<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 29, 1998
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------------
COLDWATER CREEK INC.
(Exact name of registrant as specified in its charter)
DELAWARE 82-0419266
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
ONE COLDWATER CREEK DRIVE
SANDPOINT, IDAHO 83864
(Address of principal executive offices) (Zip Code)
---------------------
1996 STOCK OPTION/STOCK ISSUANCE PLAN
(Full title of the Plans)
---------------------
DENNIS PENCE,
PRESIDENT, CHIEF EXECUTIVE OFFICER AND
VICE CHAIRMAN OF THE BOARD
COLDWATER CREEK INC.
ONE COLDWATER CREEK DRIVE
SANDPOINT, IDAHO 83864
(208) 263-2266
(Name, address including zip code, and telephone number, including area code,
of agent for service)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================
Proposed maximum Proposed maximum
Amount to be offering price aggregate offering Aggregate
Title of securities to be registered registered(1) per share(2) price(2) filing fee
------------------------------------ ------------ ---------------- ----------------- ----------
<S> <C> <C> <C> <C>
1996 Stock Option/Stock Issuance Plan
- -------------------------------------
350,000 shares $21.9375 $7,678,125 $2,265.05
Common Stock,
$.01 par value
===================================================================================================================
</TABLE>
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1996 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 outstanding shares of 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 Registrant's Common Stock on July 28, 1998, as
reported by the NASDAQ National Market.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. Incorporation of Documents by Reference
---------------------------------------
Coldwater Creek Inc., a Delaware corporation (the "Registrant"),
hereby incorporates by reference into this Registration Statement the following
documents which were previously filed with the Securities and Exchange
Commission (the "SEC"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year
ended February 28, 1998 filed with the SEC pursuant to Section
13(a) of the Securities Exchange Act of 1934, as amended (the
"1934 Act"), on May 29, 1998;
(b) The Registrant's Quarterly Report on Form 10-Q for the fiscal
quarter ended May 30, 1998, filed with the SEC on July 14, 1998;
(c) The Registrant's Registration Statement No. 00-21915 on Form 8-A
filed with the SEC on December 30, 1996 pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (the "1934 Act"),
in which there is described the terms, rights and provisions
applicable to the Registrant's outstanding Common Stock.
All reports and definitive proxy or information statements filed
by the Registrant pursuant to Section 13(a), 13(c), 14 or 15(d) of 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 at the time of
such amendment will 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 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
-----------------------------------------
The Registrant's Certificate of Incorporation limits the liability of
directors to the maximum extent permitted by Delaware law. Delaware law provides
that a director of a corporation will not be personally liable for monetary
damages for breach of such individual's fiduciary duties as a director except
for liability (i) for any breach of such director's duty of loyalty to the
corporation, (ii) for acts or omissions not in good faith or that involve
intentional misconduct or a knowing violation of law, (iii) for unlawful
payments of dividends or unlawful stock repurchases or redemptions as provided
in Section 174 of the Delaware General Corporation Law, or (iv) for any
transaction from which a director derives an improper personal benefit.
The Registrant's Bylaws provide that the Registrant will indemnify its
directors and may indemnify its officers, employees and other agents to the full
extent permitted by law. Indemnification under the Registrant's Bylaws permits
the Registrant to advance expenses incurred by an indemnified party in
connection with the defense of any
II-1
<PAGE>
action or proceeding arising out of such party's status or service as a
director, officer, employee or other agent of the Registrant upon an undertaking
by such party to repay such advances if it is ultimately determined that such
party is not entitled to indemnification.
The Registrant has entered into separate indemnification agreements
with each of its directors and certain of its officers. These agreements require
the Registrant, among other things, to indemnify such director or officer
against expenses (including attorneys' fees), judgments, fines and settlements
incurred by such individual in connection with any action, suit or proceeding
arising out of such individual's status or service as a director or officer of
the Registrant acting at the request of the Registrant to the maximum extent
permitted by applicable law, subject to certain limitations.
ITEM 7. Exemption from Registration Claimed
-----------------------------------
Not Applicable.
ITEM 8. Exhibits
--------
Exhibit Number Exhibit
- -------------- -------
4 Instruments Defining Rights of Shareholders. Reference is made
to Registrant's Registration Statement No. 00-021915 on Form 8-
A which is incorporated herein by reference pursuant to Item
3(c).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
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 1996 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 (Involuntary
Termination Following Change in Control).
99.5* Form of Addendum to Stock Option Agreement (Involuntary
Termination Following Corporate Transaction).
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).
99.11* Form of Addendum to Stock Issuance Agreement (Involuntary
Termination Following Corporate Transaction).
* Exhibits 99.2 through 99.11 are incorporated herein by reference to
Exhibits 99.2 through 99.11, respectively, to Registrant's Registration
Statement No. 333-31699 on Form S-8 filed with the SEC on July 21, 1997.
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 the Registration Statement (or the
most recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement, and (iii) to include any material information with
respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement; provided, however, that clauses (1)(i) and (1)(ii) shall not apply if
-------- -------
the information required to be included in a post-
II-2
<PAGE>
effective amendment by those clauses 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 the 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 1996 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 the 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.
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 above
or otherwise, the Registrant has been advised that in the opinion of the SEC
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 Sandpoint, State of Idaho on this 29th
day of July, 1998.
COLDWATER CREEK INC.
By: /s/ Dennis Pence
----------------------------------
Dennis Pence
President, Chief Executive Officer
and Vice Chairman of the Board
POWER OF ATTORNEY
-----------------
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of Coldwater Creek, Inc.,
a Delaware corporation, do hereby constitute and appoint Dennis Pence and Donald
Robson 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/ Dennis Pence President, Chief Executive July 29, 1998
- -------------------- Officer and Vice Chairman of the Board
Dennis Pence (Principal Executive Officer)
II-4
<PAGE>
Signature Title Date
- --------- ----- ----
/s/ Ann Pence Creative Director and Chairman of July 29, 1998
- ---------------------- the Board of Directors
Ann Pence
/s/ Donald Robson Vice President, Finance and July 29, 1998
- ---------------------- Administration, Chief Financial
Donald Robson Officer, Treasurer and Secretary
(Principal Financial and Accounting
Officer)
/s/ Robert H. McCall Director July 29, 1998
- ----------------------
Robert H. McCall, CPA
/s/ Curt Hecker Director July 29, 1998
- ----------------------
Curt Hecker
/s/ Michelle Collins Director July 29, 1998
- ----------------------
Michelle Collins
II-5
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Number Exhibit
- -------------- -------
4 Instruments Defining Rights of Shareholders. Reference is made to
Registrant's Registration Statement No. 00-021915 on Form 8-A which
is incorporated herein by reference pursuant to Item 3(c).
5 Opinion and consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Arthur Andersen LLP, Independent Public Accountants.
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 1996 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 (Involuntary Termination
Following Change in Control).
99.5* Form of Addendum to Stock Option Agreement (Involuntary Termination
Following Corporate Transaction).
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).
99.11* Form of Addendum to Stock Issuance Agreement (Involuntary
Termination Following Corporate Transaction).
* Exhibits 99.2 through 99.11 are incorporated herein by reference to
Exhibits 99.2 through 99.11, respectively, to Registrant's Registration
Statement No. 333-31699 on Form S-8 filed with the SEC on July 21, 1997.
<PAGE>
EXHIBIT 5
OPINION AND CONSENT OF BROBECK, PHLEGER & HARRISON LLP
<PAGE>
July 29, 1998
Coldwater Creek Inc.
One Coldwater Creek Drive
Sandpoint, ID 83864
Re: Registration Statement for Offering of
350,000 Shares of Common Stock
------------------------------
Ladies and Gentlemen:
We have acted as counsel to Coldwater Creek Inc., a Delaware
corporation (the "Company"), in connection with the registration on Form S-8
(the "Registration Statement") under the Securities Act of 1933, as amended, of
an additional 350,000 shares of the Company's common stock for issuance under
the Company's 1996 Stock Option/Stock Issuance Plan (the "Plan").
This opinion is being furnished in accordance with the requirements of
Item 8 of Form S-8 and Item 601(b)(5)(i) of Regulation S-K.
We have reviewed the Company's charter documents and the corporate
proceedings taken by the Company in connection with the establishment and
amendment of the Plan. Based on such review, we are of the opinion that, if, as
and when the shares of the Company's common stock are issued and sold (and the
consideration therefor received) pursuant to (a) the provisions of option
agreements duly authorized under the Plan and in accordance with the
Registration Statement, or (b) duly authorized direct stock issuances in
accordance with the Plan and in accordance with the Registration Statement, such
shares will be duly authorized, legally issued, fully paid and nonassessable.
We consent to the filing of this opinion letter as Exhibit 5 to the
Registration Statement.
This opinion letter is rendered as of the date first written above,
and we disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above, and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company, the
Plan, or the shares of the Company's common stock issuable under such plans or
options.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
<PAGE>
EXHIBIT 23.1
Consent of Arthur Andersen LLP, Independent Public Accountants
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement (Form S-8) of our report dated March
20, 1998 included in Coldwater Creek Inc.'s Form 10-K for the fiscal year ended
February 28, 1998.
/s/ ARTHUR ANDERSEN LLP
Boise, Idaho
July 29, 1998
<PAGE>
EXHIBIT 99.1
1996 Stock Option/Stock Issuance Plan
COLDWATER CREEK INC.
1996 STOCK OPTION/STOCK ISSUANCE PLAN
-------------------------------------
(AS AMENDED THROUGH JUNE 1998)
ARTICLE ONE
GENERAL
-------
I. PURPOSE OF THE PLAN
A. This 1996 Stock Option/Stock Issuance Plan (the "Plan") is intended
to promote the interests of Coldwater Creek Inc., a Delaware corporation (the
"Corporation"), by providing eligible individuals with the opportunity to
acquire a proprietary interest, or otherwise increase their proprietary
interest, in the Corporation as an incentive for them to remain in the service
of the Corporation (or its parent or subsidiary corporations).
B. The Discretionary Option Grant and Stock Issuance Programs of the
Plan became effective on March 4, 1996, upon the adoption of the Plan by the
Corporation's Board of Directors. Such date is hereby designated the "Plan
Effective Date." The Automatic Option Grant Program became effective on January
28, 1997, the date on which the Underwriting Agreement for the initial public
offering of the Corporation's Common Stock was executed and priced. Such date
is hereby designated as the "Automatic Option Grant Program Effective Date."
II. DEFINITIONS
A. For purposes of the Plan, the following definitions shall be in
effect:
AUTOMATIC OPTION GRANT PROGRAM EFFECTIVE DATE: January 28, 1997.
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 at any time after the
Section 12(g) Registration Date:
(i) the acquisition directly or indirectly 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
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive 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 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.
CODE: the Internal Revenue Code of 1986, as amended.
1
<PAGE>
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.
DISABILITY: the inability of an individual to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which is expected to result in death or has lasted or can be
expected to last for a continuous period of not less than twelve (12) months.
However, for purposes of the Automatic Option Grant Program, Disability 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.
EMPLOYEE: an individual who performs services while in the employ of
the Corporation or one or more parent or subsidiary corporations, 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.
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 securities exchange but is traded on the Nasdaq
National Market, then 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.
If there is no reported closing selling price for the Common Stock on the
date in question, then the closing selling price on the last preceding date
for which such quotation exists shall be determinative of Fair Market
Value.
- 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 any option granted on the Automatic Option Grant Program
Effective Date, the Fair Market Value per share of Common Stock shall be
deemed equal to the price per share at which the Common Stock is sold in
the initial public offering pursuant to the Underwriting Agreement.
2
<PAGE>
INCENTIVE OPTION: a stock option which satisfies the requirements of
Code Section 422.
INVOLUNTARY TERMINATION: the termination of any individual's Service
which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) 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 participation in
corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) 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 person of confidential information or trade secrets of the Corporation (or
any parent or subsidiary), or any other intentional misconduct by such person
adversely affecting the business or affairs of the Corporation (or any parent or
subsidiary) 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 person in the Service of the Corporation (or
any parent or subsidiary).
1933 ACT: the Securities Act of 1933, as amended from time to time.
1934 ACT: the Securities Exchange Act of 1934, as amended from time
to time.
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
Discretionary Option Grant or Automatic Option Grant Program.
PARTICIPANT: a person who is issued Common Stock under the Stock
Issuance Program.
PLAN ADMINISTRATOR: either the Board, the Primary Committee or a
Secondary Committee, to the extent such entity is at the time responsible for
the administration of the Plan in accordance with Section IV of Article One.
PLAN EFFECTIVE DATE: March 4, 1996.
PRIMARY COMMITTEE: the committee of two (2) or more non-employee
Board members appointed by the Board to administer the Plan with respect to
Section 16 Insiders.
SECONDARY COMMITTEE: a committee of one or more Board members
appointed by the Board to administer the Discretionary Option Grant and Stock
Issuance Programs with respect to eligible persons other than Section 16
Insiders.
SECTION 12(g) REGISTRATION DATE: January 28, 1997, the date on which
the initial registration of the Common Stock under Section 12(g) of the 1934 Act
became effective.
SERVICE: the performance of services on a periodic basis for the
Corporation (or any parent or subsidiary corporation) in the capacity of an
Employee, a non-employee member of the board of directors or an
3
<PAGE>
independent consultant or advisor, except to the extent otherwise specifically
provided in the applicable stock option or stock issuance agreement.
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
corporation.
B. The following provisions shall be applicable in determining the
parent and subsidiary corporations of the Corporation:
Any corporation (other than the Corporation) in an unbroken chain
of corporations ending with the Corporation shall be considered to be a
PARENT of 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.
Each corporation (other than the Corporation) in an unbroken chain
of corporations beginning with the Corporation shall be considered to be a
SUBSIDIARY of the Corporation, provided each such corporation (other than
the last corporation) in the unbroken chain 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.
III. STRUCTURE OF THE PLAN
A. Stock Programs. The Plan shall be divided into three (3) separate
--------------
components: the Discretionary Option Grant Program specified in Article Two, the
Stock Issuance Program specified in Article Three and the Automatic Option Grant
Program specified in Article Four. Under the Discretionary Option Grant Program,
eligible individuals may, at the discretion of the Plan Administrator, be
granted options to purchase shares of Common Stock in accordance with the
provisions of Article Two. Under the Stock Issuance Program, eligible
individuals may be issued shares of Common Stock directly, either through the
immediate purchase of such shares at a price not less than one hundred percent
(100%) of the Fair Market Value of the shares at the time of issuance or as a
bonus for services rendered the Corporation. Under the Automatic Option Grant
Program, each individual serving as a non-employee Board member on the Automatic
Option Grant Program Effective Date and each individual who first joins the
Board as a non-employee director at any time after such Effective Date shall at
periodic intervals receive option grants to purchase shares of Common Stock in
accordance with the provisions of the Automatic Option Grant Program of Article
Four, with the first such grants to be made on the Automatic Option Grant
Program Effective Date.
B. General Provisions. Unless the context clearly indicates
------------------
otherwise, the provisions of Articles One and Five shall apply to the
Discretionary Option Grant Program, the Automatic Option Grant Program and the
Stock Issuance Program and shall accordingly govern the interests of all
individuals under the Plan.
IV. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to Section 16 Insiders. Administration of the Discretionary Option
Grant and Stock Issuance Programs with respect to all other persons eligible to
participate in those programs may, at the Board's discretion, be vested in the
Primary Committee or a Secondary Committee, or the Board may retain the power to
administer those programs with respect to all such persons.
B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed by
the Board at any time. The Board may also at any time terminate the functions of
any Secondary Committee and reassume all powers and authority previously
delegated to such committee.
4
<PAGE>
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority (subject
to the provisions of the Plan) to establish such rules and regulations as it may
deem appropriate for 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 options
or stock issuances thereunder as it may deem necessary or advisable. Decisions
of the Plan Administrator within the scope of its administrative functions under
the Plan shall be final and binding on all parties who have an interest in the
Discretionary Option Grant and Stock Issuance Programs under its jurisdiction or
any option or stock issuance thereunder.
D. Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the express terms and conditions of Article
Four, and the Plan Administrator shall exercise no discretionary functions with
respect to the grant of options pursuant to that program, but may amend such
options in accordance with the provisions of Article Four.
V. OPTION GRANTS AND STOCK ISSUANCES
A. The persons eligible to participate in the Discretionary Option
Grant Program under Article Two and the Stock Issuance Program under Article
Three shall be limited to the following:
(i) officers and other key employees of the Corporation (or its
parent or subsidiary corporations) who render services which contribute to
the management, growth and financial success of the Corporation (or its
parent or subsidiary corporations);
(ii) non-employee members of the Board; and
(iii) those consultants or other independent advisors who
provide valuable services to the Corporation (or its parent or subsidiary
corporations).
B. A Board member shall not vote as a member of the Board or a member
of a committee concerning any award, or amendment of any award, to such Board
member pursuant to the Discretionary Option Grant Program or the Stock Issuance
Program, other than an award or amendment that applies uniformly to all non-
employee Board members and shall absent himself or herself from the discussion
of any such award.
C. The Plan Administrator shall have full authority to determine, (i)
with respect to the option grants made under the Discretionary Option Grant
Program, which eligible individuals are to receive option grants, the time or
times when such options are to be granted, 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 at which each granted option is to
become exercisable and the maximum term for which the option may remain
outstanding and (ii), with respect to stock issuances under the Stock Issuance
Program, the number of shares to be issued to each Participant, the vesting
schedule (if any) to be applicable to the issued shares and the consideration
for which such shares are to be issued.
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
5
<PAGE>
Common Stock which may be issued over the term of the Plan shall not exceed
1,461,847/1/ shares, subject to adjustment from time to time in accordance with
---
the provisions of this Section VI.
B. In no event shall the aggregate number of shares of Common Stock
for which any one individual participating in the Plan may be granted stock
options and direct stock issuances exceed 250,7931/ shares per calendar year.
C. Should one or more outstanding options under this 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. Unvested shares issued under the Plan and subsequently cancelled or
repurchased by the Corporation, at the original issue price paid per share,
pursuant to the Corporation's repurchase rights under the Plan shall be added
back to the number of shares of Common Stock reserved for issuance under the
Plan and shall accordingly be available for reissuance through one or more
subsequent option grants or direct stock issuances under the Plan. 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.
D. 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 any one individual participating in the Plan may be granted
stock options and direct stock issuances in the aggregate per calendar year,
(iii) the number and/or class of securities for which automatic option grants
are to be subsequently made per eligible non-employee Board member under the
Automatic Option Grant Program and (iv) the number and/or class of securities
and price per share in effect under each option outstanding under either the
Discretionary Option Grant or Automatic Option Grant Program. Such adjustments
to the outstanding options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such options. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
- ------------------------
/1/ Includes the 350,000-share increase approved by the Board in February 1998,
- ---
subject to approval by the stockholders at the 1998 Annual Meeting.
6
<PAGE>
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
----------------------------------
I. TERMS AND CONDITIONS OF OPTIONS
Options granted pursuant to the Discretionary Option Grant Program
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 corporations 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. Exercise Price.
--------------
1. The exercise price per share shall be fixed by the Plan
Administrator in accordance with the following provisions:
(i) The exercise 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 exercise 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 exercise price shall become immediately due upon exercise
of the option and shall, subject to the provisions of Section I of Article Five,
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
exercise price payable for the purchased 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 exercise price for the purchased shares must be made on
the Exercise Date.
B. Term and Exercise of Options. Each option granted under this
----------------------------
Discretionary Option Grant Program 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 from the grant date.
7
<PAGE>
During the lifetime of the Optionee, Incentive Options 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. However, a Non-Statutory Option may, in connection with the
Optionee's estate plan, be assigned in whole or in part during the Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established exclusively for one or more such family members. The assigned
portion may only be exercised by the person or persons who acquire a proprietary
interest in the option pursuant to the assignment. The terms applicable to the
assigned portion shall be the same as those in effect for the option immediately
prior to such assignment and shall be set forth in such documents issued to the
assignee as the Plan Administrator may deem appropriate.
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 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 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) 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.
(v) Under no circumstances, however, shall any such option be
exercisable after the specified expiration date of the option term.
(vi) 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 for any reason,
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.
8
<PAGE>
(vii) In the event of an Involuntary Termination following a
Corporate Transaction or a Change in Control, the provisions of Section III
of this Article Two shall govern the period for which the outstanding
options are to remain exercisable following the Optionee's cessation of
Service and shall supersede any provisions to the contrary in this Section.
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 in which the Optionee
would otherwise have vested 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 exercise price and become the holder of
record of the purchased shares.
E. Unvested Shares. The Plan Administrator shall have the
---------------
discretion to authorize the issuance of unvested shares of Common Stock under
this Discretionary Option Grant Program. Should the Optionee cease Service while
holding such unvested shares, the Corporation shall have the right to
repurchase, at the exercise 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 right.
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 provisions of Articles One, Two and Five
shall be applicable to Incentive Options. 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 corporations) 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 the 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.
9
<PAGE>
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 outstanding option
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. However, an outstanding option shall not so
accelerate if and to the extent: (i) such option is, in connection with the
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) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested option shares at
the time of the 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. 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 the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
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 to reflect such Corporate Transaction shall also be made
to (i) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
- --------
the same, (ii) the maximum number and/or class of securities available for
issuance under the remaining term of the Plan and (iii) the maximum number
and/or class of securities for which any one person may be granted stock options
and direct stock issuances under the Plan per calendar year.
E. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed twelve (12) months) following the effective date of any Corporate
Transaction in which those options are assumed or replaced and do not otherwise
accelerate. Any options so accelerated shall remain exercisable for fully-vested
shares until the earlier of (i) the expiration of the option term or (ii) the
-------
expiration of the one (1)-year period measured from the effective date of the
Involuntary Termination. In addition, the Plan Administrator may structure one
or more of the Corporation's outstanding repurchase rights so that those rights
shall immediately terminate with respect to any unvested shares held by the
Optionee at the time of such Involuntary Termination, and the shares subject to
those terminated repurchase rights shall accordingly vest in full upon such
Involuntary Termination.
10
<PAGE>
F. The Plan Administrator shall have full power and authority to
grant options under the Discretionary Option Grant Program which will
automatically accelerate in the event the Optionee's Service subsequently
terminates by reason of an Involuntary Termination within a designated period
(not to exceed twelve (12) months) following the effective date of any Change in
Control. Each option so accelerated shall remain exercisable for fully-vested
shares until the earlier of (i) the expiration of the option term or (ii) the
-------
expiration of the one (1)-year period measured from the effective date of the
Involuntary Termination. In addition, the Plan Administrator may structure one
or more of the Corporation's outstanding repurchase rights so that those rights
shall immediately terminate with respect to any unvested shares held by the
Optionee at the time of such Involuntary Termination, and the shares subject to
those terminated repurchase rights shall accordingly vest in full.
G. The portion of any Incentive Option accelerated in connection with
a Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation 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.
H. The outstanding options 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.
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 and to
grant in substitution new options under the Plan covering the same or different
numbers of shares of Common Stock but with an exercise price per share not less
than (i) one hundred percent (100%) of the Fair Market Value per share of Common
Stock 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 a grant
of an Incentive Option to a 10% Stockholder or (iii) eighty-five percent (85%)
of such Fair Market Value in the case of all other grants.
11
<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
directly without any intervening option grants. Each such stock issuance shall
be evidenced by a Stock Issuance Agreement which complies with the terms
specified below.
A. The shares shall be issued for such valid consideration as the
Plan Administrator may deem appropriate, but the value of such consideration as
determined by the Plan Administrator shall not be less than one hundred percent
(100%) of the Fair Market Value of the issued shares of Common Stock on the
issuance date.
B. The Plan Administrator shall have full power and authority to
issue shares of Common Stock under the Stock Issuance Program as a bonus for
past services rendered to the Corporation (or any parent or subsidiary). All
such bonus shares shall be fully and immediately vested upon issuance.
C. Subject to the provisions of Section I of Article Five, shares of
Common Stock may be issued under the Stock Issuance Program for any of the
following items of consideration which the Plan Administrator may deem
appropriate in each individual instance: (i) cash or check made payable to the
Corporation, or (ii) past services rendered to the Corporation (or any Parent or
Subsidiary).
D. Shares of Common Stock issued under the Stock Issuance Program
may, in the discretion of the Plan Administrator, be fully and immediately
vested upon issuance or may vest in one or more installments over the
Participant's period of Service or upon attainment of specified performance
objectives. 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 attained,
(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.
E. Any new, substituted or additional securities 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 the Participant's
unvested shares of Common Stock 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 shall be issued subject to (i) the same vesting
requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
12
<PAGE>
F. The Participant shall have full stockholder rights with respect to
any shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's 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.
G. Should the Participant cease to remain in Service while holding
one or more unvested shares of Common Stock issued under the Stock Issuance
Program or should the performance objectives not be attained with respect to one
or more such unvested shares of Common Stock, then those shares shall be
immediately surrendered to the Corporation for cancellation, and the Participant
shall have no further stockholder rights with respect to those 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 indebtedness), 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.
H. The Plan Administrator shall have full power and authority,
exercisable upon a Participant's termination of Service, to waive the surrender
and cancellation of any or all unvested shares of Common Stock (or other assets
attributable thereto) at the time held by that Participant, if the Plan
Administrator determines such waiver to be an appropriate severance benefit for
the Participant.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under the
Stock Issuance Program shall terminate automatically, and all 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 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 in the Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program in such manner that those repurchase rights shall automatically
terminate, and all the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within twelve
(12) months following the effective date of any Corporate Transaction in which
those repurchase rights are assigned to the successor corporation (or parent
thereof).
C. The Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program in such manner that those repurchase rights shall automatically
terminate, and all the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within twelve
(12) months following the effective date of any Change in Control.
III. SHARE ESCROW/LEGENDS
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 those unvested shares.
13
<PAGE>
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
------------------------------
I. ELIGIBILITY
The individuals eligible to receive automatic option grants pursuant
to the provisions of this Article Four program shall be limited to those
individuals who are serving as non-employee Board members on the Automatic
Option Grant Program Effective Date or who are first elected or appointed as
non-employee Board members on or after such Effective Date, whether through
appointment by the Board or election by the Corporation's stockholders.
II. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant Dates. Option grants shall be made under this Article
-----------
Four on the dates specified below:
1. Initial Grant. Each individual serving as a non-employee
-------------
Board member on the Automatic Option Grant Program Effective Date shall
automatically be granted on that date a Non-Statutory Option to purchase 13,376
shares of Common Stock upon the terms and conditions of this Article Four. Each
individual who is first elected or appointed as a non-employee Board member
after the Automatic Option Grant Program Effective Date shall automatically be
granted, on the date of such initial election or appointment, a Non-Statutory
Option to purchase 13,376 shares of Common Stock upon the terms and conditions
of this Article Four. In no event, however, shall a non-employee Board member be
eligible to receive such an initial option grant if such individual has at any
time been in the prior employ of the Corporation (or any parent or subsidiary
corporation).
2. Annual Grant. On the date of each Annual Stockholders
------------
Meeting, beginning with the first Annual Meeting held after the Section 12(g)
Registration Date, each individual who will continue to serve as a non-employee
Board member shall automatically be granted, whether or not such individual is
standing for re-election as a Board member at that Annual Meeting, a Non-
Statutory Option to purchase an additional 1,672 shares of Common Stock upon the
terms and conditions of this Article Four, provided he or she has served as a
non-employee Board member for at least six (6) months prior to the date of such
Annual Meeting. Non-employee Board members who have previously been in the
employ of the Corporation (or any parent or subsidiary) shall be eligible to
receive such annual option grants over their continued period of Board service.
There shall be no limit on the number of shares for which any one non-
employee Board member may be granted stock options under this Article Four over
his or her period of Board service.
B. Exercise Price. The exercise price per share of Common Stock
--------------
subject to each automatic option grant made under this Article Four shall be
equal to one hundred percent (100%) of the Fair Market Value per share of Common
Stock on the automatic grant date.
C. Payment. The exercise price shall be payable in one of the
-------
alternative forms specified below:
(i) full payment in cash or check drawn to the Corporation's
order;
(ii) full payment in shares of Common Stock held 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 (as such term is defined below);
14
<PAGE>
(iii) full payment in a combination of shares of Common Stock held
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 and cash or check drawn to the Corporation's order; or
(iv) to the extent the option is exercised for vested shares,
full payment through a sale and remittance procedure pursuant to which the
Optionee shall provide irrevocable written instructions to (I) 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
exercise price payable for the purchased shares and (II) the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
Except to the extent the sale and remittance procedure specified above
is used for the exercise of the option for vested shares, payment of the
exercise price for the purchased shares must accompany the exercise notice.
D. Option Term. Each automatic grant under this Article Four shall
-----------
have a maximum term of ten (10) years measured from the automatic grant date.
E. Exercisability/Vesting. Each automatic grant 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 in accordance with the applicable schedule
below:
Initial Grant. Each initial 13,376-share automatic grant shall
-------------
vest, and the Corporation's repurchase right shall lapse, in a series of three
(3) equal and successive annual installments over the Optionee's period of
continued service as a Board member, with the first such installment to vest
upon Optionee's completion of one (1) year of Board service measured from the
automatic grant date.
Annual Grant. Each additional 1,672-share automatic 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 automatic grant
date.
F. Limited Transferability. Each automatic option grant may, in
-----------------------
connection with the Optionee's estate plan, be assigned in whole or in part
during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
G. Effect of Termination of Board Membership. The following
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provisions shall govern the exercise of any outstanding options held by the
Optionee under this Article Four 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
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a two (2)-year period following the date of such cessation of Board service
in which to exercise each such option. However, each option shall,
immediately upon the Optionee's cessation of Board service, terminate and
cease to remain outstanding with respect to any option shares in which the
Optionee is not otherwise vested on the date of such cessation of Board
service.
(ii) During the two (2)-year period, the option may not be
exercised in the aggregate for more than the number of vested shares for
which the option is exercisable at the time of the Optionee's cessation of
Board service. However, should the Optionee cease to serve as a Board
member by reason of death or Disability, then all shares at the time
subject to the option shall immediately vest so that such option may,
during the two (2)-year exercise period following such cessation of Board
service, be exercised for all or any portion of such shares as fully-vested
shares.
(iii) In no event shall the option remain exercisable after the
expiration of the option term.
H. Stockholder Rights. The holder of an automatic option grant
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under this Article Three shall have none of the rights of a stockholder with
respect to any shares subject to such option until such individual shall have
exercised the option, paid the exercise price and become the holder of record of
the purchased shares.
I. Remaining Terms. The remaining terms and conditions of each
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automatic option grant shall be the same as the terms for option grants made
under the Discretionary Option Grant Program.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, the shares of Common
Stock at the time subject to each outstanding option under this Article Four but
not otherwise vested shall automatically vest in full so that each such option
shall, immediately prior to the specified effective date for the Corporate
Transaction, become fully exercisable for all of the shares of Common Stock at
the time subject to that 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, all automatic option grants under
this Article Four shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation or parent thereof.
B. Each outstanding option under this Article Four which is assumed
in connection with a Corporate Transaction outstanding shall be appropriately
adjusted, immediately after such Corporate Transaction, to apply and pertain to
the number and class of securities which would have been issuable to the
Optionee in the consummation of such Corporate Transaction, had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments shall also be made to (i) the class and number of securities
available for issuance under the Plan following the consummation of such
Corporate Transaction, and (ii) the exercise price payable per share, provided
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the aggregate exercise price payable for such securities shall remain the same.
C. In connection with any Change in Control of the Corporation, the
shares of Common Stock at the time subject to each outstanding option under this
Article Four but not otherwise vested shall automatically vest in full so that
each such option shall, immediately prior to the specified effective date for
the Change in Control, become fully exercisable for all of the shares of Common
Stock at the time subject to that 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 so exercisable for all the option shares following the Change in
Control, until the expiration or sooner termination of the option term.
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D. The automatic option grants outstanding under this Article Four
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.
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ARTICLE FIVE
MISCELLANEOUS
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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 exercise price or purchase price for the purchased
Common Stock in installments over a period of years. 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 exercise 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.
B. The Plan Administrator may, in its absolute discretion, determine
that one or more loans extended under this financial assistance program shall be
subject to forgiveness in whole or in part upon such terms and conditions as the
Plan Administrator may deem appropriate.
II. AMENDMENT OF THE PLAN AND AWARDS
A. The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.
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 Discretionary 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 stock options for such shares or the vesting of such shares
under the Plan shall be subject to the satisfaction of all applicable Federal,
state and local income tax and employment tax withholding requirements.
B. The Plan Administrator may, in its discretion and in accordance
with the provisions of this Section III and such supplemental rules as the Plan
Administrator may from time to time adopt (including the applicable safe-harbor
provisions of Rule 16b-3 of the Securities and Exchange Commission), provide any
or all holders of Non-Statutory Options (other than the automatic grants made
pursuant to Article Four of the Plan) or unvested shares under the Plan with the
right to use shares of Common Stock in satisfaction of all or part of the
Federal, state and local income and employment tax liabilities incurred by such
holders in connection with the exercise of their
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options or the vesting of their shares (the "Taxes"). Such right may be provided
to any such holder in either or both of the following formats:
- The holder of the Non-Statutory Option or unvested shares may
be provided with 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
applicable Taxes (not to exceed one hundred percent (100%)) designated by
the holder.
- The Plan Administrator may, in its discretion, provide the
holder of the Non-Statutory Option or the unvested shares with 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 individual (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 incurred in connection
with such option exercise or share vesting (not to exceed one hundred
percent (100%)) designated by the holder.
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IV. EFFECTIVE DATE AND TERM OF PLAN
A. The Discretionary Option Grant and Stock Issuance Programs of this
Plan became effective immediately upon the Plan's adoption by the Board on March
4, 1996 (the "Plan Effective Date"). The Plan was also approved by the
Corporation's stockholders on the Plan Effective Date. The Automatic Option
Grant Program became effective on January 28, 1997 (the "Automatic Option Grant
Program Effective Date").
B. The Plan shall terminate upon the earlier of (i) March 3, 2006 or
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(ii) the date on which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise of the options 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 grants or issuance.
V. REGULATORY APPROVALS
The implementation of the Plan and the granting of any option or
issuance of shares under the Plan 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.
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. 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 corporation)
for any period of specific duration, and the Corporation (or any parent or
subsidiary corporation 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.
VIII. MISCELLANEOUS PROVISIONS
A. Except as otherwise expressly provided under the Plan, the right to
acquire Common Stock or other assets under the Plan may not be assigned,
encumbered or otherwise transferred by any Optionee or Participant.
B. The provisions of the Plan relating to the exercise of options and
the vesting of shares shall be governed by the laws of the State of Delaware
without resort to that State's conflict-of-laws rules.
C. The provisions of the Plan shall inure to the benefit of, and be
binding upon, the Corporation and its successors or assigns, whether by
Corporate Transaction or otherwise, and the Participants and Optionees, the
legal representatives of their respective estates, their respective heirs or
legatees and their permitted assignees.
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