<PAGE>
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SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
SPLASH TECHNOLOGIES HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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SPLASH TECHNOLOGY HOLDINGS, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD FEBRUARY 26, 1998
TO THE STOCKHOLDERS OF SPLASH TECHNOLOGY HOLDINGS, INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Splash
Technology Holdings, Inc., a Delaware corporation (the "Company"), will be
held on Thursday, February 26, 1998 at 9:00 a.m., local time, at the offices
of the Company at 555 Del Rey Avenue, Sunnyvale, California 94086 for the
following purposes:
1. To elect two Class II directors to serve for three year terms expiring
upon the Meeting of Stockholders in 2001 or until their successors are
elected;
2. To approve and ratify the adoption of an amendment to the 1996 Stock
Option Plan to increase the number of shares of Common Stock reserved
for issuance thereunder from 3,150,000 to 3,900,000; and
3. To transact such other business as may properly come before the meeting
and any adjournment or postponement thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only stockholders of record at the close of business on January 15, 1998 are
entitled to notice of and to vote at the meeting and any adjournment thereof.
All stockholders are cordially invited to attend the meeting in person.
However, to ensure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose. Any stockholder attending
the meeting may vote in person even if such stockholder has returned a proxy.
THE BOARD OF DIRECTORS
Sunnyvale, California
January 27, 1998
IMPORTANT: Whether or not you plan to attend the meeting, you are
requested to complete and promptly return the enclosed proxy in the
envelope provided.
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
----------------
PROXY STATEMENT
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed Proxy is solicited on behalf of the Board of Directors of
Splash Technology Holdings, Inc. (the "Company") for use at the Annual Meeting
of Stockholders to be held February 26, 1998 at 9:00 a.m., local time, or at
any adjournment thereof, for the purposes set forth herein and in the
accompanying Notice of Annual Meeting of Stockholders. The Annual Meeting will
be held at the offices of the Company at 555 Del Rey Avenue, Sunnyvale,
California 94086. The telephone number of the Company's offices is (408) 328-
6300.
These proxy solicitation materials and the Company's Annual Report to
Stockholders for the year ended September 30, 1997, including financial
statements, were mailed on or about January 27, 1998 to all stockholders
entitled to vote at the meeting.
RECORD DATE AND VOTING SECURITIES
Stockholders of record at the close of business on January 15, 1998 (the
"Record Date") are entitled to notice of and to vote at the meeting. At the
Record Date, 13,855,161 shares of the Company's Common Stock, $0.001 par
value, were issued and outstanding.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Secretary of the
Company a written notice of revocation or a duly executed proxy bearing a
later date or by attending the meeting and voting in person.
VOTING AND SOLICITATION
Each stockholder is entitled to one vote for each share of Common Stock on
all matters presented at the Annual Meeting. Stockholders do not have the
right to cumulative voting in the election of directors.
The Company will bear the cost of soliciting proxies. In addition, the
Company may reimburse brokerage firms and other persons representing
beneficial owners of shares for their expenses in forwarding solicitation
materials to such beneficial owners. Solicitation of proxies by mail may be
supplemented by telephone, telegram, facsimile or personal solicitation by
directors, officers or regular employees of the Company. No additional
compensation will be paid to such persons for such services.
QUORUM; ABSTENTIONS; BROKER NON-VOTES
The required quorum for the transaction of business at the Annual Meeting is
a majority of the votes eligible to be cast by holders of shares of Common
Stock issued and outstanding on the Record Date. Shares that are voted "FOR,"
"AGAINST," "WITHHELD" or "ABSTAIN" are treated as being present at the meeting
for purposes of establishing a quorum and are also treated as shares entitled
to vote at the Annual Meeting (the "Votes Cast") with respect to such matter.
Although there is no definitive statutory or case law authority in Delaware
as to the proper treatment of abstentions, the Company believes that
abstentions should be counted for purposes of determining both (i) the
presence or absence of a quorum for the transaction of business and (ii) the
total number of Votes Cast with respect to a proposal (other than the election
of directors). In the absence of controlling precedent to the contrary,
<PAGE>
the Company intends to treat abstentions in this manner. Accordingly,
abstentions will have the same effect as a vote against the proposal.
The Delaware Supreme Court has held that, while broker non-votes should be
counted for purposes of determining the presence or absence of a quorum for
the transaction of business, broker non-votes should not be counted for
purposes of determining the number of Votes Cast with respect to the
particular proposal on which the broker has expressly not voted. The Company
intends to treat broker non-votes in a manner consistent with such holding.
Thus, a broker non-vote will not affect the outcome of the voting on a
proposal.
DEADLINE FOR RECEIPT OF STOCKHOLDER PROPOSALS
Proposals of stockholders of the Company which are intended to be presented
by such stockholders at the Company's 1999 Annual Meeting must be received by
the Company no later than September 29, 1998 in order that they may be
considered for inclusion in the proxy statement and form of proxy relating to
that meeting.
PROPOSAL ONE:
ELECTION OF DIRECTORS
NOMINEE
The number of directors authorized by the Company's Bylaws is currently
fixed by the Board at five. The Company's Amended and Restated Certificate of
Incorporation provides that the directors shall be divided into three classes,
with the classes serving for staggered, three year terms. Currently there is
one director in Class I, there are two directors in Class II and there are two
directors in Class III.
Two Class II directors are to be elected at the Annual Meeting. The Class II
directors elected at the Annual Meeting will hold office until the Annual
Meeting of Stockholders in 2001 or until their successors have been duly
elected and qualified. The term of each Class III director will expire at the
Annual Meeting of Stockholders in 1999. The term of the Class I director will
expire at the Annual Meeting of Stockholders in 2000.
Unless otherwise instructed, the proxy holders will vote the proxies
received by them for the Company's two nominees named below, who are currently
directors of the Company. In the event that either nominee of the Company
becomes unable or declines to serve as a director at the time of the Annual
Meeting, the proxy holders will vote the proxies for any substitute nominee
who is designated by the current Board of Directors to fill the vacancy. It is
not expected that either nominee listed below will be unable or will decline
to serve as a director.
The names of the two Class II nominees for director and certain information
about them are set forth below. The names of, and certain information about,
the current Class I and Class III directors with unexpired terms are also set
forth below.
<TABLE>
<CAPTION>
NAME AGE PRINCIPAL OCCUPATION
---- --- --------------------
<S> <C> <C>
NOMINEES FOR CLASS II DIRECTORS
Charles W. Berger 43 Chief Executive Officer, IMGIS, Inc.
Lawrence G. Finch 63 General Partner, Sigma Partners, L.P.
CONTINUING CLASS I DIRECTOR
Peter Y. Chung 30 Principal, Summit Partners, L.P.
CONTINUING CLASS III DIRECTORS
Kevin K. Macgillivray 38 President, Chief Executive Officer,
Splash Technology Holdings, Inc.
Gregory M. Avis 39 General Partner, Summit Partners, L.P.
</TABLE>
2
<PAGE>
Except as indicated below, each nominee or incumbent director has been
engaged in the principal occupation set forth above during the past five
years. There are no family relationships between any directors or executive
officers of the Company.
Charles W. Berger has been a director of the Company since January 1996. Mr.
Berger has been Chairman and Chief Executive Officer of IMGIS, Inc. since July
1997. Mr. Berger has also been a director of Radius Inc. since March 1994 and
was Chief Executive Officer for Radius Inc. from March 1993 until July 1997.
From April 1992 until he joined Radius Inc., Mr. Berger was Senior Vice
President, Worldwide Sales, Operations and Support for Claris Corporation, a
software subsidiary of Apple Computer, Inc., a personal computer manufacturer,
that develops and markets application software. From March 1989 to April 1992,
Mr. Berger held various executive positions at Sun Microsystems, Inc. and its
subsidiaries.
Lawrence G. Finch has been a director of the Company since January 1996. Mr.
Finch has served as a General Partner of Sigma Partners, L.P., a venture
capital firm, since January 1989. Mr. Finch is also a director of
International Network Services, a networking services company, and Phoenix
Technologies Ltd., a developer of computer firmware and software.
Peter Y. Chung has been a director of the Company since its formation in
December 1995. Mr. Chung has served as a Principal at Summit Partners, L.P., a
venture capital partnership, since December 1997. From December 1996 to
December 1997, Mr. Chung served as a Vice President at Summit Partners, L.P.
From August 1994 to December 1997, Mr. Chung served as a Senior Associate at
Summit Partners, L.P. From August 1989 to July 1992, Mr. Chung was employed by
Goldman, Sachs & Co., an investment banking firm.
Kevin K. Macgillivray has served as President, Chief Executive Officer and a
director of the Company since January 1996. From April 1995 until January
1996, Mr. Macgillivray was Vice President and General Manager of the
Publishing Division of Radius Inc., a manufacturer of computer video cards and
display products. From May 1993 to April 1995, Mr. Macgillivray held other
managerial positions within Radius Inc. and SuperMac Technology, Inc., which
merged into Radius Inc. in 1994. From May 1991 to May 1993, Mr. Macgillivray
was Vice President and General Manager of Oce Graphics USA, a computer
peripherals manufacturer.
Gregory M. Avis has been a director of the Company since its formation in
December 1995. Mr. Avis has served as a General Partner of Summit Partners,
L.P., a venture capital partnership, since 1987 and has served as a Managing
Partner of Summit Partners, L.P. since 1990. Mr. Avis is also a director of
CMG Information Services, Inc., a direct marketing service provider, Digital
Link Corporation, a manufacturer of digital access products for wide area
networks, and Powerwave Technologies, Inc., a designer and manufacturer of
linear power amplifiers for wireless communications.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held a total of six meetings from
October 1, 1996 through September 30, 1997 ("Fiscal 1997"). During Fiscal
1997, no director attended fewer than 75% of the meetings of the Board of
Directors or the committees upon which such director served while such
director served as a director.
The Board of Directors established an Audit Committee and a Compensation
Committee in connection with the Company's initial public offering in October
1996. The Board of Directors has no nominating committee or any committee
performing similar functions.
The Audit Committee currently consists of Directors Chung and Finch. The
Audit Committee aids management in the establishment and supervision of the
Company's financial controls, evaluates the scope of the annual audit, reviews
audit results, consults with management and the Company's independent auditors
prior to the presentation of financial statements to stockholders and, as
appropriate, initiates inquiries into aspects of the Company's financial
affairs. The Audit Committee held four meetings in Fiscal 1997.
3
<PAGE>
The Compensation Committee currently consists of Directors Avis and Berger.
The Compensation Committee makes recommendations to the Board concerning
salaries and incentive compensation for the Company's officers and employees
and administers the Company's 1996 Stock Option Plan and 1996 Employee Stock
Purchase Plan. The Compensation Committee held one meeting in Fiscal 1997.
COMPENSATION OF DIRECTORS
Directors receive no cash remuneration for serving on the Board of
Directors, although directors are reimbursed for all reasonable expenses
incurred by them in attending Board and Committee meetings. Non-employee
directors are eligible to receive stock options under the 1996 Stock Option
Plan.
VOTE REQUIRED
The two nominees receiving the highest number of affirmative votes of the
shares entitled to vote on this matter shall be elected as the Class II
directors. Votes withheld from the directors will be counted for purposes of
determining the presence or absence of a quorum but are not counted as
affirmative votes. A broker non-vote will be counted for purposes of
determining the presence or absence of a quorum but will have no other legal
effect upon the election of the director.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE NOMINEES SET
FORTH ABOVE.
PROPOSAL TWO:
APPROVAL OF THE AMENDMENT TO THE 1996 STOCK OPTION PLAN
On January 9, 1998, the Board of Directors of the Company approved an
amendment to the 1996 Stock Option Plan (the "Plan") to increase the number of
shares of Common Stock available for issuance under the Plan from 3,150,000 to
3,900,000. The proposed increase in the number of shares of Common Stock
reserved for issuance under the Plan is for the purpose of establishing a
reserve for stock option grants to new employees or consultants that may be
hired and granting stock options to key employees.
Before the proposed amendment to the Plan, a total of 3,150,000 shares of
Common Stock has been reserved for issuance under the Plan. Of the 3,150,000
shares authorized prior to the amendment described above, options to purchase
an aggregate of 667,856 shares had been exercised as of January 15, 1998,
options to purchase an aggregate of 1,776,650 shares were outstanding as of
such date, and 705,494 shares remained available for future grants as of such
date.
At the Annual Meeting, the stockholders are being asked to approve the
amendment to the Plan to increase the number of shares of Common Stock
reserved under the Plan.
SUMMARY OF THE 1996 PLAN
General. The purpose of the Plan is to attract and retain the best available
personnel for positions of substantial responsibility with the Company, to
provide additional incentive to the employees, directors and consultants of
the Company and to promote the success of the Company's business. Options may
be granted under the Plan. Options granted under the Plan may be either
"incentive stock options," as defined in Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"), or nonstatutory stock options.
Administration. The Plan may generally be administered by the Board or the
Committee appointed by the Board (collectively, the "Administrator"). The
Committee appointed by the Board may be constituted to meet the requirements
of Section 162(m) of the Code or Rule 16b-3 promulgated under the Securities
and Exchange Act of 1934, as amended.
4
<PAGE>
Eligibility. Nonstatutory stock options may be granted under the Plan to
employees, directors and consultants of the Company and any parent or
subsidiary of the Company. Incentive stock options may be granted only to
employees. The Administrator, in its discretion, selects the employees,
directors and consultants to whom options may be granted, the time or times at
which such options shall be granted, and the number of shares subject to each
such grant.
Limitations. Section 162(m) of the Code places limits on the deductibility
for federal income tax purposes of compensation paid to certain executive
officers of the Company. In order to preserve the Company's ability to deduct
the compensation income associated with options granted to such persons, the
Plan provides that no employee, director or consultant may be granted, in any
fiscal year of the Company, options to purchase more than 100,000 shares of
Common Stock. Notwithstanding this limit, however, in connection with such
individual's initial employment with the Company, he or she may be granted
options to purchase up to an additional 100,000 shares of Common Stock.
Terms and Conditions of Options. Each option is evidenced by a stock option
agreement between the Company and the optionee, and is subject to the
following additional terms and conditions:
(a) Exercise Price. The Administrator determines the exercise price of
options at the time the options are granted. The exercise price of an
incentive stock option may not be less than 100% of the fair market value
of the Common Stock on the date such option is granted; provided, however,
the exercise price of an incentive stock option granted to a 10%
shareholder may not be less than 110% of the fair market value of the
Common Stock on the date such option is granted. The fair market value of
the Common Stock is generally determined with reference to the closing sale
price for the Common Stock (or the closing bid if no sales were reported)
on the last market trading day prior to the date the option is granted.
(b) Exercise of Option; Form of Consideration. The Administrator
determines when options become exercisable, and may in its discretion,
accelerate the vesting of any outstanding option. Stock options granted
under the Plan generally vest and become exerciseable over four years. The
means of payment for shares issued upon exercise of an option is specified
in each option agreement. The Plan permits payment to be made by cash,
check, promissory note, other shares of Common Stock of the Company (with
some restrictions), cashless exercises, or any combination thereof.
(c) Term of Option. The term of an incentive stock option may be no more
than ten (10) years from the date of grant; provided that in the case of an
incentive stock option granted to a 10% shareholder, the term of the option
may be no more than five (5) years from the date of grant. No option may be
exercised after the expiration of its term.
(d) Termination of Employment. If an optionee's employment or consulting
relationship terminates for any reason (other than death or disability),
then all options held by the optionee under the Plan expire on the earlier
of (i) the date set forth in his or her notice of grant or (ii) the
expiration date of such option. To the extent the option is exercisable at
the time of such termination, the optionee may exercise all or part of his
or her option at any time before termination.
(e) Death or Disability. If an optionee's employment or consulting
relationship terminates as a result of death or disability, then all
options held by such optionee under the Plan expire on the earlier of
(i) 12 months from the date of such termination or (ii) the expiration date
of such option. The optionee (or the optionee's estate or the person who
acquires the right to exercise the option by bequest or inheritance), may
exercise all or part of the option at any time before such expiration to
the extent that the option was exercisable at the time of such termination.
(f) Nontransferability of Options. Unless otherwise provided for by the
Administrator in the stock option agreement, options granted under the Plan
are not transferable other than by will or the laws of descent and
distribution, and may be exercised during the optionee's lifetime only by
the optionee.
(g) Other Provisions. The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the Plan as may be
determined by the Administrator.
5
<PAGE>
Adjustments Upon Changes in Capitalization. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of
stock subject to the Plan, the number and class of shares of stock subject to
any option outstanding under the Plan, and the exercise price of any such
outstanding option.
In the event of a liquidation or dissolution, any unexercised options will
terminate. The Administrator may, in its discretion provide that each optionee
shall have the right to exercise all of the optionee's options, including
those not otherwise exercisable, until the date ten (10) days prior to the
consummation of the liquidation or dissolution.
In connection with any merger, consolidation, acquisition of assets or like
occurrence involving the Company, each outstanding option shall be assumed or
an equivalent option substituted by the successor corporation. If the
successor corporation refuses to assume the options or to substitute
substantially equivalent options, the optionee shall have the right to
exercise the option as to all the optioned stock, including shares not
otherwise exercisable. In such event, the Administrator shall notify the
optionee that the option is fully exercisable for fifteen (15) days from the
date of such notice and that the option terminates upon expiration of such
period.
Amendment and Termination of the Plan. The Board may amend, alter, suspend
or terminate the Plan, or any part thereof, at any time and for any reason.
However, the Company shall obtain shareholder approval for any amendment to
the Plan to the extent necessary to comply with Section 162(m) and Section 422
of the Code, or any other applicable law, rule or regulation. No such action
by the Board or shareholders may alter or impair any option previously granted
under the Plan without the written consent of the optionee. Unless terminated
earlier, the Plan shall terminate ten years from the date of its approval by
the shareholders or the Board, whichever is earlier.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. An optionee who is granted an incentive stock
option does not recognize taxable income at the time the option is granted or
upon its exercise, although the exercise may subject the optionee to the
alternative minimum tax. Upon a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain
or loss is treated as long-term capital gain or loss. If these holding periods
are not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower
of (i) the fair market value of the shares at the date of the option exercise
or (ii) the sale price of the shares. Any gain or loss recognized on such a
premature disposition of the shares in excess of the amount treated as
ordinary income is treated as long-term or short-term capital gain or loss,
depending on the holding period. A different rule for measuring ordinary
income upon such a premature disposition may apply if the optionee is also an
officer, director, or 10% shareholder of the Company. The Company is entitled
to a deduction in the same amount as the ordinary income recognized by the
optionee.
Nonstatutory Stock Options. An optionee does not recognize any taxable
income at the time he or she is granted a nonstatutory stock option. Upon
exercise, the optionee recognizes taxable income generally measured by the
excess of the then fair market value of the shares over the exercise price.
Any taxable income recognized in connection with an option exercise by an
employee of the Company is subject to tax withholding by the Company. The
Company is entitled to a deduction in the same amount as the ordinary income
recognized by the optionee. Upon a disposition of such shares by the optionee,
any difference between the sale price and the optionee's exercise price, to
the extent not recognized as taxable income as provided above, is treated as
long-term or short-term capital gain or loss, depending on the holding period.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF
OPTIONS UNDER THE PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT
DISCUSS THE TAX CONSEQUENCES OF THE EMPLOYEE'S OR CONSULTANT'S DEATH OR THE
6
<PAGE>
PROVISIONS OF THE INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN
COUNTRY IN WHICH THE EMPLOYEE OR CONSULTANT MAY RESIDE.
REQUIRED VOTE
At the Annual Meeting, the shareholders are being asked to approve the
amendment to the 1996 Plan. The affirmative vote of the holders of Votes Cast
will be required to approve the amendment to the 1996 Plan. Abstentions will
be counted for purposes of determining the presence or absence of a quorum and
will be counted as votes against the proposal. A broker non-vote will be
counted for purposes of determining the presence or absence of a quorum but
will have no other legal effect upon the approval of the amendment to the 1996
Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS VOTING "FOR" THE APPROVAL AND
RATIFICATION OF THE AMENDMENT TO THE 1996 PLAN.
ADDITIONAL INFORMATION
EXECUTIVE COMPENSATION
The following table sets forth a summary of (i) the compensation paid by
Radius Inc., the Company's predecessor business, during the fiscal year ended
September 30, 1995, (ii) the compensation paid by Radius Inc. for the four
month period ended January 31, 1996 and paid by the Company for the eight
month period ended September 30, 1996 and (iii) the compensation paid by the
Company during Fiscal 1997 to the Company's Chief Executive Officer and the
Company's three other most highly compensated executive officers
(collectively, the "Named Executive Officers") for services rendered in all
capacities to Radius Inc. and the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------------------- ---------------------
RESTRICTED SECURITIES
NAME AND PRINCIPAL INCENTIVE OTHER ANNUAL STOCK UNDERLYING ALL OTHER
POSITION YEAR SALARY(1) BONUS COMPENSATION AWARDS OPTIONS(2) COMPENSATION
------------------ ---- --------- --------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Kevin K. Macgillivray... 1997 $176,540 $176,940 -- -- 40,000 $ 1,483(3)
President, Chief 88,373(4)
Executive Officer and 1996 163,232 184,100 -- -- 48,124 691(3)
Director 1995 135,711 44,845 -- -- -- --
Joan P. Platt(5)........ 1997 140,228 66,849 -- -- 20,000 1,268(3)
Vice President, Finance 18,133(4)
and Administration and 1996 68,019 32,875 -- -- 96,659 476(3)
Chief Financial Officer 1995 -- -- -- -- -- --
Timothy D. Kleffman..... 1997 140,228 106,172 -- -- 20,000 1,488(3)
Vice President, 88,373(4)
Engineering Operations 1996 131,616 123,240 -- -- 48,124 696(3)
1995 127,284 36,000 -- -- -- --
Christine A.
Beheshti(6)............ 1997 140,228 66,849 -- -- 20,000 1,463(3)
Vice President, 68,489(4)
Software Engineering 1996 131,616 65,500 -- -- 48,124 671(3)
1995 117,596 33,750 -- -- -- --
</TABLE>
- --------
(1) Includes compensation deferred by the employee under the Company's
qualified 401(k) retirement plan.
(2) Consists of options to purchase shares of the Company's Common Stock under
the Company's 1996 Stock Option Plan.
(3) Consists of vested contributions made by the Company under its qualified
401(k) retirement plan.
(4) Consists of reimbursement for underwriting fees paid by the Named
Executive Officer (including taxes payable in respect thereof) in
connection with the follow-on offering of the Company's Common Stock on
August 25, 1997.
(5) The Company hired Ms. Platt on March 29, 1996.
(6) Ms. Beheshti resigned from the Company on October 31, 1997.
7
<PAGE>
OPTION GRANTS AND EXERCISES
The following table sets forth certain information with respect to stock
option grants during Fiscal 1997 to the Named Executive Officers. In
accordance with the rules of the Securities and Exchange Commission, also
shown below is the potential realizable value over the term of the option (the
period from the grant date to the expiration date) based on assumed rates of
stock appreciation from the option exercise price of 5% and 10%, compounded
annually. These amounts are based on certain assumed rates of appreciation and
do not represent the Company's estimate of future stock price. Actual gains,
if any, on stock option exercises will be dependent on the future performance
of the Common Stock.
OPTION GRANTS IN FISCAL 1997
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-------------------------------------------
POTENTIAL REALIZABLE
VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM
OPTIONS EMPLOYEES IN OR BASE EXPIRATION ---------------------
NAME GRANTED FISCAL YEAR PRICE DATE 5% 10%
---- ---------- ------------ -------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Kevin K. Macgillivray... 40,000 6.7% $21 1/2/2007 $ 528,271 $ 1,338,744
Joan P. Platt........... 20,000 3.3% 21 1/2/2007 264,136 669,372
Timothy D. Kleffman..... 20,000 3.3% 21 1/2/2007 264,136 669,372
Christine A. Beheshti... 20,000 3.3% 21 1/2/2007 264,136 669,372
</TABLE>
The following table sets forth information with respect to options exercised
during Fiscal 1997 by the Named Executive Officers and the value of
unexercised options at September 30, 1997.
AGGREGATE OPTION EXERCISES IN FISCAL 1997 AND YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES SEPTEMBER 30, 1997 SEPTEMBER 30, 1997
ACQUIRED VALUE ------------------------- -------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Kevin K. Macgillivray... -- -- 40,000 -- $725,000 --
Joan P. Platt........... -- -- 20,000 -- 362,500 --
Timothy D. Kleffman..... -- -- 20,000 -- 362,500 --
Christine A. Beheshti... -- -- 20,000 -- 362,500 --
</TABLE>
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
The Company currently has no employment contract in effect with its Chief
Executive Officer or any other Named Executive Officer.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During Fiscal 1997 the Compensation Committee of the Board of Directors
consisted of Messrs. Avis and Berger. Neither of these individuals were at any
time since the formation of the Company an officer or employee of the Company.
No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity that has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
8
<PAGE>
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The following is the report to the Board of Directors describing
compensation policies and rationales applicable to the Company's executive
officers with respect to compensation paid to such executive officers for
Fiscal 1997. The information contained in the following report shall not be
deemed to be "soliciting material" or to be filed with the Securities and
Exchange Commission, nor shall such information be incorporated by reference
into any future filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates it by reference into such filing.
The Compensation Committee of the Board of Directors is responsible for
reviewing and approving the Company's compensation policies and the
compensation paid to executive officers. The Committee is comprised of the
members named above, none of whom is an employee of the Company.
Compensation Philosophy
The general philosophy of the Company's compensation program is to offer
executive officers competitive compensation based both on the Company's
performance and on the individual's contribution and performance. The
Company's compensation policies are intended to motivate, reward and retain
highly qualified executives for long-term strategic management and the
enhancement of stockholder value, to support a performance-oriented
environment that rewards achievement of specific internal Company goals and to
attract and retain executives whose abilities are critical to the long-term
success and competitiveness of the Company.
There are three main components in the Company's executive compensation
program:
.Base Salary
.Incentive Bonus
.Stock Incentives
Base Salary
The salaries of the executive officers, including the Chief Executive
Officer, are determined annually by the Compensation Committee with reference
to surveys of salaries paid to executives with similar responsibilities at
comparable companies, generally in the high technology industry. The peer
group for each executive officer is composed of executives whose
responsibilities are similar in scope and content. The Company seeks to set
executive compensation levels that are competitive with the average levels of
peer group compensation.
Incentive Bonus
Annual incentive bonuses for executive officers are intended to reflect the
Committee's belief that a significant portion of the annual compensation of
each executive officer should be contingent upon the performance of the
Company, as well as the individual contribution of each officer.
Stock Incentives
The Company utilizes stock options as long term incentives to reward and
retain executive officers. The Committee believes that this practice links
management interests with stockholder interests and motivates executive
officers to make long-term decisions that are in the best interests of the
Company. The Committee also believes that executive officers and other key
employees should own a significant percentage of the Company's stock.
Generally, stock options vest over four years after the grant date and
optionees must be employed by the Company at the time of vesting in order to
exercise the options.
The Committee believes that stock option grants provide an incentive which
focuses the executives' attention on the Company from the perspective of an
owner with an equity stake in the business. Because options
9
<PAGE>
are typically granted with an exercise price equal to the fair market value of
the Common Stock on the date of grant, the Company's stock options are tied to
the future performance of the Company's Common Stock and will provide value to
the recipient only when the price of the Company's stock increases above the
exercise price, that is, only to the extent that stockholders as a whole have
benefitted.
Compensation of the Chief Executive Officer
Kevin K. Macgillivray has been the Company's Chief Executive Officer since
January 1996. Mr. Macgillivray received a bonus of $176,940 for Fiscal 1997.
The bonus was determined in accordance with the practices described above. In
January 1997, Mr. Macgillivray was granted an option to purchase 40,000 shares
of Common Stock at a price of $21 per share, which represented the fair market
value of the Common Stock on the date of grant.
THE COMPENSATION COMMITTEE
Gregory M. Avis
Charles W. Berger
10
<PAGE>
PERFORMANCE GRAPH
The following line graph compares the cumulative total stockholder return
for the Company's Common Stock with the Nasdaq U.S. Index and the Hambrecht &
Quist Technology Index (the "Peer Group") for the period commencing October 9,
1996 and ending December 31, 1997. The graph assumes that $100 was invested on
the date of the Company's initial public offering, October 9, 1996, and that
all dividends are reinvested. In accordance with the guidelines of the SEC,
the stockholder return for each entity in the Peer Group has been weighted on
the basis of market capitalization as of each measurement date set forth in
the graph. Historic stock price performance should not be considered
indicative of future stock price performance.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG SPLASH,
NASDAQ U.S. INDEX AND HAMBRECHT & QUIST TECHNOLOGY INDEX
[PERFORMANCE CHART APPEARS HERE]
<TABLE>
<CAPTION>
NASDAQ STOCK HAMBRECHT & QUIST
MEASUREMENT PERIOD SPLASH MARKET--US TECHNOLOGY
- ------------------ ------- ------------ ----------------
<S> <C> <C> <C>
10/09/96 $100.00 $100.00 $100.00
10/31/96 125.00 98.67 98.56
11/29/96 185.23 104.41 110.17
12/31/96 195.45 104.28 107.18
01/31/97 345.45 111.46 118.64
02/28/97 270.45 105.74 108.94
03/31/97 227.27 98.68 102.10
04/30/97 196.59 101.84 105.87
05/30/97 212.50 113.11 121.79
06/30/97 328.41 116.49 122.84
07/31/97 334.09 128.74 142.59
08/29/97 307.95 128.22 142.98
09/30/97 355.68 136.16 148.83
10/31/97 378.41 128.73 132.84
11/28/97 295.45 129.29 131.45
12/31/97 204.55 126.85 125.38
</TABLE>
11
<PAGE>
SECURITY OWNERSHIP
The following table sets forth certain information known to the Company with
respect to beneficial ownership of the Company's Common Stock as of January
15, 1998 by (i) each beneficial owner of more than 5% of the Company's Common
Stock, (ii) each director and each nominee, (iii) each Named Executive Officer
and (iv) all directors and executive officers as a group. Except as otherwise
indicated, each person has sole voting and investment power with respect to
all shares shown as beneficially owned, subject to community property laws
where applicable.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES TOTAL(1)(2)
------------------------------------ --------- ----------
<S> <C> <C>
Summit Partners, L.P.(3)(4)............................... 3,391,874 24.5%
499 Hamilton Avenue, Suite 200
Palo Alto, CA 94301
Gregory M. Avis(3)(4)..................................... 3,391,874 24.5
Peter Y. Chung(3)(4)...................................... -- --
Radius Inc................................................ 704,252 5.1
215 Moffett Park Drive
Sunnyvale, CA 94089
Charles W. Berger......................................... -- --
Lawrence G. Finch......................................... 44,356 *
Kevin K. Macgillivray(5).................................. 289,216 2.1
Joan P. Platt(6).......................................... 132,257 1.0
Timothy D. Kleffman(7).................................... 190,066 1.4
Christine A. Beheshti(8).................................. 114,278 *
Edward Gavrin(9).......................................... 238,859 1.7
All directors and executive officers as a group
(8 persons)(3)(10)....................................... 4,990,880 35.1
</TABLE>
- --------
* Percentage of shares beneficially owned is less than one percent of total.
(1) Beneficial ownership is determined in accordance with the rules of
Securities and Exchange Commission. In computing the number of shares
beneficially owned by a person and the percentage ownership of that
person, shares of Common Stock subject to options or warrants held by that
person that are currently exercisable or exercisable within 60 days of
January 15, 1998 are deemed outstanding. Such shares, however, are not
deemed outstanding for the purposes of computing the percentage ownership
of any other person. Except as indicated in the footnotes to this table
and pursuant to applicable community property laws, each stockholder named
in the table has sole voting and investment power with respect to the
shares set forth opposite such stockholder's name.
(2) Percentage of ownership is based on 13,855,161 shares of Common Stock
outstanding on January 15, 1998.
(3) Includes 3,026,731, 129,123 and 236,020 shares of Common Stock held of
record by Summit Ventures IV, L.P., Summit Investors III, L.P. and Summit
Subordinated Debt Fund, L.P., respectively. Summit Partners IV, L.P. is a
General Partner of Summit Ventures IV, L.P. and Summit Partners SD, L.P.
is a General Partner of Summit Subordinated Debt Fund, L.P. Stamps,
Woodsum & Co., IV is a General Partner of Summit Ventures IV, L.P. and
Stamps, Woodsum & Co., III is a General Partner of Summit Subordinated
Debt Fund, L.P. Gregory M. Avis, a director of the Company, is a General
Partner of Stamps, Woodsum & Co., III, Stamps, Woodsum & Co., IV and
Summit Investors III, L.P. See Note (4).
(4) Includes shares described in Note (3) above. Mr. Avis, a director of the
Company, is a general partner of affiliates of Summit Partners, L.P. Mr.
Avis exercises shared investment and voting power with respect to such
shares, but disclaims beneficial ownership of such shares.
12
<PAGE>
(5) Includes 72,612 shares that are subject to a right of repurchase in favor
of the Company which expires ratably through March 2000. Also includes
90,000 shares issuable upon the exercise of options which vests over four
years; such options may be exercised immediately as to all shares,
provided that the unvested shares shall be subject to a right of
repurchase in favor of the Company.
(6) Includes 54,370 shares that are subject to a right of repurchase in favor
of the Company which expires ratably through March 2000. Also includes
55,000 shares issuable upon the exercise of options which vests over four
years; such options may be exercised immediately as to all shares,
provided that the unvested shares shall be subject to a right of
repurchase in favor of the Company.
(7) Includes 59,475 shares that are subject to a right of repurchase in favor
of the Company which expires ratably through February 2000. Also includes
55,000 shares issuable upon the exercise of options which vests over four
years; such options may be exercised immediately as to all shares,
provided that the unvested shares shall be subject to a right of
repurchase in favor of the Company.
(8) Includes 20,000 shares issuable upon the exercise of an option which vests
over four years; such option may be exercised immediately as to all
shares, provided that the unvested shares shall be subject to a right of
repurchase in favor of the Company. Ms. Beheshti resigned from the Company
on October 31, 1997.
(9) Includes 130,000 shares issuable upon the exercise of an option which
vests over four years; such option may be exercised immediately as to all
shares, provided that the unvested shares shall be subject to a right of
repurchase in favor of the Company. Edward Gavrin was elected Vice
President, Research and Development of the Company on October 30, 1997.
(10) Includes 186,457 shares that are subject to a right of repurchase in
favor of the Company which expires ratably through March 2000. Also
includes 350,000 shares issuable upon the exercise of options which vests
over four years; such options may be exercised immediately as to all
shares, provided that the unvested shares shall be subject to a right of
repurchase in favor of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's executive officers and directors and
persons who own more than ten percent of a registered class of the Company's
equity securities to file an initial report of ownership on Form 3 and changes
in ownership on Form 4 or 5 with the Securities and Exchange Commission (the
"SEC") and the National Association of Securities Dealers, Inc. Executive
officers, directors and greater than ten percent stockholders are also
required by SEC rules to furnish the Company with copies of all Section 16(a)
forms they file. Based solely on its review of the copies of such forms
received by it, or written representations from certain reporting persons, the
Company believes that, with respect to Fiscal 1997, all filing requirements
applicable to its officers, directors and ten percent stockholders were
complied with.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If any
other matters properly come before the meeting or any adjournment or
postponement thereof, it is the intention of the persons named in the enclosed
form of Proxy to vote the shares they represent as the Board of Directors may
recommend.
THE BOARD OF DIRECTORS
Sunnyvale, California
January 27, 1998
13
<PAGE>
SKU# 1577-PS-98
<PAGE>
SPLASH TECHNOLOGY HOLDINGS, INC.
PROXY for Annual Meeting of Stockholders
To Be Held February 26, 1998
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of SPLASH TECHNOLOGY HOLDINGS, INC., a Delaware
corporation (the "Company"), hereby acknowledges receipt of the Notice of Annual
Meeting of Stockholders and Proxy Statement, and hereby appoints Kevin K.
Macgillivray and Joan P. Platt, and each of them, proxies and attorneys-in-fact,
with full power to each of substitution, on behalf of the undersigned, to
represent the undersigned at the Annual Meeting of Stockholders of SPLASH
TECHNOLOGY HOLDINGS, INC. to be held at the offices of the Company at 555 Del
Rey Avenue, Sunnyvale, California 94086 on Thursday, February 26, 1998 at 9:00
a.m., local time, and at any adjournment or adjournments thereof, and to vote
all shares of Common Stock that the undersigned would be entitled to vote if
then and there personally present, on all matters set forth on the reverse side
hereof.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE
SPECIFICATIONS MADE HEREIN. IF NO SPECIFICATION IS INDICATED, THE SHARES
REPRESENTED BY THIS PROXY WILL BE VOTED FOR EACH OF THE PERSONS AND THE
PROPOSALS ON THE REVERSE SIDE HEREOF AND FOR SUCH OTHER MATTERS AS MAY PROPERLY
COME BEFORE THE MEETING AS THE PROXYHOLDERS DEEM ADVISABLE.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
<PAGE>
1. Election of Directors NOMINEES: Charles W. Berger
Lawrence G. Finch
FOR WITHHELD
[_] [_]
[_] _______________________________________
For both nominees except as noted above
2. To approve and ratify the adoption of an amendment to the 1996 Stock Option
Plan to increase the number of shares of Common Stock reserved for issuance
thereunder from 3,150,000 to 3,900,000.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. To vote or otherwise represent the shares on any and all other business
which may properly come before the meeting or any adjournment or
adjournments thereof, according to their discretion and in their
discretion.
MARK HERE FOR ADDRESS CHANGE AND [_]
NOTE NEW ADDRESS IN SPACE TO THE LEFT.
Please mark, sign, date and return the proxy card promptly using the enclosed
envelope.
NOTE: Please sign exactly as name appears on your stock certificate. If the
stock is registered in the names of two or more persons, each should
sign. Executors, administrators, trustees, guardians, attorneys and
corporate officers should insert their titles.
SIGNATURE:_____________ DATE:_________ SIGNATURE:________________ DATE:_________
<PAGE>
ANNEX A
SPLASH TECHNOLOGY HOLDINGS, INC.
1996 STOCK OPTION PLAN
(AMENDED AS OF JANUARY 9, 1998)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
--------------------
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and its Subsidiaries and to promote the success of the Company's
business. Options granted under the Plan may be incentive stock options (as
defined under Section 422 of the Code) or nonstatutory stock options, as
determined by the Administrator at the time of grant of an option and subject to
the applicable provisions of Section 422 of the Code, as amended, and the
regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
-----------
(a) "Administrator" means the Board or any of its Committees appointed
-------------
pursuant to Section 4 of the Plan.
(b) "Applicable Laws" means the requirements relating to the
---------------
administration of stock option plans under U.S. state corporate laws, U.S.
federal and state securities laws, the Code, any stock exchange or quotation
system on which the Common Stock is listed or quoted and the applicable laws of
any foreign country or jurisdiction where Options are, or will be, granted under
the Plan.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means a Committee appointed by the Board of Directors
---------
in accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
------------
(g) "Company" means Splash Technology Holdings, Inc., a Delaware
-------
corporation.
(h) "Consultant" means any person who is engaged by the Company or any
----------
Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not.
(i) "Continuous Status as an Employee or Consultant" means that the
----------------------------------------------
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be considered interrupted in the case of (i) any leave
of absence approved by the Company or (ii) transfers between locations of the
Company or between the Company, its Parent, any Subsidiary, or any successor. A
leave of absence approved by the Company shall include sick leave, military
leave, or any other personal leave approved by an authorized
<PAGE>
representative of the Company. For purposes of Incentive Stock Options, no such
leave may exceed 90 days, unless reemployment upon expiration of such leave is
guaranteed by statute or contract, including Company policies. If reemployment
upon expiration of a leave of absence approved by the Company is not so
guaranteed, on the 181st day of such leave any Incentive Stock Option held by
the Optionee shall cease to be treated as an Incentive Stock Option and shall be
treated for tax purposes as a Nonstatutory Stock Option.
(j) "Employee" means any person, including Officers and directors,
--------
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
------------
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
-----------------
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination, or;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value thereof shall be determined in good faith by the
Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to
-------------------------
qualify as an Incentive Stock Option.
(o) "Officer" means a person who is an officer of the Company within
-------
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(p) "Option" means a stock option granted pursuant to the Plan.
------
(q) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(r) "Optionee" means an Employee or Consultant who receives an Option.
--------
-2-
<PAGE>
(s) "Parent" means a "parent corporation", whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(t) "Plan" means this 1996 Stock Option Plan.
----
(u) "Section 16(b)" means Section 16(b) of the Securities Exchange Act
-------------
of 1934, as amended.
(v) "Share" means a share of the Common Stock, as adjusted in
-----
accordance with Section 11 below.
(w) "Subsidiary" means a "subsidiary corporation", whether now or
----------
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
-------------------------
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 3,900,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an option exchange program, the
unpurchased Shares which were subject thereto shall become available for future
grant or sale under the Plan (unless the Plan has terminated); provided,
--------
however, that Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan, except that if unvested Shares are repurchased by the Company at
their original purchase price, and the original purchaser of such Shares did not
receive any benefits of ownership of such Shares, such Shares shall become
available for future grant under the Plan. For purposes of the preceding
sentence, voting rights shall not be considered a benefit of Share ownership.
4. Administration of the Plan.
--------------------------
(a) Procedure.
---------
(i) Multiple Administrative Bodies. The Plan may be administered
------------------------------
by different Committees with respect to different groups of Service Providers.
(ii) Section 162(m). To the extent that the Administrator
--------------
determines it to be desirable to qualify Options granted hereunder as
"performance-based compensation" within the meaning of Section 162(m) of the
Code, the Plan shall be administered by a Committee of two or more "outside
directors" within the meaning of Section 162(m) of the Code.
(iii) Rule 16b-3. To the extent desirable to qualify
----------
transactions hereunder as exempt under Rule 16b-3, the Plan shall be
administered by the Board or a Committee of two or more "non-employee directors"
within the meaning of Rule 16b-3.
-3-
<PAGE>
(iv) Other Administration. Other than as provided above, the
--------------------
Plan shall be administered by (A) the Board or (B) a Committee, which committee
shall be constituted to satisfy Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
---------------------------
Plan and, in the case of a Committee, the specific duties delegated by the Board
to such Committee, and subject to the approval of any relevant authorities,
including the approval, if required, of any stock exchange upon which the Common
Stock is listed, the Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock;
(ii) to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are
granted hereunder;
(iv) to determine the number of shares of Common Stock to be
covered by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions of any award granted
hereunder;
(vii) to determine whether and under what circumstances an
Option may be settled in cash under subsection 9(e) instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted; and
(ix) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(c) Effect of Administrator's Decision. All decisions, determinations
----------------------------------
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility.
-----------
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
-4-
<PAGE>
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 5(b), Incentive Stock Options shall be taken into account in the order
in which they were granted. The Fair Market Value of the Shares shall be
determined as of the time the Option with respect to such Shares is granted.
(c) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his or her right or the Company's right to
terminate his or her employment or consulting relationship at any time, with or
without cause.
(d) Upon the Company or a successor corporation being subject to
Section 162(m) of the Code or upon the Plan being assumed by a corporation which
is subject to Section 162(m) of the Code, the following limitations shall apply
to grants of Options to Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 100,000 Shares.
(ii) In connection with his or her initial employment, an
Employee may be granted Options to purchase up to an additional 100,000 Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 11.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a transaction
described in Section 11), the cancelled Option will be counted against the limit
set forth in subsection (i) above. For this purpose, if the exercise price of
an Option is reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
6. Term of Plan. The Plan shall become effective upon the earlier to
------------
occur of its adoption by the Board of Directors or its approval by the
stockholders of the Company, as described in Section 17 of the Plan. It shall
continue in effect for a term of ten (10) years unless sooner terminated under
Section 13 of the Plan.
7. Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
-5-
<PAGE>
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
---------------------------------------
(a) The per share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the
Administrator, but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of
such Incentive Stock Option, owns stock representing more than ten percent (10%)
of the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described
in the preceding paragraph, the per Share exercise price shall be no less than
100% of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Nonstatutory Stock Option, the per Share
exercise price shall be determined by the Administrator. In the case of a
Nonstatutory Stock Option intended to qualify as "performance-based
compensation" within the meaning of Section 162(m) of the Code, the per Share
exercise price shall be no less than 100% of the Fair Market Value per Share on
the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with
a per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a merger or other corporate transaction.
(b) Waiting Period and Exercise Dates. At the time an Option is
---------------------------------
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
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<PAGE>
9. Exercise of Option.
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(a) Procedure for Exercise; Rights as a Stockholder. Any Option
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granted hereunder shall be exercisable at such times and under such conditions
as determined by the Administrator, including performance criteria with respect
to the Company and/or the Optionee, and as shall be permissible under the terms
of the Plan. Unless the Administrator provides otherwise, vesting of Options
granted hereunder shall be tolled during any unpaid leave of absence. An Option
may not be exercised for a fraction of a Share.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(c) of the Plan.
Until the issuance of Shares (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such Shares promptly upon
exercise of the Option. No adjustment will be made for a dividend or other right
for which the record date is prior to the date the Shares are issued, except as
provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. In the
----------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee or
Consultant with the Company (but not in the event of an Optionee's change of
status from Employee to Consultant (in which case an Employee's Incentive Stock
Option shall automatically convert to a Nonstatutory Stock Option on the date
three (3) months and one day from the date of such change of status) or from
Consultant to Employee), such Optionee may, but only within such period of time
as is determined by the Administrator, with such determination in the case of an
Incentive Stock Option not exceeding three (3) months after the date of such
termination (but in no event later than the expiration date of the term of such
Option as set forth in the Option Agreement), exercise his or her Option to the
extent that Optionee was entitled to exercise it at the date of such
termination. To the extent that Optionee was not entitled to exercise the Option
at the date of such termination, or if Optionee does not exercise such Option to
the extent so entitled within the time specified herein, the Option shall
terminate.
(c) Disability of Optionee. In the event of termination of an
----------------------
Optionee's consulting relationship or Continuous Status as an Employee as a
result of his or her disability (as defined in Section 22(e)(3) of the Code),
Optionee may, but only within twelve (12) months from the date of such
termination (and in no event later than the expiration date of the term of such
Option as set forth in the
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<PAGE>
Option Agreement), exercise the Option to the extent otherwise entitled to
exercise it at the date of such termination. To the extent that Optionee is not
entitled to exercise the Option at the date of termination, or if Optionee does
not exercise such Option to the extent so entitled within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death,
the Optionee's estate or a person who acquired the right to exercise the Option
by bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
-----------------
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
10. Non-Transferability of Options. Unless otherwise provided for by the
------------------------------
Administrator in the stock option agreement, Options may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
11. Adjustments Upon Changes in Capitalization or Merger.
----------------------------------------------------
(a) Changes in Capitalization. Subject to any required action by the
-------------------------
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the
Administrator, whose determination in that respect shall be final, binding and
conclusive. Except as expressly provided herein, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
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<PAGE>
(b) Dissolution or Liquidation. In the event of the proposed
--------------------------
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.
(c) Merger or Asset Sale. In the event of a merger of the Company
--------------------
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall fully vest in and have
the right to exercise the Option as to all of the Optioned Stock, including
Shares as to which it would not otherwise be vested or exercisable. If an
Option becomes fully vested and exercisable in lieu of assumption or
substitution in the event of a merger or sale of assets, the Administrator shall
notify the Optionee in writing or electronically that the Option shall be fully
vested and exercisable for a period of fifteen (15) days from the date of such
notice, and the Option shall terminate upon the expiration of such period. For
the purposes of this paragraph, the Option shall be considered assumed if,
following the merger or sale of assets, the option or right confers the right to
purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets is not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to the Option, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.
12. Time of Granting Options. The date of grant of an Option shall, for
------------------------
all purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Board. Notice
of the determination shall be given to each Employee or Consultant to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
-------------------------------------
(a) Amendment and Termination. The Board may at any time amend,
-------------------------
alter, suspend or discontinue the Plan, but no amendment, alteration, suspension
or discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her
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<PAGE>
consent. In addition, to the extent necessary and desirable to comply with
Applicable Laws, the Company shall obtain stockholder approval of any Plan
amendment in such a manner and to such a degree as required.
(b) Effect of Amendment or Termination. Any such amendment or
----------------------------------
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Administrator, which agreement must be in writing and signed by the Optionee
and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
----------------------------------
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with
Applicable Laws, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan,
---------------------
will at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
16. Agreements. Options shall be evidenced by written agreements in such
----------
form as the Administrator shall approve from time to time.
17. Stockholder Approval. Continuance of the Plan shall be subject to
--------------------
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange upon which the Common Stock is listed.
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