T. Lin. In
1996, the Company made lease payments to Sun of $69,232. The Company also made
lease payments to GSS of $128,192 during 1996.
The Company has entered into an agreement with Sun pursuant to which Sun
provides the Company with marketing services in Japan and access to office
space in Tokyo, Japan. The Company made payments to Sun of $60,000 during
1996.
The Company believes that the foregoing transactions were in its best
interests. As a matter of policy, all future transactions between the Company
and any of its officers, directors or principal shareholders will be approved
by a majority of the independent and disinterested members of the Board of
Directors, will be on terms no less favorable to the Company than could be
obtained from unaffiliated third parties and will be in connection with bona
fide business purposes of the Company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company during, and with respect to, its most recent
fiscal year and written representations that no other reports were required,
if any, the filing requirements of Section 16(a) applicable to its officers,
directors and 10% shareholder were satisfied during the fiscal year ended
December 31, 1996, except as follows. Form 3s for such officers, directors and
10% shareholders were filed on October 24, 1996, the date on which the
Company's Registration Statement on Form S-1, File No. 333-05107 was declared
effective. The Form 3s were required to be filed on August 4, 1996, the date
upon which the Company's Registration Statement on Form 8-A automatically
became effective under the Securities Exchange Act of 1934, as amended. Public
trading of the Company's Common Stock commenced on October 25, 1996. Prior to
that, there was no public market for the Company's Common Stock.
OTHER MATTERS
The Board of Directors knows of no other matters that will be presented for
consideration at the Annual Meeting. If any other matters are properly brought
before the meeting, it is the intention of the persons named in the
accompanying proxy to vote on such matters in accordance with their best
judgment.
By Order of the Board of Directors
/s/ GEORGE C. HUANG
George C. Huang
Chairman of the Board, President
and Chief Executive Officer
May 5, 1997
A COPY OF THE COMPANY'S ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 IS
AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO: CORPORATE SECRETARY, AWARD
SOFTWARE INTERNATIONAL, INC., 777 E. MIDDLEFIELD ROAD, MOUNTAIN VIEW,
CALIFORNIA, 94043.
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SKU#1543-PS97
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APPENDIX A
AWARD SOFTWARE INTERNATIONAL, INC.
1997 EQUITY INCENTIVE PLAN
ADOPTED APRIL 1997
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees, Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
2. DEFINITIONS.
(a) "AFFILIATE" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections 424(e)
and (f) respectively, of the Code.
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(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended.
(d) "COMMITTEE" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "COMPANY" means Award Software International, Inc., a California
corporation.
(f) "CONSULTANT" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated for
such services, provided that the term "Consultant" shall not include Directors
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(g) "CONTINUOUS STATUS AS AN EMPLOYEE, DIRECTOR OR CONSULTANT" means that
the service of an individual to the Company, whether as an Employee, Director or
Consultant is not interrupted or terminated. The Board or the chief executive
officer of the Company may determine, in that party's sole discretion, whether
Continuous Status as an Employee, Director or Consultant shall be considered
interrupted in the case of: (i) any leave of absence approved by the Board or
the chief executive officer of the Company, including sick leave, military
leave, or any other personal leave; or (ii) transfers between the Company,
Affiliates or their successors.
(h) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to shareholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(i) "DIRECTOR" means a member of the Board.
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(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(l) "FAIR MARKET VALUE" means the value of the common stock as determined
in good faith by the Board.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "NON-EMPLOYEE DIRECTOR" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does not
receive compensation (directly or indirectly) from the Company or its parent or
subsidiary for services rendered as a consultant or in any capacity other than
as Director (except for an amount as to which disclosure would not be required
under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act
("Regulation S-K")), does not possess an interest in any other transaction as to
which disclosure would be required under Item 404(a) of Regulation S-K, and is
not engaged in a business relationship as to which disclosure would be required
under Item 404(b) of Regulation S-K; or (ii) is otherwise considered a "non-
employee director" for purposes of Rule 16b-3.
(o) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(p) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
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(q) "OPTION" means a stock option granted pursuant to the Plan.
(r) "OPTION AGREEMENT" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(s) "OPTIONEE" means a person to whom an Option is granted pursuant to the
Plan or, if applicable, such other person who holds an outstanding Option.
(t) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an affiliated corporation receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an affiliated corporation at
any time, and is not currently receiving direct or indirect remuneration from
the Company or an "affiliated corporation" for services in any capacity other
than as a Director, or (ii) is otherwise considered an "outside director" for
purposes of Section 162(m) of the Code.
(u) "PLAN" means this 1997 Equity Incentive Plan.
(v) "RULE 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(w) "SECURITIES ACT" means the Securities Act of 1933, as amended.
3. ADMINISTRATION.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
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(b) The Board shall have the power, subject to, and within the limitations
of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a Nonstatutory
Stock Option; the provisions of each Option granted (which need not be
identical), including the time or times such Option may be exercised in whole or
in part; and the number of shares for which an Option shall be granted to each
such person.
(2) To construe and interpret the Plan and Options granted under it,
and to establish, amend and revoke rules and regulations for its administration.
The Board, in the exercise of this power, may correct any defect, omission or
inconsistency in the Plan or in any Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
(3) To amend the Plan or an Option as provided in Section 11.
(4) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company.
(c) The Board may delegate administration of the Plan to a committee of
the Board composed of not fewer than two (2) members (the "Committee") of the
Board who may, in the discretion of the Board, be Non-Employee Directors within
the meaning of Rule 16b-3. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board, including the power to delegate to a
subcommittee of two (2) or more Outside Directors any of the administrative
powers the Committee is authorized to exercise (and references in this Plan to
the Board shall
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thereafter be to the Committee or such subcommittee), subject, however, to such
resolutions, not inconsistent with the provisions of the Plan, as may be adopted
from time to time by the Board. The Board may abolish the Committee at any time
and revest in the Board the administration of the Plan. Notwithstanding
anything in this Section 3 to the contrary, the Board or the Committee may
delegate to a committee of one or more members of the Board the authority to
grant Options to eligible persons who (1) are not then subject to Section 16 of
the Exchange Act and/or (2) are either (i) not then Covered Employees and are
not expected to be Covered Employees at the time of recognition of income
resulting from such Option, or (ii) not persons with respect to whom the Company
wishes to comply with Section 162(m) of the Code.
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate seven hundred thousand (700,000) shares of the Company's
common stock. If any Option shall for any reason expire or otherwise terminate,
in whole or in part, without having been exercised in full, the stock not
purchased under such Option shall revert to and again become available for
issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. ELIGIBILITY.
(a) Incentive Stock Options may be granted only to Employees. Nonstatutory
Stock Options may be granted only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Option if, at the time
of grant, such person owns (or is deemed to own pursuant to Section 424(d) of
the Code) stock possessing
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more than ten percent (10%) of the total combined voting power of all classes of
stock of the Company or of any of its Affiliates unless the exercise price of
such Option is at least one hundred ten percent (110%) of the Fair Market Value
of such stock at the date of grant and the Option is not exercisable after the
expiration of five (5) years from the date of grant.
(c) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than two hundred fifty thousand (250,000) shares of the Company's common
stock in any calendar year.
6. OPTION PROVISIONS.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) TERM. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) PRICE. The exercise price of each Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted. The exercise price of
each Nonstatutory Stock Option shall be not less than eighty-five percent (85%)
of the Fair Market Value of the stock subject to the Option on the date the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than set forth in the preceding sentence if such Option is
granted pursuant to an assumption or substitution for another option in a manner
satisfying the provisions of Section 424(a) of the Code.
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(c) CONSIDERATION. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company, (B)
according to a deferred payment or other arrangement (which may include, without
limiting the generality of the foregoing, the use of other common stock of the
Company) with the person to whom the Option is granted or to whom the Option is
transferred pursuant to subsection 6(d), or (C) in any other form of legal
consideration that may be acceptable to the Board.
In the case of any deferred payment arrangement, interest shall be
compounded at least annually and shall be charged at the minimum rate of
interest necessary to avoid the treatment as interest, under any applicable
provisions of the Code, of any amounts other than amounts stated to be interest
under the deferred payment arrangement.
(d) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person. A Nonstatutory Stock Option shall not be
transferable except by will or by the laws of descent and distribution or
pursuant to a domestic relations order, unless otherwise provided in a stock
option agreement. The person to whom the Option is granted may, by delivering
written notice to the Company, in a form satisfactory to the Company, designate
a third party who, in the event of the death of the Optionee, shall thereafter
be entitled to exercise the Option.
(e) VESTING. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option
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Agreement may provide that from time to time during each of such installment
periods, the Option may become exercisable ("vest") with respect to some or all
of the shares allotted to that period, and may be exercised with respect to some
or all of the shares allotted to such period and/or any prior period as to which
the Option became vested but was not fully exercised. The Option may be subject
to such other terms and conditions on the time or times when it may be exercised
(which may be based on performance or other criteria) as the Board may deem
appropriate. The provisions of this subsection 6(e) are subject to any Option
provisions governing the minimum number of shares as to which an Option may be
exercised.
(f) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee's knowledge and experience in
financial and business matters and/or to employ a purchaser representative
reasonably satisfactory to the Company who is knowledgeable and experienced in
financial and business matters, and that he or she is capable of evaluating,
alone or together with the purchaser representative, the merits and risks of
exercising the Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
for such person's own account and not with any present intention of selling or
otherwise distributing the stock. The foregoing requirements, and any
assurances given pursuant to such requirements, shall be inoperative if (i) the
issuance of the shares upon the exercise of the Option has been registered under
a then currently effective registration statement under the Securities Act, or
(ii) as to any particular requirement, a determination is made by counsel for
the Company that such requirement need not be met in the circumstances under the
then applicable securities laws. The Company may, upon advice of counsel to the
Company,
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place legends on stock certificates issued under the Plan as such counsel deems
necessary or appropriate in order to comply with applicable securities laws,
including, but not limited to, legends restricting the transfer of the stock.
(g) TERMINATION OF EMPLOYMENT OR RELATIONSHIP AS A DIRECTOR OR CONSULTANT.
In the event an Optionee's Continuous Status as an Employee, Director or
Consultant terminates (other than upon the Optionee's death or disability), the
Optionee may exercise his or her Option (to the extent that the Optionee was
entitled to exercise it as of the date of termination) but only within such
period of time ending on the earlier of (i) the date three (3) months following
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant or such longer or shorter period specified in the Option Agreement,
or (ii) the expiration of the term of the Option as set forth in the Option
Agreement. If, at the date of termination, the Optionee is not entitled to
exercise his or her entire Option, the shares covered by the unexercisable
portion of the Option shall revert to and again become available for issuance
under the Plan.
(h) DISABILITY OF OPTIONEE. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise his or her Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified in
the Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement. If, at the date of termination, the Optionee is
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified herein, the Option shall
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terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(i) DEATH OF OPTIONEE. In the event of the death of an Optionee during,
or within a period specified in the Option after the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant, the Option
may be exercised (to the extent the Optionee was entitled to exercise the Option
as of the date of death) by the Optionee's estate, by a person who acquired the
right to exercise the Option by bequest or inheritance or by a person designated
to exercise the option upon the Optionee's death pursuant to subsection 6(d),
but only within the period ending on the earlier of (i) the date eighteen (18)
months following the date of death (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of such Option as
set forth in the Option Agreement. If, at the time of death, the Optionee was
not entitled to exercise his or her entire Option, the shares covered by the
unexercisable portion of the Option shall revert to and again become available
for issuance under the Plan. If, after death, the Option is not exercised
within the time specified herein, the Option shall terminate, and the shares
covered by such Option shall revert to and again become available for issuance
under the Plan.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate.
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(k) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option by any of the following means
or by a combination of such means: (1) tendering a cash payment; (2)
authorizing the Company to withhold shares from the shares of the common stock
otherwise issuable to the Optionee as a result of the exercise of the Option; or
(3) delivering to the Company owned and unencumbered shares of the common stock
of the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Options; provided, however,
that this undertaking shall not require the Company to register under the
Securities Act either the Plan, any Option or any stock issued or issuable
pursuant to any such Option. If, after reasonable efforts, the Company is
unable to obtain from any such regulatory commission or agency the authority
which counsel for the Company deems necessary for the lawful issuance and sale
of stock under the Plan, the Company shall be relieved from any liability for
failure to issue and sell stock upon exercise of such Options unless and until
such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
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9. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) shall be deemed to be the holder of, or to have any of the
rights of a holder with respect to, any shares subject to such Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee, with or
without cause and with or without notice.
(d) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(e) (1) The Board or the Committee shall have the authority to effect, at
any time and from time to time (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of the affected holders of Options,
the cancellation of any outstanding Options and
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the grant in substitution therefor of new Options under the Plan covering the
same or different numbers of shares of Common Stock, but having an exercise
price per share not less than eighty-five percent (85%) of the Fair Market Value
(one hundred percent (100%) of the Fair Market Value in the case of an Incentive
Stock Option or, in the case of a ten percent (10%) shareholder (as defined in
subsection 5(b)), not less than one hundred and ten percent (110%) of the Fair
Market Value) per share of Common Stock on the new grant date.
(2) Shares subject to an Option canceled under this subsection 9(e)
shall continue to be counted, for the applicable period in which it was granted,
against the maximum award of Options permitted to be granted pursuant to
subsection 5(c) of the Plan. The repricing of an Option under this subsection
9(e), resulting in a reduction of the exercise price, shall be deemed to be a
cancellation of the original Option and the grant of a substitute Option; in the
event of such repricing, both the original and the substituted Options shall be
counted for the applicable period against the maximum awards of Options
permitted to be granted pursuant to subsection 5(d) of the Plan. The provisions
of this subsection 9(e) shall be applicable only to the extent required by
Section 162(m) of the Code.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option (through merger, consolidation, reorganization, recapitalization,
stock dividend, dividend in property other than cash, stock split, liquidating
dividend, combination of shares, exchange of shares, change in corporate
structure or other transaction not involving the receipt of consideration by the
Company), the Plan will be appropriately adjusted in the type(s) and maximum
number of securities subject to the Plan pursuant to subsection 4(a) and the
maximum number of securities subject to award to any person during any calendar
year pursuant to
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subsection 5(d), and the outstanding Options will be appropriately adjusted in
the type(s) and number of securities and price per share of stock subject to
such outstanding Options. Such adjustments shall be made by the Board or
Committee, the determination of which shall be final, binding and conclusive.
(The conversion of any convertible securities of the Company shall not be
treated as a "transaction not involving the receipt of consideration by the
Company.")
(b) In the event of: (1) a dissolution, liquidation, or sale of all or
substantially all of the assets of the Company; (2) a merger or consolidation in
which the Company is not the surviving corporation; or (3) a reverse merger in
which the Company is the surviving corporation but the shares of the Company's
common stock outstanding immediately preceding the merger are converted by
virtue of the merger into other property, whether in the form of securities,
cash or otherwise; (4) the acquisition by any person, entity or group within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, or any comparable
successor provisions (excluding any employee benefit plan, or related trust,
sponsored or maintained by the Company or any Affiliate of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company
representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, then: (i) any surviving or acquiring
corporation shall assume Options outstanding under the Plan or shall substitute
similar options (including an option to acquire the same consideration paid to
stockholders in the transaction described in this Subsection 10(b)) for those
outstanding under the Plan, or (ii) in the event any surviving or acquiring
corporation refuses to assume such options or to substitute similar options for
those outstanding under the Plan, (A) with respect to Options held by persons
then performing services as Employees, Directors or Consultants, the vesting of
such Options and the time during which
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such Options may be exercised shall be accelerated prior to such event and the
Options terminated if not exercised after such termination and at or prior to
such event, and (B) with respect to any other Options outstanding under the
Plan, such Options shall be terminated if not exercised prior to such event.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the shareholders of
the Company to the extent shareholder approval is required to comply with Rule
16b-3, Section 422 of the Code or any Nasdaq or securities exchange listing
requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for shareholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option granted before amendment of
the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
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(e) The Board at any time, and from time to time, may amend the terms of
any one or more Options; provided however, that the rights and obligations under
any Option shall not be impaired by any such amendment unless (i) the Company
requests the consent of the person to whom the Option was granted and (ii) such
person consents in writing.
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless
sooner terminated, the Plan shall terminate on the day before the tenth
anniversary of the date the Plan was adopted by the Board or approved by the
shareholders of the Company, whichever is earlier. No Options may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option granted while the Plan is in
effect shall not be or impaired by suspension or termination of the Plan, except
with the written consent of the person to whom the Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the shareholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
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APPENDIX B
AWARD SOFTWARE INTERNATIONAL, INC.
INCENTIVE STOCK OPTION
1~, Optionee:
Award Software International, Inc. (the "Company"), pursuant to its
1997 Equity Incentive Plan (the "Plan"), has granted to you, the optionee named
above, an option to purchase shares of the common stock of the Company ("Common
Stock"). This option is intended to qualify as an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants. Defined terms not explicitly
defined in this agreement but defined in the Plan shall have the same
definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is 2~.
2. VESTING. Subject to the limitations contained herein, 3~ of the
shares will vest (become exercisable) on 4~ and 5~ of the shares will then vest
each month thereafter until either (i) you cease to provide services to the
Company for any reason, or (ii) this option becomes fully vested.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is _______
_____________________________________________________ ($_______) per share,
being not less than the fair market value of the Common Stock on the date of
grant of this option.
(b) METHOD OF PAYMENT. Payment of the exercise price per share is
due in full upon exercise of all or any part of each installment which has
accrued to you. You may elect, to the extent permitted by applicable statutes
and regulations, to make payment of the exercise price under one of the
following alternatives:
(i) Payment of the exercise price per share in cash
(including check) at the time of exercise;
<PAGE>
(ii) Payment pursuant to a program developed under Regulation
T as promulgated by the Federal Reserve Board which, prior to the issuance of
Common Stock, results in either the receipt of cash (or check) by the Company or
the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds;
(iii) Provided that at the time of exercise the Company's
Common Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of already-owned shares of Common Stock, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interests, which Common
Stock shall be valued at its fair market value on the date of exercise; or
(iv) Payment by a combination of the methods of payment
permitted by subparagraph 3(b)(i) through 3(b)(iii) above.
4. WHOLE SHARES. This option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this option may not be exercised unless the shares
issuable upon exercise of this option are then registered under the Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Act.
6. TERM. The term of this option commences on _______,1997, the date
of grant, and expires on ______, 2007 (the "Expiration Date," which date shall
be no more than ten (10) years from the date this option is granted), unless
this option expires sooner as set forth below or in the Plan. In no event may
this option be exercised on or after the Expiration Date. This option shall
terminate prior to the Expiration Date as follows: three (3) months after the
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or an Affiliate of the Company unless one of the following
circumstances exists:
(a) Your termination of Continuous Status as an Employee, Director
or Consultant is due to your permanent and total disability (within the meaning
of Section 422(c)(6) of the Code). This option will then expire on the earlier
of the Expiration Date set forth above or twelve (12) months following such
termination of Continuous Status as an Employee, Director or Consultant.
(b) Your termination of Continuous Status as an Employee, Director
or Consultant is due to your death or your death occurs within three (3) months
following your termination of Continuous Status as an Employee, Director or
Consultant for any other reason. This option will then expire on the earlier of
the Expiration Date set forth above or eighteen (18) months after your death.
2.
<PAGE>
(c) If during any part of such three (3) month period you may not
exercise your option solely because of the condition set forth in paragraph 5
above, then your option will not expire until the earlier of the Expiration Date
set forth above or until this option shall have been exercisable for an
aggregate period of three (3) months after your termination of Continuous Status
as an Employee, Director or Consultant.
(d) If your exercise of the option within three (3) months after
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or with an Affiliate of the Company would result in liability
under section 16(b) of the Securities Exchange Act of 1934, then your option
will expire on the earlier of (i) the Expiration Date set forth above, (ii) the
tenth (10th) day after the last date upon which exercise would result in such
liability or (iii) six (6) months and ten (10) days after the termination of
your Continuous Status as an Employee, Director or Consultant with the Company
or an Affiliate of the Company.
However, this option may be exercised following termination of
Continuous Status as an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status as an Employee, Director or Consultant under the provisions of
paragraph 2 of this option.
In order to obtain the federal income tax advantages associated with
an "incentive stock option," the Code requires that at all times beginning on
the date of grant of the option and ending on the day three (3) months before
the date of the option's exercise, you must be an employee of the Company or an
Affiliate of the Company, except in the event of your death or permanent and
total disability. The Company has provided for continued vesting or extended
exercisability of your option under certain circumstances for your benefit, but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you provide services to the Company or an Affiliate of the
Company as a consultant or exercise your option more than three (3) months after
the date your employment with the Company and all Affiliates of the Company
terminates.
7. EXERCISE.
(a) This option may be exercised, to the extent specified above,
by delivering a notice of exercise (in the form attached hereto) together with
the exercise price to the Secretary of the Company, or to such other person as
the Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to section 6 of
the Plan.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any exercise of
this option, the Company may require you to enter an arrangement providing for
the payment by you to the Company of any tax withholding obligation of the
Company arising by reason of (1) the exercise of this option; (2) the lapse of
any substantial risk of forfeiture to which the shares are subject at the time
of exercise; or (3) the disposition of shares acquired upon such exercise; and
3.
<PAGE>
(ii) you will notify the Company in writing within fifteen
(15) days after the date of any disposition of any of the shares of the Common
Stock issued upon exercise of this option that occurs within two (2) years after
the date of this option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of this option.
8. TRANSFERABILITY. This option is not transferable, except by will
or by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise this
option.
9. OPTION NOT A SERVICE CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in this option shall obligate the Company or any Affiliate of the
Company, or their respective stockholders, board of directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
10. NOTICES. Any notices provided for in this option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the
address specified below or at such other address as you hereafter designate by
written notice to the Company.
4.
<PAGE>
11. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.
Dated the __________________, 1997.
Very truly yours,
AWARD SOFTWARE INTERNATIONAL, INC.
By__________________________________________
Duly authorized on behalf of the Board
of Directors
ATTACHMENTS:
1997 Equity Incentive Plan
Notice of Exercise
5.
<PAGE>
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets forth
the entire understanding between the undersigned optionee and the Company and
its Affiliates regarding the acquisition of stock in the Company and supersedes
all prior oral and written agreements on that subject with the exception of (i)
the options previously granted and delivered to the undersigned under stock
option plans of the Company, and (ii) the following agreements only:
NONE ______________
(Initial)
OTHER __________________________________
__________________________________
__________________________________
_____________________________________________
1~, OPTIONEE
Address: __________________________________
__________________________________
6.
<PAGE>
NOTICE OF EXERCISE
Award Software International, Inc.
777 E. Middlefield Road
Mountain View, CA 94043 Date of Exercise: ____________________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
<TABLE>
<S> <C> <C>
Type of option (check one): Incentive [_] Nonstatutory [_]
Stock option dated: __________________
Number of shares as
to which option is
exercised: __________________
Certificates to be
issued in name of: __________________
Total exercise price: $_________________
Cash payment delivered
herewith: $_________________
Value of _________ shares
of Award common stock
delivered herewith/1/: $_________________
</TABLE>
- -----------------------
/1/ Shares must meet the public trading requirements set forth in the option.
Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or security
interests. Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.
<PAGE>
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the 1997 Equity Incentive Plan, (ii) to
provide for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this option, and
(iii) if this exercise relates to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any of the
shares of Common Stock issued upon exercise of this option that occurs within
two (2) years after the date of grant of this option or within one (1) year
after such shares of Common Stock are issued upon exercise of this option.
I acknowledge that all certificates representing any of the Shares subject
to the provisions of the Option shall have endorsed thereon appropriate legends
reflecting any restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws.
I further agree that, if required by the Company (or a representative of
the underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, I will not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Act (the "Effective Date") as may be requested by the Company or the
representative of the underwriters. I further agree that the Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.
Very truly yours,
------------------------------------
1~
<PAGE>
APPENDIX C
AWARD SOFTWARE INTERNATIONAL, INC.
NONSTATUTORY STOCK OPTION
1~, Optionee:
Award Software International, Inc. (the "Company"), pursuant to its
1997 Equity Incentive Plan (the "Plan"), has granted to you, the optionee named
above, an option to purchase shares of the common stock of the Company ("Common
Stock"). This option is not intended to qualify as an "incentive stock option"
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors or consultants. Defined terms not explicitly
defined in this agreement but defined in the Plan shall have the same
definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is 2~.
2. VESTING. Subject to the limitations contained herein, 3~ of the
shares will vest (become exercisable) on 4~ and 5~ of the shares will then vest
each month thereafter until either (i) you cease to provide services to the
Company for any reason, or (ii) this option becomes fully vested.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(A) EXERCISE PRICE. The exercise price of this option is ____________
________________________________________ ($______) per share, being not less
than the fair market value of the Common Stock on the date of grant of this
option.
(B) METHOD OF PAYMENT. Payment of the exercise price per share is due
in full upon exercise of all or any part of each installment which has accrued
to you. You may elect, to the extent permitted by applicable statutes and
regulations, to make payment of the exercise price under one of the following
alternatives:
(i) Payment of the exercise price per share in cash (including
check) at the time of exercise;
<PAGE>
(ii) Payment pursuant to a program developed under Regulation
T as promulgated by the Federal Reserve Board which, prior to the issuance of
Common Stock, results in either the receipt of cash (or check) by the Company or
the receipt of irrevocable instructions to pay the aggregate exercise price to
the Company from the sales proceeds;
(iii) Provided that at the time of exercise the Company's Common
Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of already-owned shares of Common Stock, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interests, which Common
Stock shall be valued at its fair market value on the date of exercise; or
(iv) Payment by a combination of the methods of payment
permitted by subparagraph 3(b)(i) through 3(b)(iii) above.
4. WHOLE SHARES. This option may not be exercised for any number of
shares which would require the issuance of anything other than whole shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the
contrary contained herein, this option may not be exercised unless the shares
issuable upon exercise of this option are then registered under the Act or, if
such shares are not then so registered, the Company has determined that such
exercise and issuance would be exempt from the registration requirements of the
Act.
6. TERM. The term of this option commences on _______, 1997, the date
of grant, and expires on ________, 2007 (the "Expiration Date," which date shall
be no more than ten (10) years from the date this option is granted), unless
this option expires sooner as set forth below or in the Plan. In no event may
this option be exercised on or after the Expiration Date. This option shall
terminate prior to the Expiration Date as follows: three (3) months after the
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or an Affiliate of the Company unless one of the following
circumstances exists:
(a) Your termination of Continuous Status as an Employee, Director or
Consultant is due to your permanent and total disability (within the meaning of
Section 422(c)(6) of the Code). This option will then expire on the earlier of
the Expiration Date set forth above or twelve (12) months following such
termination of Continuous Status as an Employee, Director or Consultant.
(b) Your termination of Continuous Status as an Employee, Director or
Consultant is due to your death or your death occurs within three (3) months
following your termination of Continuous Status as an Employee, Director or
Consultant for any other reason. This option will then expire on the earlier of
the Expiration Date set forth above or eighteen (18) months after your death.
-2-
<PAGE>
(c) If during any part of such three (3) month period you may not
exercise your option solely because of the condition set forth in paragraph 5
above, then your option will not expire until the earlier of the Expiration Date
set forth above or until this option shall have been exercisable for an
aggregate period of three (3) months after your termination of Continuous Status
as an Employee, Director or Consultant.
(d) If your exercise of the option within three (3) months after
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or with an Affiliate of the Company would result in liability
under section 16(b) of the Securities Exchange Act of 1934, then your option
will expire on the earlier of (i) the Expiration Date set forth above, (ii) the
tenth (10th) day after the last date upon which exercise would result in such
liability or (iii) six (6) months and ten (10) days after the termination of
your Continuous Status as an Employee, Director or Consultant with the Company
or an Affiliate of the Company.
However, this option may be exercised following termination of
Continuous Status as an Employee, Director or Consultant only as to that number
of shares as to which it was exercisable on the date of termination of
Continuous Status as an Employee, Director or Consultant under the provisions of
paragraph 2 of this option.
7. EXERCISE.
(A) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in the form attached hereto) together with the
exercise price to the Secretary of the Company, or to such other person as the
Company may designate, during regular business hours, together with such
additional documents as the Company may then require pursuant to section 6 of
the Plan.
(B) By exercising this option you agree that as a precondition to the
completion of any exercise of this option, the Company may require you to enter
an arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
this option; (2) the lapse of any substantial risk of forfeiture to which the
shares are subject at the time of exercise; or (3) the disposition of shares
acquired upon such exercise.
8. TRANSFERABILITY. This option is not transferable, except by will or by
the laws of descent and distribution or pursuant to a domestic relations order,
and is exercisable during your life only by you or a transferee pursuant to a
domestic relations order. Notwithstanding the foregoing, by delivering written
notice to the Company, in a form satisfactory to the Company, you may designate
a third party who, in the event of your death, shall thereafter be entitled to
exercise this option.
9. OPTION NOT A SERVICE CONTRACT. This option is not an employment contract
and nothing in this option shall be deemed to create in any way whatsoever any
obligation on your part to continue in the employ of the Company, or of the
Company to continue your employment with the Company. In addition, nothing in
this option shall obligate the Company or any Affiliate of the Company, or their
respective stockholders, board of directors, officers
-3-
<PAGE>
or employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
10. NOTICES. Any notices provided for in this option or the Plan
shall be given in writing and shall be deemed effectively given upon receipt or,
in the case of notices delivered by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the
address specified below or at such other address as you hereafter designate by
written notice to the Company.
-4-
<PAGE>
11. GOVERNING PLAN DOCUMENT. This option is subject to all the
provisions of the Plan, a copy of which is attached hereto and its provisions
are hereby made a part of this option, including without limitation the
provisions of Section 6 of the Plan relating to option provisions, and is
further subject to all interpretations, amendments, rules and regulations which
may from time to time be promulgated and adopted pursuant to the Plan. In the
event of any conflict between the provisions of this option and those of the
Plan, the provisions of the Plan shall control.
Dated the _______________, 1997.
Very truly yours,
AWARD SOFTWARE INTERNATIONAL, INC.
By_______________________________
Duly authorized on behalf of
the Board of Directors
ATTACHMENTS:
1997 Equity Incentive Plan
Notice of Exercise
-5-
<PAGE>
The undersigned:
(A) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(B) Acknowledges that as of the date of grant of this option, it sets forth
the entire understanding between the undersigned optionee and the Company and
its Affiliates regarding the acquisition of stock in the Company and supersedes
all prior oral and written agreements on that subject with the exception of (i)
the options previously granted and delivered to the undersigned under stock
option plans of the Company, and (ii) the following agreements only:
NONE _____________________
(Initial)
OTHER __________________________________
__________________________________
__________________________________
____________________________________
1~, OPTIONEE
Address: ________________________
________________________
-6-
<PAGE>
NOTICE OF EXERCISE
Award Software International, Inc.
777 E. Middlefield Road
Mountain View, CA 94043 Date of Exercise: ____________________
Ladies and Gentlemen:
This constitutes notice under my stock option that I elect to purchase the
number of shares for the price set forth below.
Type of option (check one): Incentive [_] Nonstatutory [_]
Stock option dated: _____________________
Number of shares as
to which option is
exercised: _____________________
Certificates to be
issued in name of: _____________________
Total exercise price: $____________________
Cash payment delivered
herewith: $____________________
Value of _______ shares
of Award common
stock delivered herewith(1): $____________________
_____________________
(1) Shares must meet the public trading requirements set forth in the
option. Shares must be valued in accordance with the terms of the option being
exercised, must have been owned for the minimum period required in the option,
and must be owned free and clear of any liens, claims, encumbrances or security
interests. Certificates must be endorsed or accompanied by an executed
assignment separate from certificate.
-7-
<PAGE>
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the 1997 Equity Incentive Plan, (ii) to
provide for the payment by me to you (in the manner designated by you) of your
withholding obligation, if any, relating to the exercise of this option, and
(iii) if this exercise relates to an incentive stock option, to notify you in
writing within fifteen (15) days after the date of any disposition of any of the
shares of Common Stock issued upon exercise of this option that occurs within
two (2) years after the date of grant of this option or within one (1) year
after such shares of Common Stock are issued upon exercise of this option.
I acknowledge that all certificates representing any of the Shares subject
to the provisions of the Option shall have endorsed thereon appropriate legends
reflecting any restrictions pursuant to the Company's Articles of Incorporation,
Bylaws and/or applicable securities laws.
I further agree that, if required by the Company (or a representative of
the underwriters) in connection with the first underwritten registration of the
offering of any securities of the Company under the Act, I will not sell or
otherwise transfer or dispose of any shares of Common Stock or other securities
of the Company during such period (not to exceed one hundred eighty (180) days)
following the effective date of the registration statement of the Company filed
under the Act (the "Effective Date") as may be requested by the Company or the
representative of the underwriters. I further agree that the Company may impose
stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such period.
Very truly yours,
________________________________
1~
-8-
<PAGE>
APPENDIX D
AWARD SOFTWARE INTERNATIONAL, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 4, 1997
The undersigned hereby appoints GEORGE C. HUANG and KEVIN J. BERRY,
and each of them, as attorneys and proxies of the undersigned, with full power
of substitution, to vote all of the shares of stock of AWARD SOFTWARE
INTERNATIONAL, INC. which the undersigned may be entitled to vote at the Annual
Meeting of Shareholders of AWARD SOFTWARE INTERNATIONAL, INC. to be held at
Sunnyvale Hilton Inn, 1250 Lakeside Drive, Sunnyvale, California 94086 on
Wednesday, June 4, 1997 at 9:00 a.m., (local time), and at any and all
postponements, continuations and adjournments thereof, with all powers that the
undersigned would possess if personally present, upon and in respect of the
following matters and in accordance with the following instructions, with
discretionary authority as to any and all other matters that may properly come
before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY WILL BE VOTED FOR
ALL NOMINEES LISTED IN PROPOSAL 1 AND FOR PROPOSALS 2 AND 3, AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT. IF SPECIFIC INSTRUCTIONS ARE
INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
MANAGEMENT RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED BELOW.
PROPOSAL 1: To elect directors to hold office until the next Annual Meeting
of Shareholders and until their successors are duly elected and
qualified.
[_] FOR all nominees listed below [_] WITHHOLD AUTHORITY to
(except as marked to the contrary vote for all nominees listed below.
below).
NOMINEES: George C. Huang, Cheng Ming Lee, David S. Lee, Masami Maeda, Anthony
Sun, William P. Tai and Willy Weck.
TO WITHHOLD AUTHORITY TO VOTE FOR ANY NOMINEE(S), WRITE SUCH NOMINEE(S)' NAME(S)
BELOW
________________________________________________________________________________
________________________________________________________________________________
MANAGEMENT RECOMMENDS A VOTE FOR PROPOSALS 2 AND 3.
PROPOSAL 2: To approve the Company's 1997 Equity Incentive Plan.
[_] FOR [_] AGAINST [_] ABSTAIN
PROPOSAL 3: To ratify selection of Price Waterhouse LLP as independent
accountants of the Company for its fiscal year ending December 31,
1997.
[_] FOR [_] AGAINST [_] ABSTAIN
<PAGE>
(Continued from other side)
Dated ______________, 1997 __________________________________________________
__________________________________________________
SIGNATURE(S)
Please sign exactly as your name appears hereon.
If the stock is registered in the names of two or
more persons, each should sign. Executors,
administrators, trustees, guardians and attorneys-
in-fact should add their titles. If signer is a
corporation, please give full corporate name and
have a duly authorized officer sign, stating
title. If signer is a partnership, please sign in
partnership name by authorized person.
PLEASE VOTE, DATE AND PROMPTLY RETURN THIS PROXY IN THE ENCLOSED RETURN ENVELOPE
WHICH IS POSTAGE PREPAID IF MAILED IN THE UNITED STATES.
