<PAGE>
As filed with the Securities and Exchange Commission on June 10, 1998
Registration No. 333-_______
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
-----------------------
OPTIKA IMAGING SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 84-1345326
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
7450 CAMPUS DRIVE, SUITE 200
COLORADO SPRINGS, COLORADO 80920
(Address of principal executive offices) (Zip Code)
-----------------------
OPTIKA IMAGING SYSTEMS, INC.
1994 STOCK OPTION/STOCK ISSUANCE PLAN
(Full title of the Plans)
-----------------------
MARK K. RUPORT
PRESIDENT AND CHIEF EXECUTIVE OFFICER
OPTIKA IMAGING SYSTEMS, INC.
7450 CAMPUS DRIVE, SUITE 200
COLORADO SPRINGS, COLORADO 80920
(719) 548-9800
(Name and address, including zip code, and telephone number, including area
code, of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price(2) Fee
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock
$0.001 par value 206,721 $2.8125 $581,402.8125 $171.51
=============================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the Optika Imaging Systems, Inc.
1994 Stock Option/Stock Issuance Plan, by reason of any stock dividend,
stock split, recapitalization or other similar transaction effected without
the Registrant's receipt of consideration which results in an increase in
the number of the outstanding shares of the Registrant's Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the high
and low selling prices per share of the Registrant's Common Stock on June
5, 1998, as reported by the Nasdaq National Market.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
---------------------------------------
Optika Imaging Systems, Inc. (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, filed with the Commission on March 31, 1998;
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1998, filed with the Commission on May 14, 1998;
(c) The Registrant's Registration Statement No. 00-111751 on Form 8-A,
filed with the Commission on May 22, 1996 pursuant to Section 12 of
the Exchange Act which describes the terms, rights and provisions
applicable to the Registrant's outstanding Common Stock.
All reports and definitive proxy or information statements filed pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), after the date of this Registration Statement and
prior to the filing of a post-effective amendment which indicates that all
securities offered hereby have been sold or which deregisters all securities
then remaining unsold shall be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any subsequently filed document which also is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.
Item 4. Description of Securities
-------------------------
Not Applicable.
Item 5. Interests of Named Experts and Counsel
--------------------------------------
Not Applicable.
Item 6. Indemnification of Directors and Officers
-----------------------------------------
Pursuant to the provisions of the Delaware General Corporation Law, the
Registrant has adopted provisions in its Amended and Restated Certificate of
Incorporation which provide that none of directors of the Registrant shall be
personally liable for monetary damages to the Registrant or its stockholders for
a breach of fiduciary duty as a director, except for liability as a result of:
(i) a breach of the director's duty of loyalty to the Registrant or its
stockholders, (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) an act related to
the unlawful stock repurchase or payment of a dividend under Section 174 of
Delaware General Corporation Law and (iv) transactions from which the director
derived an improper personal benefit. Such limitation of liability does not
affect the availability or equitable remedies such as injunctive relief or
rescission.
The Registrant's Amended and Restated Certificate of Incorporation also
authorizes the Registrant to indemnify its officers, directors and other agents
by bylaws, agreements or otherwise, to the full extent permitted under Delaware
law. The Registrant has entered into separate indemnification agreements with
its executive officers and directors which may, in some cases, be broader than
the specific indemnification provisions contained in the Delaware General
Corporation Law. The indemnification agreements will require the Registrant,
among other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service
<PAGE>
as officers or directors (other than liabilities arising from willful misconduct
of a culpable nature), and to advance their expenses incurred as a result of any
proceeding against them as to which they could be indemnified.
Item 7. Exemption from Registration Claimed
-----------------------------------
Not Applicable.
Item 8. Exhibits
--------
Number Exhibit
------ -------
4.0 Instrument Defining the Rights of Stockholders. Reference is made
to the Registrant's Statement 00-111751 on Form 8-A, and the
exhibits thereto, which are incorporated herein by reference
pursuant to Item 3(b) of this Registration Statement.
5.0 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Price Waterhouse LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit
5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Optika Imaging Systems, Inc., 1994 Stock Option/Stock Issuance Plan.
99.2* Form of Notice of Grant of Stock Option.
99.3* Form of Stock Option Agreement.
99.4* Form of Addendum to Stock Option Agreement. (Limited Stock
Appreciation Right).
99.5* Form of Addendum to Stock Option Agreement. (Involuntary Termination
Following Change in Control).
99.6* Form of Notice of Grant of Automatic Stock Option (Initial Grant).
99.7* Form of Notice of Grant of Automatic Stock Option (Annual Grant).
99.8* Form of Automatic Stock Option Agreement.
99.9* Form of Stock Issuance Agreement.
99.10* Form of Addendum to Stock Issuance Agreement. (Involuntary
Termination Following Change in Control).
* Exhibits 99.2 through 99.10 are incorporated herein by reference to
Exhibits 99.3 through 99.11 of Registrant's Registration Statement No. 333-10769
on Form S-8, filed with the Commission on August 23, 1996.
Item 9. Undertakings
------------
A. The undersigned Registrant hereby undertakes: (1) to file, during
any period in which offers or sales are being made, a post-effective amendment
to this Registration Statement (i) to include any prospectus required by Section
10(a)(3) of the 1933 Act, (ii) to reflect in the prospectus any facts or events
arising after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in this
Registration Statement or any material change to such information in this
Registration Statement; provided, however, that clauses (1)(i) and (1)(ii) shall
--------
not apply if the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the 1934 Act that are
incorporated by reference into this Registration Statement; (2) that for the
purpose of determining any liability under the 1933 Act each such post-effective
amendment shall be deemed to be a new registration statement relating to the
securities offered therein and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof; and (3) to remove
from registration by means of a post-effective amendment any of the securities
being registered which remain unsold at the termination of the Registrant's 1994
Stock Option/Stock Issuance Plan.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 Act that is
incorporated by reference into this Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-2
<PAGE>
C. Insofar as indemnification for liabilities arising under the 1933
Act may be permitted to directors, officers, or controlling persons of the
Registrant pursuant to the indemnification provisions summarized in Item 6 or
otherwise, the Registrant has been advised that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
1933 Act, and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer, or controlling
person of the Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling person in
connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the 1933
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Registrant certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8, and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Colorado Springs, State of Colorado on
this 8th day of June, 1998.
OPTIKA IMAGING SYSTEMS, INC.
By: /s/ Mark K. Ruport
--------------------------------------
Mark K. Ruport
President, Chief Executive Officer and
Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Optika Imaging Systems,
Inc., a Delaware corporation, do hereby constitute and appoint Mark K. Ruport
and Steven M. Johnson and each of them, the lawful attorneys-in-fact and agents
with full power and authority to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, and any one of them,
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act of 1933, as amended, and any rules or
regulations or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
that all said attorneys and agents, or any one of them, shall do or cause to be
done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Mark K. Ruport President, Chief Executive June 8, 1998
- ------------------ Officer and Chairman of the Board
Mark K. Ruport (Principal Executive Officer)
II-4
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ Steven M. Johnson Chief Financial Officer, June 8, 1998
- --------------------- Vice President Finance and
Steven M. Johnson Administration, Secretary and
Chief Accounting Officer
(Principal Financial and
Accounting Officer)
/s/ Paul Carter Director June 8, 1998
- ---------------
Paul Carter
/s/ Richard A. Bass Director June 8, 1998
- -------------------
Richard A. Bass
/s/ James E. Crawford Director June 8, 1998
- ---------------------
James E. Crawford
/s/ Robert L. Gett Director June 8, 1998
- ------------------
Robert L. Gett
/s/ Harry S. Gruner Director June 8, 1998
- -------------------
Harry S. Gruner
/s/ Graham O. King Director June 8, 1998
- ------------------
Graham O. King
II-5
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
OPTIKA IMAGING SYSTEMS, INC.
<PAGE>
EXHIBIT INDEX
-------------
Number Exhibit
------ -------
4.0 Instrument Defining the Rights of Stockholders. Reference is made
to the Registrant's Statement 00-111751 on Form 8-A, and the
exhibits thereto, which are incorporated herein by reference
pursuant to Item 3(b) of this Registration Statement. 3(c) of this
Registration
5.0 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Price Waterhouse LLP, Independent Auditors.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit
5.
24 Power of Attorney. Reference is made to page II-4 of this
Registration Statement.
99.1 Optika Imaging systems, Inc. 1994 Stock Option/Stock Issuance Plan
99.2* Form of Notice of Grant of Stock Option.
99.3* Form of Stock Option Agreement.
99.4* Form of Addendum to Stock Option Agreement. (Limited Stock
Appreciation Right).
99.5* Form of Addendum to Stock Option Agreement. (Involuntary Termination
Following Change in Control).
99.6* Form of Notice of Grant of Automatic Stock Option (Initial Grant).
99.7* Form of Notice of Grant of Automatic Stock Option (Annual Grant).
99.8* Form of Automatic Stock Option Agreement.
99.9* Form of Stock Issuance Agreement.
99.10* Form of Addendum to Stock Issuance Agreement. (Involuntary
Termination Following Change in Control).
* Exhibits 99.2 through 99.10 are incorporated herein by reference to Exhibit
99.1 and Exhibits 99.3 through 99.11 of Registrant's Registration Statement No.
333-10769 on Form S-8, filed with the Commission on August 23, 1996.
<PAGE>
Exhibit 5.0
June 8, 1998
Optika Imaging Systems, Inc.
7450 Campus Drive, Suite 200
Colorado Springs, CO 80920
Re: Registration Statement for Offering of
206,721 Shares of Common Stock
------------------------------
Ladies and Gentlemen:
We refer to your Registration Statement on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of an additional
206,721 shares of the Common Stock of Optika Imaging Systems, Inc. (the
"Company") under the Company's the 1994 Stock Option/Stock Issuance Plan. We
advise you that, in our opinion, when such shares have been issued and sold
pursuant to the applicable provisions of the 1994 Stock Option/Stock Issuance
Plan and in accordance with the Registration Statement, such shares will be duly
authorized, validly issued, fully paid and non-assessable shares of the
Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF PRICE WATERHOUSE LLP, INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated February 23, 1998, which appears on
page 28 of the Annual Report on Form 10-K of Optika Imaging Systems, Inc. for
the year ended December 31, 1997.
/s/ PRICE WATERHOUSE LLP
PRICE WATERHOUSE LLP
Boulder, Colorado
June 3, 1998
<PAGE>
Exhibit 99.1
OPTIKA IMAGING SYSTEMS, INC.
1994 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
AS RESTATED AND AMENDED THROUGH MAY 21, 1996
ARTICLE ONE
GENERAL
-------
I. PURPOSE OF THE PLAN
This 1994 Stock Option/Stock Issuance Plan, as amended and restated,
is intended to promote the interests of Optika Imaging Systems, Inc., a Delaware
corporation, by providing eligible individuals with the opportunity to obtain an
equity interest, or otherwise increase their equity interest, in the
Corporation. This Plan shall serve as the successor equity incentive program to
the Corporation's 1992 Stock Plan.
II. DEFINITIONS
For the purposes of this Plan, the following definitions shall be in
effect:
AUTOMATIC OPTION GRANT PROGRAM: the automatic option grant program in
effect under the Plan.
BOARD: the Corporation's Board of Directors.
CHANGE IN CONTROL: a change in ownership or control of the Corporation
effected through either of the following transactions:
- the direct or indirect acquisition by any person or related group
of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept, or
- a change in the composition of the Board over a period of thirty-
six (36) months or less such that a majority of the Board members ceases,
by reason of one or more contested elections for Board membership, to be
comprised of individuals who either (a) have been Board members
continuously since the beginning of such period or (b) have been elected or
nominated for election as
<PAGE>
Board members during such period by at least a majority of the Board
members described in clause (a) who were still in office at the time such
election or nomination was approved by the Board; provided, however, that a
change in the composition of the Board pursuant to Section 4.3.1(b) or
Section 4.3.6 of the Corporation's Amended and Restated Articles of
Incorporation shall not constitute a Change in Control.
CODE: the Internal Revenue Code of 1986, as amended.
COMMITTEE: the committee of two (2) or more non-employee Board
members appointed by the Board to administer the Plan.
COMMON STOCK: shares of the Corporation's common stock.
CORPORATE TRANSACTION: either of the following stockholder-approved
transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more
than fifty percent (50%) of the total combined voting power of the
Corporation's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to
such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
CORPORATION: Optika Imaging Systems, Inc., a Delaware corporation, and
its successors.
DISCRETIONARY OPTION GRANT PROGRAM: the discretionary option grant
program in effect under the Plan.
ELIGIBLE DIRECTOR: a non-employee Board member eligible to participate
in the Automatic Option Grant Program in accordance with the eligibility
provisions of Section v, Article One.
EMPLOYEE: an individual who performs services while in the employ of
the Corporation (or any Parent or Subsidiary) subject to the control and
direction of the employer entity not only as to the work to be performed but
also as to the manner and method of performance.
EXERCISE DATE: the date on which the Corporation shall have received
written notice of the option exercise.
2
<PAGE>
FAIR MARKET VALUE: the Fair Market Value per share of Common Stock
determined in accordance with the following provisions:
- If the Common Stock is not at the time listed or admitted to
trading on any national stock exchange but is traded on the Nasdaq National
Market, the Fair Market Value shall be the closing selling price per share
on the date in question, as such price is reported by the National
Association of Securities Dealers on the Nasdaq National Market or any
successor system. If there is no reported closing selling price for the
Common Stock on the date in question, then the Fair Market Value shall be
the closing selling price on the last preceding date for which such
quotation exists.
- If the Common Stock is at the time listed or admitted to trading on
any national securities exchange, then the Fair Market Value shall be the
closing selling price per share on the date in question on the exchange
determined by the Plan Administrator to be the primary market for the
Common Stock, as such price is officially quoted in the composite tape of
transactions on such exchange. If there is no reported sale of Common
Stock on such exchange on the date in question, then the Fair Market Value
shall be the closing selling price on the exchange on the last preceding
date for which such quotation exists.
- If the Common Stock is on the date in question neither listed nor
admitted to trading on any national securities exchange nor traded on the
Nasdaq National Market, then the Fair Market Value of the Common Stock on
such date shall be determined by the Plan Administrator after taking into
account such factors as the Plan Administrator shall deem appropriate.
- For purposes of any option grants made on the Underwriting Date,
the Fair Market Value shall be deemed to be equal to the price per share at
which the Common Stock is to be sold in the initial public offering
pursuant to the Underwriting Agreement.
HOSTILE TAKE-OVER: a change in ownership of the Corporation effected
through the following transaction:
- the direct or indirect acquisition by any person or related group
of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders which the Board does not recommend such stockholders to
accept, and
---
3
<PAGE>
- the acceptance of more than fifty percent (50%) of the securities
so acquired in such tender or exchange offer from holders other than
Section 16 Insiders.
INCENTIVE OPTION: a stock option which satisfies the requirements of
Code Section 422.
INVOLUNTARY TERMINATION: the termination of the Service of any
Optionee or Participant which occurs by reason of:
- such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
- such individual's voluntary resignation following (i) a change in
his or her position with the Corporation which materially reduces his or
her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and any non-
discretionary and objective-standard incentive payment or bonus award) by
more than ten percent (10%) in the aggregate or (C) a relocation of such
individual's place of employment by more than fifty (50) miles, provided
and only if such change, reduction or relocation is effected by the
Corporation without the individual's consent.
MISCONDUCT: the commission of any act of fraud, embezzlement or
dishonesty by the Optionee or Participant, any unauthorized use or disclosure by
such individual of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary) or any other intentional misconduct by such
individual adversely affecting the business or affairs of the Corporation in a
material manner. The foregoing definition shall not be deemed to be inclusive
of all the acts or omissions which the Corporation or any Parent or Subsidiary
may consider as grounds for the dismissal or discharge of any Optionee,
Participant or other individual in the Service of the Corporation.
1934 ACT: the Securities Exchange Act of 1934, as amended.
NON-STATUTORY OPTION: a stock option not intended to meet the
requirements of Code Section 422.
OPTIONEE: a person to whom an option is granted under the Option
Grant Program.
PARENT: Any corporation (other than the Corporation) in an unbroken
chain of corporations ending with the Corporation, provided each such
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
4
<PAGE>
PARTICIPANT: a person who is issued Common Stock under the Stock
Issuance Program.
PERMANENT DISABILITY OR PERMANENTLY DISABLED: the inability of the
Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
However, solely for purposes of the Automatic Option Grant Program, Permanent
Disability or Permanently Disabled shall mean the inability of the non-employee
Board member to perform his or her usual duties as a Board member by reason of
any medically determinable physical or mental impairment expected to result in
death or to be of continuous duration of twelve (12) months or more.
PLAN: the Corporation's 1994 Stock Option/Stock Issuance Plan, as
amended and restated and set forth in this document.
PLAN EFFECTIVE DATE: August 12, 1994, the date on which the Plan was
adopted by the Board.
PLAN ADMINISTRATOR: either the Board or the Committee, to the extent
the Committee is at the time responsible for the administration of the Plan in
accordance with Section IV of Article One.
PREDECESSOR PLAN: the Corporation's 1992 Stock Plan.
SALARY INVESTMENT OPTION GRANT PROGRAM: the salary reduction grant
program in effect under the Plan.
SECTION 12(g) REGISTRATION DATE: July 25, 1996, the date on which the
initial registration of the Common Stock under Section 12(g) of the 1934 Act
became effective.
SECTION 16 INSIDER: an officer or director of the Corporation subject
to the short-swing profit liabilities of Section 16 of the 1934 Act.
SERVICE: the performance of services on a periodic basis for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a non-
employee member of the board of directors or an independent consultant, except
to the extent otherwise specifically provided in the applicable stock option or
stock issuance agreement.
STOCK ISSUANCE PROGRAM: the stock issuance program in effect under the
Plan.
SUBSIDIARY: any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
such corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing
5
<PAGE>
fifty percent (50%) or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.
TAXES: the Federal, state and local income and employment tax
liabilities incurred by the holder of Non-Statutory Options or unvested shares
of Common Stock in connection with the exercise of those options or the vesting
of those shares.
10% STOCKHOLDER: the owner of stock (as determined under Code Section
424(d)) possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Corporation or any Parent or Subsidiary.
TAKE-OVER PRICE: the greater of (a) the Fair Market Value per share of
-------
Common Stock on the date the particular option to purchase such stock is
surrendered to the Corporation in connection with a Hostile Take-Over or (b) the
highest reported price per share of Common Stock paid by the tender offeror in
effecting such Hostile Take-Over. However, if the cancelled option is an
Incentive Option, then the Take-Over Price shall not exceed the clause (a) price
per share.
UNDERWRITING AGREEMENT: the agreement between the Corporation and the
underwriter or underwriters managing the initial public offering of the Common
Stock.
UNDERWRITING DATE: July 25, 1996, the date on which the Underwriting
Agreement was executed and priced in connection with the initial public offering
of the Common Stock.
III. STRUCTURE OF THE PLAN
A. The Plan shall be divided into four separate equity programs:
(i) the Discretionary Option Grant Program under which eligible
persons may, at the discretion of the Plan Administrator, be granted
options to purchase shares of Common Stock,
(ii) the Stock Issuance Program under which eligible persons may,
at the discretion of the Plan Administrator, be issued shares of Common
Stock directly, either through the immediate purchase of such shares or as
a bonus for services rendered the Corporation (or any Parent or
Subsidiary),
(iii) the Salary Investment Option Grant Program under which
eligible employees may elect to have a portion of their base salary
invested each year in special below-market option grants, and
6
<PAGE>
(iv) the Automatic Option Grant Program under which eligible non-
employee Board members shall automatically receive option grants at
periodic intervals to purchase shares of Common Stock.
B. The Discretionary Option Grant and Stock Issuance programs
became effective on the Plan Effective Date. The Salary Investment Option Grant
Program shall become effective when implemented by the Plan Administrator. The
Automatic Option Grant Program shall become effective on the Underwriting Date.
C. The provisions of Articles One and Six shall apply to all
equity programs under the Plan and shall govern the interests of all persons
under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. Until the Section 12(g) Registration Date, the Discretionary
Option Grant and Stock Issuance Programs shall be administered by the Board or
the Committee. From and after such Section 12(g) Registration Date, the
Discretionary Option Grant and Stock Issuance Programs shall be administered
solely and exclusively by the Committee. No non-employee Board member shall be
eligible to serve on the Committee if such individual has, within the relevant
period designated below, received an option grant or direct stock issuance under
this Plan or any other stock plan of the Corporation (or any Parent or
Subsidiary):
- for each of the initial members of the Committee, the period
commencing with the Section 12(g) Registration Date and ending with the
date of his or her appointment to the Committee, or
- for any successor or substitute member, the twelve (12)-month
period immediately preceding the date of his or her appointment to the
Committee or (if shorter) the period commencing with the Section 12(g)
Registration Date and ending with the date of his or her appointment to the
Committee.
B. Members of the Committee shall serve for such period of time
as the Board may determine and shall be subject to removal by the Board at any
time.
C. The Plan Administrator shall have full power and authority
(subject to the express provisions of the Plan) to establish rules and
regulations for the proper administration of the Discretionary Option Grant and
Stock Issuance Programs and to make such determinations under, and issue such
interpretations of, the provisions of such programs and any outstanding option
grants or stock issuances thereunder as it may deem necessary or advisable.
Decisions of the Plan Administrator shall be final and binding on all parties
who have an interest in the Discretionary Option Grant or Stock Issuance
Programs, or any outstanding option grant or share issuance thereunder.
7
<PAGE>
D. Administration of the Salary Investment Option Grant and Automatic
Option Grant Programs shall be self-executing in accordance with the terms of
each such program, and no Plan Administrator shall exercise any discretionary
functions with respect to any option grants or stock issuances made under those
programs.
V. ELIGIBILITY
A. The persons eligible to participate in the Discretionary
Option Grant and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee members of the Board (other than those serving
as members of the Committee) or the board of directors of any Parent or
Subsidiary, and
(iii) consultants who provide services to the Corporation (or
any Parent or Subsidiary).
B. Each Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
C. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
D. Only Section 16 Insiders and other highly compensated Employees
shall be eligible to participate in the Salary Investment Option Grant Program.
E. The individuals who shall be eligible to participate in the
Automatic Option Grant Program shall be limited to (i) those individuals serving
as non-employee Board members on the Underwriting Date (ii) those individuals
who first become non-employee Board members after the Underwriting Date, whether
through appointment by the Board or election by the Corporation's stockholders,
and (iii) those individuals who continue to serve as non-employee Board members
at one or more Annual Stockholders Meetings held after the Underwriting Date.
8
<PAGE>
However, Messrs. Gett and King, who each received an option grant under the
Discretionary Option Grant Program of the Plan prior to the Underwriting Date
shall not be eligible to receive an initial option grant under the Automatic
Option Grant Program on the Underwriting Date. In addition, a non-employee
Board member who has previously been in the employ of the Corporation (or any
Parent or Subsidiary) shall not be eligible to receive an option grant under the
Automatic Option Grant Program at the time he or she first becomes a non-
employee Board member, but shall be eligible to receive periodic option grants
under the Automatic Option Grant Program while he or she continues to serve as a
non-employee Board member.
VI. STOCK SUBJECT TO THE PLAN
A. Shares of Common Stock shall be available for issuance under the
Plan and shall be drawn from either the Corporation's authorized but unissued
shares of Common Stock or from reacquired shares of Common Stock, including
shares repurchased by the Corporation on the open market. The maximum number of
shares of Common Stock which may be issued over the ten (10)-year term of the
Plan shall not exceed 2,996,721/*/ shares, subject to adjustment from time to
time in accordance with the provisions of this Section VI. Such authorized
share reserve is comprised of (i) the number of shares which remained available
for issuance, as of the Plan Effective Date, under the Predecessor Plan as last
approved by the Corporation's stockholders, including the shares subject to the
outstanding options incorporated into this Plan and any other shares which would
have been available for future option grant under the Predecessor Plan as last
approved by the stockholders, plus (ii) an increase of 520,000/*/ shares
authorized by the Board as of the Plan Effective Date and subsequently approved
by the Corporation's stockholders, plus (iii) an additional increase of 200,000
shares authorized by the Board on November 8, 1995, and approved by the
Corporation's stockholders in February 1996, plus (iv) an additional increase of
750,000 shares approved by the Board in February 1996 and by the Corporation's
stockholders in June 1996, plus (v) an additional increase of 206,721 shares
effected on January 2, 1998 pursuant to Section VI. B. below. As one or more
outstanding options under the Predecessor Plan which have been incorporated into
this Plan are exercised, the number of shares issued with respect to each such
option shall reduce, on a share-for-share basis, the number of shares available
for issuance under this Plan. In addition, the share reserve under the Plan
shall be reduced on a share-for-share basis for each share of Common Stock
issued under the Corporation's Special Stock Option/Stock Purchase Plan,
pursuant to which a maximum of 80,000 shares of Common Stock have been reserved
for issuance to service providers of the Corporation's Business Solution Partner
Companies.
B. The number of shares of Common Stock available for issuance under
the Plan shall automatically increase on the first trading day of each of the
1998 and 1999 calendar years, by an amount equal to three percent (3%) of the
shares of Common Stock outstanding on December 31 of the immediately preceding
calendar year. No Incentive Options may be granted on the basis of the
additional shares of Common Stock resulting from such annual increases.
- -----------------
/*/ Adjusted for the 4-for-1 split of the Common Stock effected on November 22,
1994.
9
<PAGE>
C. In no event may any one individual participating in the Plan be
granted stock options, separately exercisable stock appreciation rights and
direct stock issuances for more than 500,000 shares of Common Stock in the
aggregate per calendar year, beginning with the 1996 calendar year.
D. Should one or more outstanding options under this Plan (including
options incorporated from the Predecessor Plan) expire or terminate for any
reason prior to exercise in full (including any option cancelled in accordance
with the cancellation-regrant provisions of Section IV of Article Two of the
Plan), then the shares subject to the portion of each option not so exercised
shall be available for subsequent option grants under the Plan. Shares subject
to any stock appreciation rights exercised under the Plan and all share
issuances under the Plan, whether or not the shares are subsequently repurchased
by the Corporation pursuant to its repurchase rights under the Plan, shall
reduce on a share-for-share basis the number of shares of Common Stock available
for subsequent issuance under the Plan. In addition, should the exercise price
of an outstanding option under the Plan be paid with shares of Common Stock or
should shares of Common Stock otherwise issuable under the Plan be withheld by
the Corporation in satisfaction of the withholding taxes incurred in connection
with the exercise of an outstanding option under the Plan or the vesting of a
direct share issuance made under the Plan, then the number of shares of Common
Stock available for issuance under the Plan shall be reduced by the gross number
of shares for which the option is exercised or which vest under the share
issuance, and not by the net number of shares of Common Stock actually issued to
the holder of such option or share issuance.
E. Should any change be made to the Common Stock issuable under the
Plan by reason of any stock split, stock dividend, recapitalization, combination
of shares, exchange of shares or other change affecting the outstanding Common
Stock as a class without the Corporation's receipt of consideration, then
appropriate adjustments shall be made to (i) the maximum number and/or class of
securities issuable under the Plan, (ii) the maximum number and/or class of
securities for which the share reserve is to increase automatically on the first
trading day of each of the 1998 and 1999 calendar years, (iii) the maximum
number and/or class of securities for which any one individual participating in
the Plan may be granted stock options, separately exercisable stock appreciation
rights and direct stock issuances in the aggregate under this Plan per calendar
year, (iv) the number and/or class of securities for which grants are
subsequently to be made under the Automatic Option Grant Program to new and
continuing non-employee Board members, (v) the number and/or class of securities
and price per share in effect under each option outstanding under the Plan and
(vi) the number and/or class of securities and price per share in effect under
each outstanding option incorporated into this Plan from the Predecessor Plan.
Such adjustments to the outstanding options are to be effected in a manner which
shall preclude the enlargement or dilution of rights and benefits thereunder.
The adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
10
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Plan shall be authorized by action of
the Plan Administrator and may, at the Plan Administrator's discretion, be
either Incentive Options or Non-Statutory Options. Individuals who are not
Employees of the Corporation or its Parent or Subsidiary may only be granted
Non-Statutory Options. Each granted option shall be evidenced by one or more
instruments in the form approved by the Plan Administrator; provided, however,
--------
that each such instrument shall comply with the terms and conditions specified
below. Each instrument evidencing an Incentive Option shall, in addition, be
subject to the applicable provisions of Section II of this Article Two.
A. Option Price.
------------
1. The option price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The option price per share of Common Stock subject to an
Incentive Option shall in no event be less than one hundred percent (100%)
of the Fair Market Value of such Common Stock on the grant date.
(ii) The option price per share of Common Stock subject to a
Non-Statutory Option shall in no event be less than eighty-five percent
(85%) of the Fair Market Value of such Common Stock on the grant date.
2. The option price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Four, be payable as follows:
(i) in cash or check made payable to the Corporation,
(ii) in shares of Common Stock held by the Optionee for the
requisite period necessary to avoid a charge to the Corporation's earnings
for financial reporting purposes and valued at Fair Market Value on the
Exercise Date, or
(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable written instructions (a) to
a Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
option price payable for the purchased
11
<PAGE>
shares plus all applicable Federal, state and local income and employment
taxes required to be withheld by the Corporation by reason of such purchase
and (b) to the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the sale
transaction.
3. Except to the extent such sale and remittance procedure is
utilized, payment of the option price for the purchased shares must be made on
the Exercise Date.
B. Term and Exercise of Options. Each option granted under this Plan
----------------------------
shall be exercisable at such time or times and during such period as is
determined by the Plan Administrator and set forth in the instrument evidencing
the grant. No such option, however, shall have a maximum term in excess of ten
(10) years measured from the grant date. During the lifetime of the Optionee,
the option shall be exercisable only by the Optionee and shall not be assignable
or transferable by the Optionee other than by will or by the laws of descent and
distribution following the Optionee's death.
C. Termination of Service.
----------------------
1. Except to the extent otherwise provided pursuant to
subsection C.2 below, the following provisions shall govern the exercise period
applicable to any options held by the Optionee at the time of cessation of
Service or death:
(i) Should the Optionee cease to remain in Service for any
reason other than death or Permanent Disability, then the period during
which each outstanding option held by such Optionee is to remain
exercisable shall be limited to the three (3)-month period following the
date of such cessation of Service.
(ii) Should such Service terminate by reason of Permanent
Disability, then the period during which each outstanding option held by
the Optionee is to remain exercisable shall be limited to the twelve (12)-
month period following the date of such cessation of Service.
(iii) Should the Optionee die while holding one or more
outstanding options, then the period during which each such option is to
remain exercisable shall be limited to the twelve (12)-month period
following the date of the Optionee's death. During such limited period,
the option may be exercised by the personal representative of the
Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the laws
of descent and distribution.
(iv) Under no circumstances, however, shall any such option be
exercisable after the specified expiration date of the option term.
12
<PAGE>
(v) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be exercisable for any vested shares
for which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease
to be outstanding with respect to any option shares for which the option is
not at that time exercisable or in which the Optionee is not otherwise at
that time vested.
(vi) Should the Optionee's Service be terminated for Misconduct,
then all outstanding options held by the Optionee shall terminate
immediately and cease to be outstanding.
2. The Plan Administrator shall have complete discretion,
exercisable either at the time the option is granted or at any time while the
option remains outstanding,
- to extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service or death from the
limited period in effect under subsection C.1 of this Article Two to such
greater period of time as the Plan Administrator shall deem appropriate;
provided, that in no event shall such option be exercisable after the
--------
specified expiration date of the option term; and/or
- to permit one or more options held by the Optionee under this
Article Two to be exercised, during the limited post-Service exercise
period applicable under this paragraph C., not only with respect to the
number of vested shares of Common Stock for which each such option is
exercisable at the time of the Optionee's cessation of Service but also
with respect to one or more subsequent installments for which the option
would otherwise have become exercisable had such cessation of Service not
occurred.
D. Stockholder Rights. An Optionee shall have no stockholder rights
------------------
with respect to any shares covered by the option until such individual shall
have exercised the option, paid the option price for the purchased shares and
become the record holder of those shares.
E. Unvested Shares. The Plan Administrator shall have the discretion
---------------
to authorize the issuance of unvested shares of Common Stock under the Plan.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the option price paid per
share, any or all of those unvested shares. The terms and conditions upon which
such repurchase right shall be exercisable (including the period and procedure
for exercise and the appropriate vesting schedule for the purchased shares)
shall be established by the Plan Administrator and set forth in the agreement
evidencing such repurchase
13
<PAGE>
right. All outstanding repurchase rights under the Plan shall terminate
automatically upon the occurrence of any Corporate Transaction, except to the
extent the repurchase rights are expressly assigned to the successor corporation
(or parent thereof) in connection with the Corporate Transaction.
II. INCENTIVE OPTIONS
Incentive Options may only be granted to individuals who are
Employees, and the terms and conditions specified below shall be applicable to
all Incentive Options granted under the Plan. Except as modified by the
provisions of this Section II, all the provisions of Articles One, Two and Six
of the Plan shall be applicable to all Incentive Options granted hereunder. Any
Options specifically designated as Non-Statutory shall not be subject to such
---
terms and conditions.
A. Dollar Limitation. The aggregate Fair Market Value (determined as
-----------------
of the respective date or dates of grant) of the Common Stock for which one or
more options granted to any Employee under this Plan (or any other option plan
of the Corporation or its Parent or Subsidiary) may for the first time become
exercisable as incentive stock options under the Federal tax laws during any one
calendar year shall not exceed the sum of One Hundred Thousand Dollars
($100,000). To the extent the Employee holds two (2) or more such options which
become exercisable for the first time in the same calendar year, the foregoing
limitation on the exercisability of such options as incentive stock options
under the Federal tax laws shall be applied on the basis of the order in which
such options are granted. Should e number of shares of Common Stock for which
any Incentive Option first becomes exercisable in any calendar year exceed the
applicable One Hundred Thousand Dollar ($100,000) limitation, then that option
may nevertheless be exercised in that calendar year for the excess number of
shares as a Non-Statutory Option under the Federal tax laws.
B. 10% Stockholder. If any individual to whom an Incentive Option is
---------------
granted is a 10% Stockholder, then the exercise price per share shall not be
less than one hundred ten percent (110%) of the Fair Market Value per share of
Common Stock on the grant date and the option term shall not exceed five (5)
years measured from the grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each option which is at
the time outstanding under this Article Two shall automatically accelerate so
that each such option shall, immediately prior to the specified effective date
for such Corporate Transaction, become fully exercisable with respect to the
total number of shares of Common Stock at the time subject to such option and
may be exercised for all or any portion of such shares as fully-vested shares of
Common Stock. However, an outstanding option under this Article Two shall NOT
so accelerate if and to the extent: (i) such option is, in connection with such
Corporate Transaction, either to be assumed by the successor corporation or
parent thereof or to be replaced with a comparable option to purchase shares of
the capital stock of the successor corporation or parent thereof, (ii)
14
<PAGE>
such option is to be replaced with a cash incentive program of the successor
corporation which preserves the option spread existing at the time of such
Corporate Transaction and provides for subsequent payout in accordance with the
same vesting schedule applicable to such option, or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. However, upon an Optionee's cessation of Service
by reason of an Involuntary Termination (other than for Misconduct) within
eighteen (18) months after a Corporate Transaction in which his or her
outstanding options are assumed or replaced pursuant to clause (i) above, each
such option shall automatically accelerate and become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for all or any portion of such shares as fully
vested shares of Common Stock. The option as so accelerated shall remain
exercisable until the earlier of (i) the expiration of the option term or (ii)
-------
the expiration of the one (1)-year period measured from the date of such
Involuntary Termination. The determination of option comparability under clause
(i) above shall be made by the Plan Administrator, and its determination shall
be final, binding and conclusive.
B. All outstanding repurchase rights shall also terminate
automatically, and the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event of any Corporate Transaction,
except to the extent: (i) those repurchase rights are to be assigned to the
successor corporation (or parent thereof) in connection with such Corporate
Transaction or (ii) such accelerated vesting is precluded by other limitations
imposed by the Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of a Corporate Transaction,
all outstanding options under this Article Two shall terminate and cease to
remain outstanding, except to the extent assumed by the successor corporation or
its parent company.
D. Each outstanding option under this Article Two that is assumed in
connection with a Corporate Transaction or is otherwise to continue in effect
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply and pertain to the number and class of securities which would have been
issued to the option holder, in consummation of such Corporate Transaction, had
such person exercised the option immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to the exercise price
payable per share, provided the aggregate exercise price payable for such
--------
securities shall remain the same. In addition, the class and number of
securities available for issuance under the Plan on both an aggregate and per
participant basis following the consummation of such Corporate Transaction shall
be appropriately adjusted.
E. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the option is granted or at any time while the
option remains outstanding, to provide for the automatic acceleration of one or
more outstanding options under this Article Two (and the termination of one or
more of the Corporation's outstanding repurchase rights under this Article Two)
upon the occurrence of a Change in Control. The Plan Administrator shall also
15
<PAGE>
have full power and authority to condition any such option acceleration (and the
termination of any outstanding repurchase rights) upon the Optionee's cessation
of Service by reason of an Involuntary Termination (other than for Misconduct)
within a specified period following such Change in Control.
F. Any options accelerated in connection with a Change in Control
shall remain fully exercisable until the expiration or sooner termination of the
option term or the surrender of such option in accordance with Section V of this
Article Two.
G. The grant of options under this Article Two shall in no way affect
the right of the Corporation to adjust, reclassify, reorganize or otherwise
change its capital or business structure or to merge, consolidate, dissolve,
liquidate or sell or transfer all or any part of its business or assets.
H. The portion of any Incentive Option accelerated under this Section
III in connection with a Corporate Transaction or Change in Control shall remain
exercisable as an incentive stock option under the Federal tax laws only to the
extent the dollar limitation of Section II of this Article Two is not exceeded.
To the extent such dollar limitation is exceeded, the accelerated portion of
such option shall be exercisable as a non-statutory option under the Federal tax
laws.
IV. CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected Optionees, the
cancellation of any or all outstanding options under this Article Two (including
outstanding options under the Predecessor Plan incorporated into this Plan) and
to grant in substitution new options under the Plan covering the same or
different numbers of shares of Common Stock but with an option price per share
not less than (i) one hundred percent (100%) of the Fair Market Value on the new
grant date in the case of a grant of an Incentive Option, (ii) one hundred ten
percent (110%) of such Fair Market Value in the case of an Incentive Option
grant to a 10% Stockholder or (iii) eighty-five percent (85%) of such Fair
Market Value in the case of all other grants.
V. STOCK APPRECIATION RIGHTS
A. Provided and only if the Plan Administrator determines in its
discretion to implement the stock appreciation right provisions of this Section
V, one or more Optionees may be granted the right, exercisable upon such terms
and conditions as the Plan Administrator may establish, to surrender all or part
of an unexercised option under this Article Two in exchange for a distribution
from the Corporation in an amount equal to the excess of (i) the Fair Market
Value (on the option surrender date) of the number of shares in which the
Optionee is at the time vested under the surrendered option (or surrendered
portion thereof) over (ii) the aggregate exercise price payable for such vested
shares.
16
<PAGE>
B. No surrender of an option shall be effective hereunder unless it
is approved by the Plan Administrator. If the surrender is so approved, then
the distribution to which the Optionee shall accordingly become entitled under
this Section V may be made in shares of Common Stock valued at Fair Market Value
on the option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
C. If the surrender of an option is rejected by the Plan
Administrator, then the Optionee shall retain whatever rights the Optionee had
under the surrendered option (or surrendered portion thereof) on the option
surrender date and may exercise such rights at any time prior to the later of
-----
(i) five (5) business days after the receipt of the rejection notice or (ii) the
last day on which the option is otherwise exercisable in accordance with the
terms of the instrument evidencing such option, but in no event may such rights
be exercised more than ten (10) years after the date of the option grant.
D. One or more Section 16 Insiders may, in the Plan Administrator's
sole discretion, be granted limited stock appreciation rights in tandem with
their outstanding options under this Article Two. Upon the occurrence of a
Hostile Take-Over at a time when the Corporation's outstanding Common Stock is
registered under Section 12(g) of the 1934 Act, each such officer holding one or
more options with such a limited stock appreciation right in effect for at least
six (6) months shall have the unconditional right (exercisable for a thirty
(30)-day period following such Hostile Take-Over) to surrender each such option
to the Corporation, to the extent the option is at the time exercisable for
fully vested shares of Common Stock. The officer shall in return be entitled to
a cash distribution from the Corporation in an amount equal to the excess of (i)
the Take-Over Price of the vested shares of Common Stock at the time subject to
each surrendered option (or surrendered portion of such option) over (ii) the
aggregate exercise price payable for such vested shares. Such cash distribution
shall be made within five (5) days following the option surrender date. Neither
the approval of the Plan Administrator nor the consent of the Board shall be
required in connection with such option surrender and cash distribution. Any
unsurrendered portion of the option shall continue to remain outstanding and
become exercisable in accordance with the terms of the instrument evidencing
such grant.
E. The shares of Common Stock subject to any option surrendered for
an appreciation distribution pursuant to this Section V shall NOT be available
for subsequent issuance under the Plan.
17
<PAGE>
ARTICLE THREE
STOCK ISSUANCE PROGRAM
----------------------
I. TERMS AND CONDITIONS OF STOCK ISSUANCES
Shares of Common Stock may be issued under the Stock Issuance Program
through direct and immediate purchases without any intervening stock option
grants. The issued shares shall be evidenced by a Stock Issuance Agreement that
complies with the terms and conditions of this Article Three.
A. Consideration.
-------------
1. Shares of Common Stock may be issued under the Stock
Issuance Program for one or more of the following items of consideration which
the Plan Administrator may deem appropriate in each individual instance:
(i) full payment in cash or check made payable to the
Corporation's order;
(ii) a promissory note payable to the Corporation's order in one
or more installments; or
(iii) past services rendered to the Corporation or any Parent or
Subsidiary.
2. The shares may, in the absolute discretion of the Plan
Administrator, be issued for consideration with a value less than one hundred
percent (100%) of the Fair Market Value of such shares at the time of issuance,
but in no event less than eighty-five percent (85%) of such Fair Market Value.
B. Vesting Provisions.
------------------
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the absolute discretion of the Plan Administrator, be fully and
immediately vested upon issuance (as a bonus for past services) or may vest in
one or more installments over the Participant's period of Service or the
Corporation's attainment of performance milestones. The elements of the vesting
schedule applicable to any unvested shares of Common Stock issued under the
Stock Issuance Program, namely:
(i) the Service period to be completed by the Participant or
the performance objectives to be achieved by the Corporation,
18
<PAGE>
(ii) the number of installments in which the shares are to vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
(iv) the effect which death, Permanent Disability or other event
designated by the Plan Administrator is to have upon the vesting schedule,
shall be determined by the Plan Administrator and incorporated into the Stock
Issuance Agreement executed by the Corporation and the Participant at the time
such unvested shares are issued.
2. The Participant shall have full stockholder rights with
respect to any shares of Common Stock issued to him or her under the Plan,
whether or not his or her interest in those shares is vested. Accordingly, the
Participant shall have the right to vote such shares and to receive any regular
cash dividends paid on such shares. Any new, additional or different shares of
stock or other property (including money paid other than as a regular cash
dividend) which the Participant may have the right to receive with respect to
his or her unvested shares by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration or by reason of any Corporate Transaction shall be
issued, subject to (i) the same vesting requirements applicable to his or her
unvested shares and (ii) such escrow arrangements as the Plan Administrator
shall deem appropriate.
3. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock under the Stock Issuance
Program, then the Corporation shall have the right to require the Participant to
surrender those shares immediately to the Corporation for cancellation, and the
Participant shall cease to have any further stockholder rights with respect to
the surrendered shares. To the extent the surrendered shares were previously
issued to the Participant for consideration paid in cash or cash equivalent
(including the Participant's purchase-money promissory note), the Corporation
shall repay to the Participant the cash consideration paid for the surrendered
shares and shall cancel the unpaid principal balance of any outstanding
purchase-money note of the Participant attributable to such surrendered shares.
4. The Plan Administrator may in its discretion elect to waive
the surrender and cancellation of one or more unvested shares of Common Stock
(or other assets attributable thereto) which would otherwise occur upon the non-
completion of the vesting schedule applicable to such shares. Such waiver shall
result in the immediate vesting of the Participant's interest in the shares of
Common Stock as to which the waiver applies. Such waiver may be effected at any
time, whether before or after the Participant's cessation of Service or the
attainment or non-attainment of the applicable performance objectives.
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II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under this
Article Three shall automatically terminate upon the occurrence of a Corporate
Transaction, except to the extent the Corporation's outstanding repurchase
rights are expressly assigned to the successor corporation (or parent thereof)
in connection with such Corporate Transaction. However, any assigned repurchase
rights covering the unvested shares held by a Participant under this Article
Three shall immediately terminate should there occur an Involuntary Termination
of that Participant's Service (other than for Misconduct) within eighteen (18)
months after such Corporate Transaction.
B. The Plan Administrator shall have the discretionary authority,
exercisable either at the time the shares are issued under this Article Three or
at any time while those shares remain outstanding, to provide for the automatic
termination of the Corporation's repurchase rights with respect to those shares
should there occur a Change in Control. The Plan Administrator shall also have
full power and authority to condition the termination of those repurchase rights
upon the Participant's cessation of Service by reason of an Involuntary
Termination (other than for Misconduct) within a specified period following such
Change in Control.
III. SHARE ESCROW/TRANSFER RESTRICTIONS
A. Unvested shares may, in the Plan Administrator's discretion, be
held in escrow by the Corporation until the Participant's interest in such
shares vests or may be issued directly to the Participant with restrictive
legends on the certificates evidencing such unvested shares.
B. The Participant shall have no right to transfer any unvested
shares of Common Stock issued to him or her under the Stock Issuance Program.
For purposes of this restriction, the term "transfer" shall include (without
limitation) any sale, pledge, assignment, encumbrance, gift or other disposition
of such shares, whether voluntary or involuntary. Upon any such attempted
transfer, the unvested shares shall immediately be cancelled in accordance with
substantially the same procedure in effect under Section I.B.3 of this Article
Three, and neither the Participant nor the proposed transferee shall have any
rights with respect to such cancelled shares. However, the Participant shall
have the right to make a gift of unvested shares acquired under the Stock
Issuance Program to his or her spouse or issue, including adopted children, or
to a trust established for such spouse or issue, provided the transferee of such
shares delivers to the Corporation a written agreement to be bound by all the
provisions of the Stock Issuance Program and the Stock Issuance Agreement
applicable to the gifted shares.
20
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ARTICLE FOUR
SALARY INVESTMENT OPTION GRANT PROGRAM
--------------------------------------
I. OPTION GRANTS
The Committee shall have the sole and exclusive authority to determine
the calendar year or years (if any) for which the Salary Investment Option Grant
Program is to be in effect and to select the Section 16 Insiders and other
highly compensated Employees eligible to participate in the Salary Investment
Option Grant Program for those calendar year or years. Each selected individual
who elects to participate in the Salary Investment Option Grant Program must,
prior to the start of each calendar year of participation, file with the Plan
Administrator (or its designate) an irrevocable authorization directing the
Corporation to reduce his or her base salary for that calendar year by an amount
not less than Ten Thousand Dollars ($10,000.00) nor more than Fifty Thousand
Dollars ($50,000.00). Each individual who files a proper salary reduction
authorization shall automatically be granted an option under this Salary
Investment Option Grant Program on the first trading day in January of the
calendar year for which that salary reduction is to be in effect.
II. OPTION TERMS
Each option shall be a Non-Statutory Option evidenced by one or more
documents in the form approved by the Plan Administrator; provided, however,
--------
that each such document shall comply with the terms specified below.
A. Exercise Price.
--------------
1. The exercise price per share shall be thirty-three and one-
third percent (33-1/3%) of the Fair Market Value per share of Common Stock on
the option grant date.
2. The exercise price shall become immediately due upon
exercise of the option and shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
B. Number of Option Shares. The number of shares of Common Stock
-----------------------
subject to the option shall be determined pursuant to the following formula
(rounded down to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
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A is the dollar amount by which the Optionee's base salary is to
be reduced for the calendar year, and
B is the Fair Market Value per share of Common Stock on the
option grant date.
C. Exercise and Term of Options. The option shall become
----------------------------
exercisable in a series of twelve (12) successive equal monthly installments
upon the Optionee's completion of each calendar month of Service in the calendar
year for which the salary reduction is in effect. Each option shall have a
maximum term of ten (10) years measured from the option grant date.
D. Effect of Termination of Service. Should the Optionee cease
--------------------------------
Service for any reason while holding one or more options under this Article
Three, then each such option shall remain exercisable, for any or all of the
shares for which the option is exercisable at the time of such cessation of
Service, until the earlier of (i) the expiration of the ten (10)-year option
-------
term or (ii) the expiration of the three (3)-year period measured from the date
of such cessation of Service. Should the Optionee die while holding one or more
options under this Article Three, then each such option may be exercised, for
any or all of the shares for which the option is exercisable at the time of the
Optionee's cessation of Service (less any shares subsequently purchased by
Optionee prior to death), by the personal representative of the Optionee's
estate or by the person or persons to whom the option is transferred pursuant to
the Optionee's will or in accordance with the laws of descent and distribution.
Such right of exercise shall lapse, and the option shall terminate, upon the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the three
- -------
(3)-year period measured from the date of the Optionee's cessation of Service.
However, the option shall, immediately upon the Optionee's cessation of Service
for any reason, terminate and cease to remain outstanding with respect to any
and all shares of Common Stock for which the option is not otherwise at that
time exercisable.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee
remains in Service, each outstanding option held by such Optionee under this
Salary Investment Option Grant Program shall automatically accelerate so that
each such option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of shares
of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. Each such
outstanding option shall be assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and shall remain exercisable for the
fully-vested shares until the earlier of (i) the expiration of the ten (10)-year
-------
option term or (ii) the expiration of the three (3)-year period measured from
the date of the Optionee's cessation of Service.
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<PAGE>
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Investment Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
The option shall remain so exercisable until the earlier or (i) the expiration
-------
of the ten (10)-year option term or (ii) the expiration of the three (3)-year
period measured from the date of the Optionee's cessation of Service.
C. The grant of options under the Salary Investment Option Grant
Program shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Salary Investment
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
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<PAGE>
ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates specified
-----------
below:
1. Each individual who is serving as a non-employee Board
member on the Underwriting Date, other than Messrs. King and Gett, who each
received an option under the Discretionary Option Grant Program upon his
respective appointment to the Board prior to the Underwriting Date, shall
automatically be granted, on such date, a Non-Statutory Option to purchase
10,000 shares of Common Stock, provided such individual has not previously been
in the employ of the Corporation (or any Parent or Subsidiary).
2. Each individual who is first elected or appointed as a non-
employee Board member at any time on or after the Underwriting Date shall
automatically be granted, on the date of such initial election or appointment
(as the case may be), a Non-Statutory Option to purchase 10,000 shares of Common
Stock, provided that individual has not previously been in the employ of the
Corporation or any Parent or Subsidiary.
3. On the date of each Annual Stockholders Meeting held after
the Underwriting Date, each individual who is to continue to serve as an
Eligible Director (including those individuals first appointed on or after April
1, 1996 but prior to the Underwriting Date) whether or not that individual is
standing for re-election to the Board at that particular Annual Meeting, shall
automatically be granted a Non-Statutory Option to purchase 2,500 shares of
Common Stock, provided such individual has served as a non-employee Board member
for at least six (6) months. There shall be no limit on the number of such
2,500-share option grants any one Eligible Director may receive over his or her
period of Board service, and non-employee Board members who have previously been
in the employ of the Corporation (or any Parent or Subsidiary) shall be eligible
to receive one or more such annual option grants over their period of continued
Board service.
B. Exercise Price.
--------------
1. The exercise price per share shall be equal to one hundred
percent (100%) of the Fair Market Value per share of Common Stock on the option
grant date.
2. The exercise price shall be payable in one or more of the
alternative forms authorized under the Discretionary Option Grant Program.
Except to the extent the sale and remittance procedure specified thereunder is
utilized, payment of the exercise price for the purchased shares must be made on
the Exercise Date.
24
<PAGE>
C. Option Term. Each option shall have a term of ten (10) years
-----------
measured from the option grant date.
D. Exercise and Vesting of Options. Each option shall be
-------------------------------
immediately exercisable for any or all of the option shares. However, any
shares purchased under the option shall be subject to repurchase by the
Corporation, at the exercise price paid per share, upon the Optionee's cessation
of Board service prior to vesting in those shares. Each initial 10,000-share
grant shall vest, and the Corporation's repurchase right shall lapse, in a
series of four (4) successive equal annual installments over the Optionee's
period of continued service as a Board member, with the first such installment
to vest upon the Optionee's completion of one (1) year of Board service measured
from the option grant date. Each annual 2,500-share grant shall vest, and the
Corporation's repurchase right shall lapse, upon the Optionee's completion of
one (1) year of Board service measured from the option grant date.
E. Termination of Board Service. The following provisions shall
----------------------------
govern the exercise of any options held by the Optionee at the time the Optionee
ceases to serve as a Board member:
(i) The Optionee (or, in the event of Optionee's death, the
personal representative of the Optionee's estate or the person or persons
to whom the option is transferred pursuant to the Optionee's will or in
accordance with the laws of descent and distribution) shall have a twelve
(12)-month period following the date of such cessation of Board service in
which to exercise each such option.
(ii) During the twelve (12)-month exercise period, the option
may not be exercised in the aggregate for more than the number of vested
shares of Common Stock for which the option is exercisable at the time of
the Optionee's cessation of Board service.
(iii) Should the Optionee cease to serve as a Board member by
reason of death or Permanent Disability, then all shares at the time
subject to the option shall immediately vest so that such option may,
during the twelve (12)-month exercise period following such cessation of
Board service, be exercised for all or any portion of those shares as
fully-vested shares of Common Stock.
(iv) In no event shall the option remain exercisable after the
expiration of the option term. Upon the expiration of the twelve (12)-
month exercise period or (if earlier) upon the expiration of the option
term, the option shall terminate and cease to be outstanding for any vested
shares for which the
25
<PAGE>
option has not been exercised. However, the option shall, immediately upon
the Optionee's cessation of Board service for any reason other than death
or Permanent Disability, terminate and cease to be outstanding to the
extent the option is not otherwise at that time exercisable for vested
shares.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for all or any portion of those shares as fully-
vested shares of Common Stock. Immediately following the consummation of the
Corporate Transaction, each automatic option grant shall terminate and cease to
be outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B. In connection with any Change in Control, the shares of Common
Stock at the time subject to each outstanding option but not otherwise vested
shall automatically vest in full so that each such option shall, immediately
prior to the effective date of the Change in Control, become fully exercisable
for all of the shares of Common Stock at the time subject to such option and may
be exercised for all or any portion of those shares as fully-vested shares of
Common Stock. Each such option shall remain exercisable for such fully-vested
option shares until the expiration or sooner termination of the option term or
the surrender of the option in connection with a Hostile Take-Over.
C. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
automatic option held by him or her for a period of at least six (6) months.
The Optionee shall in return be entitled to a cash distribution from the
Corporation in an amount equal to the excess of (i) the Take-Over Price of the
shares of Common Stock at the time subject to the surrendered option (whether or
not the Optionee is otherwise at the time vested in those shares) over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board or any Plan Administrator
shall be required in connection with such option surrender and cash
distribution.
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to the exercise price payable per
share under each outstanding option, provided the aggregate exercise price
--------
payable for such securities shall remain the same.
26
<PAGE>
E. The grant of options under the Automatic Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. AMENDMENT OF THE AUTOMATIC OPTION GRANT PROGRAM
The provisions of this Automatic Option Grant Program, together with
the option grants outstanding thereunder, may not be amended at intervals more
frequently than once every six (6) months, other than to the extent necessary to
comply with applicable Federal income tax laws and regulations.
IV. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
27
<PAGE>
ARTICLE SIX
MISCELLANEOUS
-------------
I. LOANS OR INSTALLMENT PAYMENTS
A. The Plan Administrator may, in its discretion, assist any Optionee or
Participant (including an Optionee or Participant who is an officer of the
Corporation) in the exercise of one or more options granted to such Optionee
under the Discretionary Option Grant Program or the purchase of one or more
shares issued to such Participant under the Stock Issuance Program, including
the satisfaction of any Federal, state and local income and employment tax
obligations arising therefrom, by:
(i) authorizing the extension of a loan from the Corporation to
such Optionee or Participant, or
(ii) permitting the Optionee or Participant to pay the option
price or purchase price for the purchased Common Stock in installments over
a period of years.
B. The terms of any loan or installment method of payment (including the
interest rate and terms of repayment) shall be upon such terms as the Plan
Administrator specifies in the applicable option or issuance agreement or
otherwise deems appropriate at the time such option price or purchase price
becomes due and payable. Loans or installment payments may be authorized with
or without security or collateral. In all events, the maximum credit available
to the Optionee or Participant may not exceed the option or purchase price of
the acquired shares (less the par value of such shares) plus any Federal, state
and local income and employment tax liability incurred by the Optionee or
Participant in connection with the acquisition of such shares.
C. The Plan Administrator may, in its absolute discretion, determine that
one or more loans extended under this Section I shall be subject to forgiveness
by the Corporation in whole or in part upon such terms and conditions as the
Plan Administrator may in its discretion deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board has complete and exclusive power and authority to amend
or modify the Plan (or any component thereof) in any or all respects whatsoever.
However, (i) no such amendment or modification shall adversely affect rights and
obligations with respect to options at the time outstanding under the Plan, nor
adversely affect the rights of any Participant with respect to Common Stock
issued under the Stock Issuance Program prior to such action, unless the
Optionee or Participant consents to such amendment and (ii) any amendment made
to the Salary Incentive Option Grant and Automatic Option Grant Program (or any
stock option or stock issuances outstanding thereunder) shall be in compliance
with the applicable limitations of
28
<PAGE>
those programs. In addition, the Board may not, without the approval of the
Corporation's stockholders, amend the Plan to (i) increase the maximum number of
shares issuable under the Plan or the maximum number of shares for which any one
individual participating in the Plan may be granted stock options, separately
exercisable stock appreciation rights and direct stock issuances in the
aggregate per calendar year under the Plan, except for permissible adjustments
under Article One, (ii) materially modify the eligibility requirements for Plan
participation, or (iii) otherwise materially increase the benefits accruing to
Plan participants.
B. (i) Options to purchase shares of Common Stock may be granted
under the Discretionary Option Grant Program and (ii) shares of Common Stock may
be issued under the Stock Issuance Program, which are in both instances in
excess of the number of shares then available for issuance under the Plan,
provided any excess shares actually issued under the Option Grant Program or the
Stock Issuance Program are held in escrow until stockholder approval is obtained
for a sufficient increase in the number of shares available for issuance under
the Plan. If such stockholder approval is not obtained within twelve (12)
months after the date the first such excess option grants or excess share
issuances are made, then (i) any unexercised excess options shall terminate and
cease to be exercisable and (ii) the Corporation shall promptly refund the
purchase price paid for any excess shares actually issued under the Plan and
held in escrow, together with interest (at the applicable Short Term Federal
Rate) for the period the shares were held in escrow.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of any stock options granted under Article Two or upon the
issuance of any shares under Article Three shall be subject to the satisfaction
of all applicable Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the Taxes incurred by such holders in connection
with the exercise of their options or the vesting of their shares. Such right
may be provided to any such holder in either or both of the following formats:
Stock Withholding: The election to have the Corporation withhold,
-----------------
from the shares of Common Stock otherwise issuable upon the exercise of such
Non-Statutory Option or the vesting of such shares, a portion of those shares
with an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
29
<PAGE>
Stock Delivery: The election to deliver to the Corporation, at
--------------
the time the Non-Statutory Option is exercised or the shares vest, one or more
shares of Common Stock previously acquired by such holder (other than in
connection with the option exercise or share vesting triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not to
exceed one hundred percent (100%)) designated by the holder.
IV. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan originally became effective upon its adoption by the
Board on August 12, 1994 and was approved by the Corporation's stockholders on
October 10, 1994. The Plan is designed to serve as the successor to the
Corporation's 1992 Stock Plan No further option grants or stock issuances shall
be made under the Predecessor Plan from and after the Plan Effective Date.
B. On November 22, 1994, the Corporation effected a four-for-one
split of the outstanding Common Stock. On November 8, 1995 the Board adopted a
200,000-share increase in the maximum number of shares of Common Stock issuable
over the term of the Plan. The increase was approved by the Corporation's
stockholders in November 1995.
C. In February 1996, the Board amended the Plan to (i) increase the
maximum number of shares of Common Stock issuable over the term of the Plan by
750,000 shares to 2,790,000 shares and (ii) increase the maximum number of
shares of Common Stock for which any one participant in the Plan may receive
option grants, separately exercisable stock appreciation rights and direct stock
issuances in the aggregate from 500,000 shares over the term of such plan to
500,000 shares per calendar year, beginning with the 1996 calendar year. On May
21, 1996, in anticipation of the initial public offering of the Common Stock,
the Board further amended and restated the Plan to (i) provide for the immediate
termination of options granted after such date in the event of the Optionee's
termination of Service for misconduct, (ii) provide for automatic increases in
the maximum number of shares of Common Stock reserved for issuance under the
Plan to be effected on the first trading day in each of the 1998 and 1999
calendar years, and (ii) implement the Automatic Option Grant and Salary
Investment Option Grant Programs. The restatement was approved by the
Corporation's stockholders in June, 1996.
D. Each stock option grant outstanding under the Predecessor Plan
immediately prior to the Plan Effective Date was incorporated into this Plan and
treated as an outstanding option under this Plan, but each such option shall
continue to be governed solely by the terms and conditions of the instrument
evidencing such grant, and nothing in this Plan shall be deemed to affect or
otherwise modify the rights or obligations of the holders of such options with
respect to their acquisition of shares of Common Stock thereunder. However, the
Plan Administrator shall have complete discretion to extend, under such
circumstances as it may deem appropriate, one or more provisions of this Plan to
any or all of the stock options which are incorporated into this Plan from the
Predecessor Plan but which do not otherwise contain such provisions.
30
<PAGE>
E. The provisions of each restatement and amendment of the Plan apply
only to stock options and stock appreciation rights granted under the Plan and
stock issuances made under the Plan from and after the effective date of such
restatement or amendment. All stock options and stock appreciation rights
issued and outstanding under the Plan and all stock issuances effected
immediately prior to such effective date shall continue to be governed by the
terms and conditions of the Plan (and the respective instruments evidencing each
such option, stock appreciation right or stock issuance) as in effect on the
date each such option or stock appreciation right was previously granted or such
stock issuance was made, and nothing in any such restatement or amendment shall
be deemed to affect or otherwise modify the rights or obligations of the holders
of such options or stock appreciation rights with respect to their acquisition
of shares of Common Stock under such options or their exercise of such stock
appreciation rights or the rights or obligations of the individuals to which
such shares of Common Stock have been issued.
F. The Plan shall terminate upon the earlier of (i) August 11, 2004
-------
or (ii) the date on which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise of the options or stock appreciation
rights granted under the Plan or the issuance of shares (whether vested or
unvested) under the Stock Issuance Program. If the date of termination is
determined under clause (i) above, then all option grants and unvested share
issuances outstanding on such date shall thereafter continue to have force and
effect in accordance with the provisions of the instruments evidencing such
option grants or share issuances.
V. NO EMPLOYMENT/SERVICE RIGHTS
Neither the action of the Corporation in establishing the Plan, nor
any action taken by the Plan Administrator hereunder, nor any provision of the
Plan shall be construed so as to grant any individual the right to remain in the
employ or service of the Corporation (or any Parent or Subsidiary) for any
period of specific duration, and the Corporation (or any Parent or Subsidiary
retaining the services of such individual) may terminate such individual's
employment or service at any time and for any reason, with or without cause.
VI. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares
pursuant to option grants or share issuances under the Plan shall be used for
general corporate purposes.
VII. REGULATORY APPROVALS
The implementation of the Plan, the granting of any option under the
Plan, the issuance of any shares under the Stock Issuance Program, and the
issuance of Common Stock upon the exercise or surrender of the option grants
made hereunder shall be subject to the Corporation's procurement of all
approvals and permits required by regulatory authorities having jurisdiction
over the Plan, the options granted under it, and the Common Stock issued
pursuant to it.
31
