<PAGE>
As filed with the Securities and Exchange Commission on May 4, 1998.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________________________
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
____________________________________
EXCEL SWITCHING CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2992806
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
255 Independence Drive
Hyannis, Massachusetts 02601
(508) 862-3000
(Address of Principal Executive Offices) (Zip Code)
____________________________________
Stock Option Program
1997 Stock Option Plan
1997 Non-Employee Director Stock Option Plan
1997 Employee Stock Purchase Plan
(Full title of the plans)
____________________________________
Robert P. Madonna
Chief Executive Officer and President
Excel Switching Corporation
255 Independence Drive
Hyannis, Massachusetts 02601
(508) 862-3000
(Name, address and telephone number,
including area code, of agent for service)
____________________________________
Copy to:
CHRISTOPHER STAVROS, ESQ. JOHN HESSION, ESQ.
EXCEL SWITCHING CORPORATION TESTA, HURWITZ & THIBEAULT, LLP
255 INDEPENDENCE DRIVE HIGH STREET TOWER, 125 HIGH STREET
HYANNIS, MASSACHUSETTS 02601 BOSTON, MASSACHUSETTS 02110
(508) 862-3000 (617) 248-7000
================================================================================
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Maximum Maximum Amount of
Amount to Offering Price Aggregate Registration
Title of Securities to be Registered be Registered Per Share Offering Price Fee
<S> <C> <C> <C> <C>
STOCK OPTION PROGRAM
Common Stock (Par Value $.01 Per Share) 5,014,840 $0.0017 (1) $ 8,525 $ 2.51
Common Stock (Par Value $.01 Per Share) 930,000 $ 0.17 (1) $ 158,100 $ 46.64
Common Stock (Par Value $.01 Per Share) 1,272,200 $ 0.33 (1) $ 419,826 $ 123.85
Common Stock (Par Value $.01 Per Share) 21,600 $ 1.00 (1) $ 21,600 $ 6.37
Common Stock (Par Value $.01 Per Share) 300,000 $ 2.33 (1) $ 699,000 $ 206.21
Common Stock (Par Value $.01 Per Share) 920,700 $ 4.50 (1) $ 4,143,150 $ 1,222.23
Common Stock (Par Value $.01 Per Share) 600,000 $ 5.00 (1) $ 3,000,000 $ 885.00
Common Stock (Par Value $.01 Per Share) 651,440 $ 6.00 (1) $ 3,908,640 $ 1,153.05
Common Stock (Par Value $.01 Per Share) 291,600 $ 7.00 (1) $ 2,041,200 $ 602.15
Common Stock (Par Value $.01 Per Share) 21,600 $ 7.50 (1) $ 162,000 $ 47.79
Common Stock (Par Value $.01 Per Share) 42,500 $ 8.50 (1) $ 361,250 $ 106.57
Common Stock (Par Value $.01 Per Share) 10,800 $ 9.50 (1) $ 102,600 $ 30.27
Common Stock (Par Value $.01 Per Share) 24,800 $ 10.50 (1) $ 260,400 $ 76.82
Common Stock (Par Value $.01 Per Share) 52,600 $ 11.50 (1) $ 604,900 $ 178.45
Common Stock (Par Value $.01 Per Share) 6,200 $ 12.50 (1) $ 77,500 $ 22.86
Common Stock (Par Value $.01 Per Share) 283,000 $ 14.50 (1) $ 4,103,500 $ 1,210.53
Common Stock (Par Value $.01 Per Share) 63,200 $ 15.50 (1) $ 979,600 $ 288.98
Common Stock (Par Value $.01 Per Share) 7,400 $ 18.00 (1) $ 133,200 $ 39.29
1997 STOCK OPTION PLAN
Common Stock (Par Value $.01 Per Share) 10,000 $ 16.38 (1) $ 163,800 $ 48.32
Common Stock (Par Value $.01 Per Share) 300 $ 16.69 (1) $ 5,007 $ 1.48
Common Stock (Par Value $.01 Per Share) 13,000 $ 16.75 (1) $ 217,750 $ 64.24
Common Stock (Par Value $.01 Per Share) 1,300 $ 17.25 (1) $ 22,425 $ 6.62
Common Stock (Par Value $.01 Per Share) 24,500 $ 18.13 (1) $ 444,185 $ 131.03
Common Stock (Par Value $.01 Per Share) 5,000 $ 18.16 (1) $ 90,800 $ 26.79
Common Stock (Par Value $.01 Per Share) 16,300 $ 19.00 (1) $ 309,700 $ 91.36
Common Stock (Par Value $.01 Per Share) 1,000 $ 19.75 (1) $ 19,750 $ 5.83
Common Stock (Par Value $.01 Per Share) 1,600 $ 20.13 (1) $ 32,208 $ 9.50
Common Stock (Par Value $.01 Per Share) 9,000 $ 20.25 (1) $ 182,250 $ 53.76
Common Stock (Par Value $.01 Per Share) 23,800 $ 20.88 (1) $ 496,944 $ 146.60
Common Stock (Par Value $.01 Per Share) 16,300 $ 20.75 (1) $ 338,225 $ 99.78
Common Stock (Par Value $.01 Per Share) 2,000 $ 21.00 (1) $ 42,000 $ 12.39
Common Stock (Par Value $.01 Per Share) 12,200 $ 25.25 (1) $ 308,050 $ 90.87
Common Stock (Par Value $.01 Per Share) 2,863,700 $ 21.31 (2) $61,025,447 $18,002.51
1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
Common Stock (Par Value $.01 Per Share) 70,000 $ 21.00 (1) $ 1,470,000 $ 433.65
Common Stock (Par Value $.01 Per Share) 155,000 $ 21.31 (2) $ 3,303,050 $ 974.40
1997 EMPLOYEE STOCK PURCHASE PLAN
Common Stock (Par Value $.01 Per Share) 400,000 $ 21.31 (2) $ 8,524,000 $ 2,514.58
TOTAL: 14,139,480 $98,180,582 $28,963.27
</TABLE>
________________________________________________________________________________
(1) All such shares are issuable upon exercise of outstanding options with
fixed exercise prices. Pursuant to Regulation C, Rule 457(h)(1) under the
Securities Act of 1933, as amended, the aggregate offering price and the
fee have been computed upon the basis of the price at which the options may
be exercised.
(2) The price of $21.31 per share, which is the average of the high and low
prices of the common stock of the registrant reported on the Nasdaq National
Market on April 29, 1998, is set forth solely for purposes of calculating
the filing fee pursuant to Rule 457(c) and (h) and has been used only for
those shares without a fixed exercise price.
<PAGE>
-1-
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information.
----------------
The documents containing the information specified in this Item 1 will
be sent or given to employees, directors or others as specified by Rule
428(b)(1). In accordance with the rules and regulations of the Securities and
Exchange Commission (the "Commission") and the instructions to Form S-8, such
documents are not being filed with the Commission either as part of this
Registration Statement or as prospectuses or prospectus supplements pursuant to
Rule 424.
Item 2. Registrant Information and Employee Plan Annual Information.
-----------------------------------------------------------
The documents containing the information specified in this Item 2 will
be sent or given to employees as specified by Rule 428(b)(1). In accordance
with the rules and regulations of the Commission and the instructions to Form S-
8, such documents are not being filed with the Commission either as part of this
Registration Statement or as prospectuses or prospectus supplements pursuant to
Rule 424.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
---------------------------------------
The following documents filed with the Commission are incorporated by
reference in this Registration Statement:
(a) Registrant's Annual Report on Form 10-K for the fiscal year ended
December 27, 1997;
(b) The section entitled "Description of Registrant's Securities to
be Registered," contained in the Registrant's Registration
Statement on Form 8-A, filed on October 23, 1997 pursuant to
Section 12(g) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act").
All documents subsequently filed with the Commission by the Registrant
pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to
the filing of a post-effective amendment which indicates that all securities
offered herein have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this Registration
Statement and to be a part hereof from the date of filing of such documents.
Item 4. Description of Securities.
-------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel.
--------------------------------------
Not applicable.
<PAGE>
-2-
Item 6. Indemnification of Directors and Officers.
-----------------------------------------
The Company is required by its Restated By-laws and the Restated
Articles or Organization generally to indemnify any director, officer or
employee against all expenses and liabilities reasonably incurred by or imposed
upon such person in connection with any legal action in which such person is
involved by reason of such person's position with the Company unless such person
shall have been finally adjudicated in any action, suit or proceeding not to
have acted in good faith in the reasonable belief that such person's action was
in the best interests of the Company. The Company may pay expenses incurred by
any such person in defending a civil or criminal action or proceeding in advance
of the final disposition of such action upon the Company's receipt of the
undertaking of such person to repay such amount if such person shall be
adjudicated not to be entitled to indemnification.
The Company's Restated Articles of Incorporation include a provision
limiting the personal liability of a director of the Company to its stockholders
for monetary damages for breaches of their fiduciary duty except (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under section sixty-one or
sixty-two of Chapter 156B of the Massachusetts General Laws, or (iv) for any
transaction from which the director derived an improper benefit.
The Company maintains directors and officers liability insurance of
the benefit of its directors and certain of its officers.
Item 7. Exemption From Registration Claimed.
-----------------------------------
Not applicable.
Item 8. Exhibits.
--------
Exhibit No. Description of Exhibit
----------- ----------------------
Exhibit 4.1 Specimen certificate representing the Common Stock of the
Registrant (filed as Exhibit 4.1 to the Registrant's
Registration Statement on Form S-1 (Registration
No. 333-35791) and incorporated herein by reference).
Exhibit 4.2 Restated Articles of Organization of the Registrant
(filed as Exhibit 3.2 to the Registrant's Registration
Statement on Form S-1 (Registration No. 333-35791) and
incorporated herein by reference).
Exhibit 4.3 Restated By-laws of the Registrant (filed as Exhibit 3.2
to the Registrant's Registration Statement on Form S-1
(Registration No. 333-35791) and incorporated herein by
reference).
Exhibit 4.4 Form of Stock Option Agreement under the Registrant's
Stock Option Program (filed as Exhibit 10.4 to the
Registration Statement on Form S-1 (Registration No. 333-
35791) and incorporated herein by reference).
Exhibit 4.5 1997 Stock Option Plan (filed herewith).
<PAGE>
-3-
Exhibit 4.6 1997 Non-Employee Director Stock Option Plan (filed as
Exhibit 10.2 to the Registrant's Registration Statement
on Form S-1 (Registration No. 333-35791) and incorporated
herein by reference).
Exhibit 4.7 1997 Employee Stock Purchase Plan (filed as Exhibit 10.3
to the Registrant's Registration Statement on Form S-1
(Registration No. 333-35791) and incorporated herein by
reference).
Exhibit 4.8 Form of Non-Qualified Stock Option Agreement under the
Registrant's 1997 Stock Option Plan (filed herewith).
Exhibit 4.9 Form of Incentive Stock Option Agreement under the
Registrant's 1997 Stock Option Plan (filed herewith).
Exhibit 4.10 Form of Non-Qualified Stock Option Agreement under the
Registrant's 1997 Non-Employee Director Stock Option Plan
(filed herewith).
Exhibit 5.1 Opinion of Testa, Hurwitz & Thibeault, LLP (filed
herewith).
Exhibit 23.1 Consent of Testa, Hurwitz & Thibeault, LLP (contained in
Exhibit 5.1).
Exhibit 23.2 Consent of Arthur Andersen LLP (filed herewith).
Exhibit 24.1 Power of Attorney (included as part of the signature page
to this Registration Statement).
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 Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate,
represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding
the foregoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high and
of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the Registration Statement;
<PAGE>
-4-
(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;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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.
(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 offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the Registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in 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
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification
is against public policy as expressed in the Securities Act of 1933
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 Act and will be
governed by the final adjudication of such issue.
<PAGE>
-5-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant,
Excel Switching Corporation, 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 Hyannis, Massachusetts, on this 1st day of May,
1998.
EXCEL SWITCHING CORPORATION
By: /s/ Robert P. Madonna
---------------------
Robert P. Madonna
Chief Executive Officer and President
POWER OF ATTORNEY
We, the undersigned officers and directors of Excel Switching Corporation,
hereby severally constitute and appoint Christopher Stavros and Stephen S.
Galliker, and each of them singly, our true and lawful attorneys, with full
power to them and each of them singly, to sign for us in our names in the
capacities indicated below, any amendments to this Registration Statement on
Form S-8 (including post-effective amendments), and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, and generally to do all things in our names
and on our behalf in our capacities as officers and directors to enable Excel
Switching Corporation, to comply with the provisions of the Securities Act of
1933, as amended, hereby ratifying and confirming our signatures as they may be
signed by our said attorneys, or any of them, to said Registration Statement and
all amendments thereto.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- ------- -----
<S> <C> <C>
/s/ Robert P. Madonna Chief Executive Officer, President and May 1, 1998
- -------------------------------------- Director (Principal Executive Officer)
Robert P. Madonna
/s/ Stephen S. Galliker Chief Financial Officer May 1, 1998
- -------------------------------------- (Principal Financial and Accounting
Stephen S. Galliker Officer)
/s/ Christopher Stavros Director, Vice President and General May 1, 1998
- -------------------------------------- Counsel
Christopher Stavros
/s/ Edward Breslow Director May 1, 1998
- --------------------------------------
Edward Breslow
/s/ John Loughlin Director May 1, 1998
- --------------------------------------
John Loughlin
</TABLE>
<PAGE>
-6-
Exhibit Index
-------------
<TABLE>
<CAPTION>
Exhibit No. Description of Exhibit
----------- -----------------------
<C> <S>
4.1 Specimen certificate representing the Common Stock of the Registrant (filed as
Exhibit 4.1 to the Registrant's Registration Statement on Form S-1 (Registration
No. 333-35791) and incorporated herein by reference).
4.2 Restated Articles of Organization of the Registrant (filed as Exhibit 3.2 to the
Registrant's Registration Statement on Form S-1 (Registration No. 333-35791) and
incorporated herein by reference).
4.3 Restated By-laws of the Registrant (filed as Exhibit 3.2 to the Registrant's
Registration Statement on Form S-1 (Registration No. 333-35791) and incorporated
herein by reference).
4.4 Form of Stock Option Agreement under the Registrant's Stock Option Program (filed
as Exhibit 10.4 to the Registration Statement on Form S-1 (Registration No.
333-35791) and incorporated herein by reference).
4.5 1997 Stock Option Plan (filed herewith).
4.6 1997 Non-Employee Director Stock Option Plan (filed as Exhibit 10.2 to the
Registrant's Registration Statement on Form S-1 (Registration No. 333-35791) and
incorporated herein by reference).
4.7 1997 Employee Stock Purchase Plan (filed as Exhibit 10.3 to the Registrant's
Registration Statement on Form S-1 (Registration No. 333-35791) and incorporated
herein by reference).
4.8 Form of Non-Qualified Stock Option Agreement under the Registrant's 1997 Stock
Option Plan (filed herewith).
4.9 Form of Incentive Stock Option Agreement under the Registrant's 1997 Stock Option
Plan (filed herewith).
4.10 Form of Non-Qualified Stock Option Agreement under the Registrant's 1997
Non-Employee Director Stock Option Plan (filed herewith).
5.1 Opinion of Testa, Hurwitz & Thibeault, LLP (filed herewith).
23.1 Consent of Testa, Hurwitz & Thibeault, LLP (contained in Exhibit 5.1).
23.2 Consent of Arthur Andersen LLP (filed herewith).
24.1 Power of Attorney (included as part of the signature page to this Registration
Statement).
</TABLE>
<PAGE>
Exhibit 4.5
EXCEL SWITCHING CORPORATION
1997 STOCK OPTION PLAN
----------------------
1. PURPOSE. This 1997 Stock Option Plan (the "Plan") is intended to
-------
provide incentives: (a) to the officers and other employees of Excel Switching
Corporation (the "Company"), any present or future parent and any present or
future subsidiaries of the Company (collectively, "Related Corporations") by
providing them with opportunities to purchase stock in the Company pursuant to
options granted hereunder which qualify as "incentive stock options" ("ISO" or
"ISOs") under Section 422(b) of the Internal Revenue Code of 1986, as amended
(the "Code"); (b) to directors, officers, employees and consultants of the
Company and Related Corporations by providing them with opportunities to
purchase stock in the Company pursuant to options granted hereunder which do not
qualify as ISOs ("Non-Qualified Option" or "Non-Qualified Options"); (c) to
directors, officers, employees and consultants of the Company and Related
Corporations by providing them with awards of stock in the Company ("Awards");
and (d) to directors, officers, employees and consultants of the Company and
Related Corporations by providing them with opportunities to make direct
purchases of stock in the Company ("Purchases"). Both ISOs and Non-Qualified
Options are referred to hereafter individually as an "Option" and collectively
as "Options". Options, Awards and authorizations to make Purchases are referred
to hereafter collectively as "Stock Rights". As used herein, the terms "parent"
and "subsidiary" mean "parent corporation" and "subsidiary corporation",
respectively, as those terms are defined in Section 424 of the Code.
2. ADMINISTRATION OF THE PLAN.
---------------------------
A. BOARD OR COMMITTEE ADMINISTRATION. The Plan shall be administered by
---------------------------------
the Board of Directors of the Company (the "Board") or, subject to paragraph
2(d) (relating to compliance with Section 162(m) of the Code), by a committee
appointed by the Board (the "Committee"). Hereinafter, all references in
this Plan to the "Committee" shall mean the Board if no Committee has been
appointed. Subject to ratification of the grant or authorization of each
Stock Right by the Board (if so required by applicable state law), and
subject to the terms of the Plan, the Committee shall have the authority to
(i) determine the employees of the Company and Related Corporations (from
among the class of employees eligible under paragraph 3 to receive ISOs) to
whom ISOs may be granted, and to determine (from among the class of
individuals and entities eligible under paragraph 3 to receive Non-Qualified
Options and Awards and to make Purchases) to whom Non-Qualified Options,
Awards and authorizations to make Purchases may be granted; (ii) determine
the time or times at which Options or Awards may be granted or Purchases
made; (iii) determine the exercise price per share subject to each Option,
which price shall not be less than the minimum price specified in paragraph
6, and the purchase price of shares subject to each Purchase; (iv) determine
whether each Option granted shall be an ISO or a Non-Qualified Option; (v)
determine (subject to paragraph 7) the time or times when each Option shall
become exercisable and the duration of the exercise period; (vi) extend the
period during which outstanding Options may be exercised; (vii) determine
whether restrictions such as repurchase options are to be imposed on shares
subject to Options, Awards and Purchases and the nature of such restrictions,
if any; (viii) interpret the Plan and prescribe and rescind rules and
regulations relating to it; and (ix) authorize executive officers of the
Company to (a) execute option agreements with individuals hired as employees
of the Company during the periods between Comittee meetings, not including
<PAGE>
individuals hired as executive officers, as of the date of hire of each
individual employee, and (b) determine the number of Options to be issued to
such employee, subject to the specific limitations set forth by the Committee
in its grant of authority to such executive officer. If the Committee
determines to issue a Non-Qualified Option, it shall take whatever actions it
deems necessary, under Section 422 of the Code and the regulations
promulgated thereunder, to ensure that such Option is not treated as an ISO.
The interpretation and construction by the Committee of any provisions of the
Plan or of any Stock Right granted under it shall be final unless otherwise
determined by the Board. The Committee may from time to time adopt such
rules and regulations for carrying out the Plan as it may deem best. No
member of the Board or the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Stock Right
granted under it.
B. COMMITTEE ACTION. The Committee may select one of its members as its
----------------
chairman, and shall hold meetings at such time and places as it may
determine. Acts by a majority of the Committee, or acts reduced to or
approved in writing by a majority of the members of the Committee, shall be
the valid acts of the Committee. From time to time the Board may increase
the size of the Committee and appoint additional members thereof, remove
members (with or without cause) and appoint new members in substitution
therefor, fill vacancies however caused, or remove all members of the
Committee and thereafter directly administer the Plan.
C. GRANT OF STOCK RIGHTS TO BOARD MEMBERS. Stock Rights may be granted to
--------------------------------------
members of the Board. All grants of Stock Rights to members of the Board
shall in all other respects be made in accordance with the provisions of this
Plan applicable to other eligible persons. Members of the Board who are
either (i) eligible for Stock Rights pursuant to the Plan or (ii) have been
granted Stock Rights may vote on any matters affecting the administration of
the Plan or the grant of any Stock Rights pursuant to the Plan, except that
no such member shall act upon the granting to himself of Stock Rights, but
any such member may be counted in determining the existence of a quorum at
any meeting of the Board during which action is taken with respect to the
granting to him of Stock Rights.
D. PERFORMANCE-BASED COMPENSATION. The Board, in its discretion, may take
------------------------------
such action as may be necessary to ensure that Stock Rights granted under the
Plan qualify as "qualified performance-based compensation" within the meaning
of Section 162(m) of the Code and applicable regulations promulgated
thereunder ("Performance-Based Compensation"). Such action may include, in
the Board's discretion, some or all of the following (i) if the Board
determines that Stock Rights granted under the Plan generally shall
constitute Performance-Based Compensation, by a committee consisting solely
of two or more "outside directors (as defined in applicable regulations
promulgated under Section 162(m) of the Code), (ii) if any Non-Qualified
Options with an exercise price less than the fair market value per share of
Common Stock are granted under the Plan and the Board determines that such
Options should constitute Performance-Based Compensation, such options shall
be made exercisable only upon the attainment of a pre-established, objective
performance goal established by the Committee, and such grant shall be
submitted for, and shall be contingent upon shareholder approval and (iii)
Stock Rights granted under the Plan may be subject to such other terms and
conditions as are necessary for compensation recognized in connection with
the exercise or disposition of such Stock Right or the disposition of Common
Stock acquired pursuant to such Stock Right, to constitute Performance-Based
Compensation.
<PAGE>
3. ELIGIBLE EMPLOYEES AND OTHERS. ISOs may be granted only to employees
-----------------------------
of the Company or any Related Corporation. Non-Qualified Options, Awards and
authorizations to make Purchases may be granted to any director (whether or not
an employee), officer, employee or consultant of the Company or any Related
Corporation. Notwithstanding the foregoing, effective only on and after the
date of the Company's initial public offering, non-employee directors shall no
longer be eligible to participate in this Plan. The Committee may take into
consideration a recipient's individual circumstances in determining whether to
grant an ISO, a Non-Qualified Option or an authorization to make a Purchase.
Granting of any Stock Right to any individual or entity shall neither entitle
that individual or entity to, nor disqualify him from, participation in any
other grant of Stock Rights.
4. STOCK. The stock subject to Options, Awards and Purchases shall be
-----
authorized but unissued shares of Common Stock of the Company, par value $.01
per share (the "Common Stock"), or shares of Common Stock reacquired by the
Company in any manner. The aggregate number of shares which may be issued
pursuant to the Plan is 3,000,000 shares, subject to adjustment as provided in
paragraph 13. If any Option granted under the Plan shall expire or terminate
for any reason without having been exercised in full or shall cease for any
reason to be exercisable in whole or in part, the shares subject to such Options
shall again be available for grants of Stock Rights under the Plan.
The following provision shall be effective only on and after the date of
the initial public offering of shares of Common Stock of the Company pursuant to
the Securities Act of 1933, as amended. If any Option granted under the Plan
shall expire or terminate for any reason without having been exercised in full
or shall cease for any reason to be exercisable in whole or in part or shall be
repurchased by the Company, the shares subject to such Option shall be included
in the determination of the aggregate number of shares of Common Stock deemed to
have been granted to such employee under the Plan.
5. GRANTING OF STOCK RIGHTS. Stock Rights may be granted under the Plan
------------------------
at any time on or after September 16, 1997 and prior to September 15, 2007. The
date of grant of a Stock Right under the Plan will be the date specified by the
Committee at the time it grants the Stock Right; provided, however, that such
date shall not be prior to the date on which the Committee acts to approve the
grant.
6. MINIMUM OPTION PRICE; ISO LIMITATIONS.
-------------------------------------
A. PRICE FOR NON-QUALIFIED OPTIONS, AWARDS, AND PURCHASES. Subject to
------------------------------------------------------
paragraph 2(D) (relating to compliance with Section 162(m) of the Code), the
exercise price per share specified in the agreement relating to each Non-
Qualified Option granted and the purchase price per share of stock granted in
any Award or authorized as a Purchase under the Plan shall in no event be
less than the minimum legal consideration required therefor under the laws of
any jurisdiction in which the Company or its successors in interest may be
organized.
B. PRICE FOR ISOS. The exercise price per share specified in the
--------------
agreement relating to each ISO granted under the Plan shall not be less than
the fair market value per share of Common Stock on the date of such grant.
In the case of an ISO to be granted to an employee owning stock possessing
more than ten percent (10%) of the total combined voting power of all classes
of stock of the Company or any Related Corporation, the price per share
specified in the agreement relating to such ISO shall not be less than one
hundred ten percent (110%) of the fair market value per share of Common Stock
on the date of grant. For purposes of determining stock ownership under this
paragraph, the rules of Section 424(d) of the Code shall apply.
<PAGE>
C. $100,000 ANNUAL LIMITATION ON ISO VESTING. Each eligible employee may
-----------------------------------------
be granted options treated as ISOs only to the extent that, in the aggregate
under this Plan and all incentive stock option plans of the Company and any
Related Corporation, such ISOs do not become exercisable for the first time
by such employee during any calendar year in a manner which would entitle the
employee to purchase more than $100,000 in fair market value (determined at
the time the ISOs were granted) of Common Stock in that year. Any options
granted to an employee in excess of such amount will be granted as Non-
Qualified Options, and the Company shall issue separate certificates to the
optionee with respect to options that are Non-Qualified Options and Options
that are ISOs.
D. DETERMINATION OF FAIR MARKET VALUE. If, at the time an Option is
----------------------------------
granted under the Plan, the Company's Common Stock is publicly traded, "fair
market value" shall be determined as of the date of grant or, if the prices
or quotes discussed in this sentence are unavailable for such date, the last
business day for which such prices or quotes are available prior to the date
such Option is granted and shall mean (i) the average (on that date) of the
high and low prices of the Common Stock on the principal national securities
exchange on which the Common Stock is traded, if the Common Stock is then
traded on a national securities exchange; or (ii) the last reported sale
price (on that date) of the Common Stock on the Nasdaq National Market, if
the Common Stock is not then traded on a national securities exchange; or
(iii) the average of the closing bid and asked prices last quoted (on that
date) by an established quotation service for over-the-counter securities, if
the Common Stock is not reported on the Nasdaq National Market. However, if
the Common Stock is not publicly traded at the time an Option is granted
under the Plan, "fair market value" shall be deemed to be the fair value of
the Common Stock as determined by the Committee after taking into
consideration all factors which it deems appropriate, including, without
limitation, recent sale and offer prices of the Common Stock in private
transactions negotiated at arm's length.
7. OPTION DURATION. Subject to earlier termination as provided in
---------------
paragraphs 9 and 10 or in the agreement relating to such Option, each Option
shall expire on the date specified by the Committee, but not more than (i) ten
years and one day from the date of grant in the case of Non-Qualified Options,
(ii) ten years from the date of grant in the case of ISOs generally, and (iii)
five years from the date of grant in the case of ISOs granted to an employee
owning stock possessing more than ten percent (10%) of the total combined voting
power of all classes of stock of the Company or any Related Corporation, as
determined under paragraph 6(B). Subject to earlier termination as provided in
paragraphs 9 and 10, the term of each ISO shall be the term set forth in the
original instrument granting such ISO, except with respect to any part of such
ISO that is converted into a Non-Qualified Option pursuant to paragraph 16.
8. EXERCISE OF OPTION. Subject to the provisions of paragraphs 9 through
------------------
12, 21 and 22 each Option granted under the Plan shall be exercisable as
follows:
A. FULL VESTING OR PARTIAL VESTING. The Option shall either be fully
-------------------------------
exercisable on the date of grant or shall become exercisable thereafter in
such installments as the Committee may specify.
B. FULL VESTING OF INSTALLMENTS. Once an installment becomes exercisable
----------------------------
it shall remain exercisable until expiration or termination of the Option,
unless otherwise specified by the Committee or as otherwise provided in this
Plan.
<PAGE>
C. PARTIAL EXERCISE. Each Option or installment may be exercised at any
----------------
time or from time to time, in whole or in part, for up to the total number of
shares with respect to which it is then exercisable.
D. ACCELERATION OF VESTING. Subject to any accounting considerations with
-----------------------
respect to "Accounting for Business Combinations" pursuant to Accounting
Principles Board Opinion No. 16, The Committee shall have the right to
accelerate the date of exercise of any installment of any Option; provided
that the Committee shall not accelerate the exercise date of any installment
of any Option granted to any employee as an ISO (and not previously converted
into a Non-Qualified Option pursuant to paragraph 16) if such acceleration
would violate the annual vesting limitation contained in Section 422(d) of
the Code, as described in paragraph 6(C).
9. TERMINATION OF EMPLOYMENT. Unless otherwise specified in the
-------------------------
Agreement relating to such ISO, if an ISO Optionee ceases to be employed by the
Company and all Related Corporations other than by reason of death or disability
as defined in paragraph 10, no further installments of his ISOs shall become
exercisable, and his ISOs shall terminate after the passage of ninety (90) days
from the date of termination of his employment, but in no event later than on
their specified expiration dates, except to the extent that such ISOs (or
unexercised installments thereof) have been converted into Non-Qualified Options
pursuant to paragraph 16. Employment shall be considered as continuing
uninterrupted during any bona fide leave of absence (such as those attributable
to illness, military obligations or governmental service) provided that the
period of such leave does not exceed ninety (90) days or, if longer, any period
during which such Optionee's right to reemployment is guaranteed by statute or
by contract. A bona fide leave of absence with the written approval of the
Committee shall not be considered an interruption of employment under the Plan,
provided that such written approval contractually obligates the Company or any
Related Corporation to continue the employment of the Optionee after the
approved period of absence. ISOs granted under the Plan shall not be affected
by any change of employment within or among the Company and Related
Corporations, so long as the Optionee continues to be an employee of the Company
or any Related Corporation. Nothing in the Plan shall be deemed to give any
grantee of any Stock Right the right to be retained in employment or other
service by the Company or any Related Corporation for any period of time.
10. DEATH; DISABILITY.
-----------------
A. DEATH. If an ISO Optionee ceases to be employed by the Company and all
-----
Related Corporations by reason of his or her death, any ISO owned by such
Optionee may be exercised, to the extent of the number of shares with respect
to which he or she could have exercised it on the date of his or her death,
by the estate, personal representative or beneficiary who has acquired the
ISO by will or by the laws of descent and distribution, at any time prior to
the earlier of (i) the specified expiration date of the ISO or (ii) 180 days
from the date of the Optionee's death.
B. DISABILITY. If an ISO Optionee ceases to be employed by the Company
----------
and all Related Corporations by reason of his or her disability, such
Optionee shall have the right to exercise any ISO held by him or her on the
date of termination of employment, to the extent of the number of shares with
respect to which he or she could have exercised it on that date, until the
earlier of (i) the specified expiration date of the ISO or (ii) 180 days from
the date of the termination of the Optionee's employment. For the purposes
of the Plan, the term "disability" shall mean "permanent and total
disability" as defined in Section 22(e)(3) of the Code or successor statute.
<PAGE>
11. ASSIGNABILITY. No Option shall be assignable or transferable by the
-------------
Optionee except by will or by the laws of descent and distribution or in case of
Non-Qualified Options only, pursuant to a valid domestic relations order, and
during the lifetime of the Optionee each Option shall be exercisable only by him
or her.
12. TERMS AND CONDITIONS OF OPTIONS. Options shall be evidenced by
-------------------------------
instruments (which need not be identical) in such forms as the Committee may
from time to time approve. Such instruments shall conform to the terms and
conditions set forth in paragraphs 6 through 11 hereof and may contain such
other provisions as the Committee deems advisable which are not inconsistent
with the Plan, including restrictions applicable to shares of Common Stock
issuable upon exercise of Options. In granting any Non-Qualified Option, the
Committee may specify that such Non-Qualified Option shall be subject to the
restrictions set forth herein with respect to ISOs, or to such other termination
and cancellation provisions as the Committee may determine. The Committee may
from time to time confer authority and responsibility on one or more of its own
members and/or one or more officers of the Company to execute and deliver such
instruments. The proper officers of the Company are authorized and directed to
take any and all action necessary or advisable from time to time to carry out
the terms of such instruments.
13. ADJUSTMENTS. Upon the occurrence of any of the following events, an
-----------
Optionee's rights with respect to Options granted to him hereunder shall be
adjusted as hereinafter provided, unless otherwise specifically provided in the
written agreement between the Optionee and the Company relating to such Option:
A. STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall
--------------------------------
be subdivided or combined into a greater or smaller number of shares or if
the Company shall issue any shares of Common Stock as a stock dividend on its
outstanding Common Stock, the number of shares of Common Stock deliverable
upon the exercise of Options shall be appropriately increased or decreased
proportionately, and appropriate adjustments shall be made in the purchase
price per share to reflect such subdivision, combination or stock dividend.
B. CONSOLIDATIONS OR MERGERS. If the Company is to be consolidated with
-------------------------
or acquired by another entity in a merger or other reorganization in which
the holders of the outstanding voting stock of the Company immediately
preceding the consummation of such event, shall, immediately following such
event, hold as a group, less than a majority of the voting securities of the
surviving or successor entity, or in the event of a sale of all or
substantially all of the Company's assets or otherwise (an "Acquisition"),
the Committee or the board of directors of any entity assuming the
obligations of the Company hereunder (the "Successor Board"), shall, as to
outstanding Options, take one or more of the following actions: (i) make
appropriate provision for the continuation of such Options by substituting on
an equitable basis for the shares then subject to such Options the
consideration payable with respect to the outstanding shares of Common Stock
in connection with the Acquisition; or (ii) make appropriate provision for
the continuation of such Options by substituting on an equitable basis for
the shares then subject to such Options any equity securities of the
successor corporation or such other securities as the Successor Board deems
appropriate, the fair market value of which shall not materially exceed the
fair market value of the shares of Common Stock subject to such Options
immediately preceding the Acquisition; or (iii) upon written notice to the
Optionees, provide that all Options must be exercised, to the extent then
exercisable, within a specified number of days of the date of such notice, at
the end of which period the Options shall terminate; or (iv) terminate all
Options in exchange for a cash payment equal to the excess of the fair market
value of the shares subject to such Options (to the extent then
<PAGE>
exercisable) over the exercise price thereof; or (v) accelerate the date of
exercise of such Options or of any installment of any such Options; or (vi)
terminate all Options in exchange for the right to participate in any stock
option or other employee benefit plan of any successor corporation. The
foregoing actions are subject in all instances to the approval of the Board
of Directors and any accounting considerations for any acquisition which is
treated as a "pooling of interests" transaction pursuant to the Accounting
Principles Board (APB) Opinion No. 16, if any discretionary action by the
Board of Directors would otherwise violate the accounting rules for treatment
of the Acquisition as a "pooling of interests" under APB No. 16.
C. RECAPITALIZATION OR REORGANIZATION. In the event of a recapitalization
----------------------------------
or reorganization of the Company (other than a transaction described in
subparagraph B above) pursuant to which securities of the Company or of
another corporation are issued with respect to the outstanding shares of
Common Stock, an Optionee upon exercising an Option shall be entitled to
receive for the purchase price paid upon such exercise the securities he or
she would have received if he or she had exercised his or her Option prior to
such recapitalization or reorganization.
D. MODIFICATION OF ISOS. Notwithstanding the foregoing, any adjustments
--------------------
made pursuant to subparagraphs A, B or C with respect to ISOs shall be made
only after the Committee, after consulting with counsel for the Company,
determines whether such adjustments would constitute a "modification" of such
ISOs (as that term is defined in Section 424 of the Code) or would cause any
adverse tax consequences for the holders of such ISOs. If the Committee
determines that such adjustments made with respect to ISOs would constitute a
modification of such ISOs, or would cause adverse tax consequences to the
holders, it may refrain from making such adjustments.
E. DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution
--------------------------
or liquidation of the Company, each Option will terminate immediately prior
to the consummation of such proposed action or at such other time and subject
to such other conditions as shall be determined by the Committee.
F. ISSUANCES OF SECURITIES. 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 subject to Options. No adjustments shall be made for
dividends paid in cash or in property other than securities of the Company.
G. FRACTIONAL SHARES. No fractional shares shall be issued under the Plan
-----------------
and the Optionee shall receive from the Company cash in lieu of such
fractional shares.
H. ADJUSTMENTS. Upon the happening of any of the foregoing events
-----------
described in subparagraphs A, B or C above, the class and aggregate number of
shares set forth in paragraph 4 hereof that are subject to Stock Rights which
previously have been or subsequently may be granted under the Plan shall also
be appropriately adjusted to reflect the events described in such
subparagraphs. The Committee or the Successor Board shall determine the
specific adjustments to be made under this paragraph 13 and, subject to
paragraph 2, its determination shall be conclusive.
If any person or entity owning restricted Common Stock obtained by exercise of a
Stock Right made hereunder receives shares or securities or cash in connection
with a corporate transaction described in subparagraphs A, B or C above as a
result of owning such restricted
<PAGE>
Common Stock, such shares or securities or cash shall be subject to all of the
conditions and restrictions applicable to the restricted Common Stock with
respect to which such shares or securities or cash were issued, unless otherwise
determined by the Committee or the Successor Board.
14. MEANS OF EXERCISING STOCK RIGHTS. A Stock Right (or any part or
--------------------------------
installment thereof) shall be exercised by giving written notice to the Company
at its principal office address. Such notice shall identify the Stock Right
being exercised and specify the number of shares as to which such Stock Right is
being exercised, accompanied by full payment of the purchase price therefor
either (a) in United States dollars in cash or by check, or (b) at the
discretion of the Committee, through delivery of shares of Common Stock having a
fair market value equal as of the date of the exercise to the cash exercise
price of the Stock Right, or (c) at the discretion of the Committee, by delivery
of the grantee's personal recourse note bearing interest payable not less than
annually at no less than 100% of the lowest applicable Federal rate, as defined
in Section 1274(d) of the Code, or (d) at the discretion of the Committee and
consistent with applicable law, through the delivery of an assignment to the
Company of a sufficient amount of the proceeds from the sale of the Common Stock
acquired upon exercise of the Option and an authorization to the broker or
selling agent to pay that amount to the Company, which sale shall be at the
participant's direction at the time of exercise, or (e) at the discretion of the
Committee, by any combination of (a), (b), (c) and (d) above. If the Committee
exercises its discretion to permit payment of the exercise price of an ISO by
means of the methods set forth in clauses (b), (c), (d) or (e) of the preceding
sentence, such discretion shall be exercised in writing at the time of the grant
of the ISO in question. The holder of a Stock Right shall not have the rights
of a shareholder with respect to the shares covered by his Stock Right until the
date of issuance of a stock certificate to him for such shares. Except as
expressly provided above in paragraph 13 with respect to changes in
capitalization and stock dividends, no adjustment shall be made for dividends or
similar rights for which the record date is before the date such stock
certificate is issued.
15. TERM AND AMENDMENT OF PLAN. This Plan was adopted by the Board as of
--------------------------
September 16, 1997, subject (with respect to the validation of ISOs granted
under the Plan) to approval of the Plan by the stockholders of the Company at
the next Meeting of Stockholders or, in lieu thereof, by unanimous written
consent. If the approval of stockholders is not obtained by September 16, 1998,
any grants of Options under the Plan made prior to that date will be rescinded.
The Plan shall expire at the end of the day on September 15, 2007 (except as to
Options outstanding on that date). Subject to the provisions of paragraph 5
above, Stock Rights may be granted under the Plan prior to the date of
stockholder approval of the Plan. The Board may terminate or amend the Plan in
any respect at any time, except that, without the approval of the stockholders
obtained within 12 months before or after the Board adopts a resolution
authorizing any of the following actions: (a) the total number of shares that
may be issued under the Plan may not be increased (except by adjustment pursuant
to paragraph 13); (b) the benefits accruing to participants under the Plan may
not be materially increased; (c) the requirements as to eligibility for
participation in the Plan may not be materially modified; (d) the provisions of
paragraph 3 regarding eligibility for grants of ISOs may not be modified; (e)
the provisions of paragraph 6(B) regarding the exercise price at which shares
may be offered pursuant to ISOs may not be modified (except by adjustment
pursuant to paragraph 13); (f) the expiration date of the Plan may not be
extended; and (g) the Board may not take any action which would cause the Plan
to fail to comply with Rule 16b-3. Except as otherwise provided in this
paragraph 15, in no event may action of the Board or stockholders alter or
impair the rights of a grantee, without his consent, under any Stock Right
previously granted to him.
16. CONVERSION OF ISOS INTO NON-QUALIFIED OPTIONS; TERMINATION OF ISOS.
------------------------------------------------------------------
Subject to paragraph 13(D), without the prior written consent of the holder of
an ISO, the Committee shall not alter the terms of such ISO (including the means
of exercising such ISO) if such alteration would constitute a
<PAGE>
modification (within the meaning of Section 424(h)(3) of the Code). The
Committee, at the written request or with the written consent of any Optionee,
may in its discretion take such actions as may be necessary to convert such
Optionee's ISOs (or any installments or portions of installments thereof) that
have not been exercised on the date of conversion into Non-Qualified Options at
any time prior to the expiration of such ISOs, regardless of whether the
Optionee is an employee of the Company or a Related Corporation at the time of
such conversion. Such actions may include, but shall not be limited to,
extending the exercise period or reducing the exercise price of the appropriate
installments of such ISOs. At the time of such conversion, the Committee (with
the consent of the Optionee) may impose such conditions on the exercise of the
resulting Non-Qualified Options as the Committee in its discretion may
determine, provided that such conditions shall not be inconsistent with this
Plan. Nothing in the Plan shall be deemed to give any Optionee the right to have
such Optionee's ISOs converted into Non-Qualified Options, and no such
conversion shall occur until and unless the Committee takes appropriate action.
Upon the taking of such action, the Company shall issue separate certificates to
the Optionee with respect to Options that are Non-Qualified Options and Options
that are ISOs.
17. APPLICATION OF FUNDS. The proceeds received by the Company from the
--------------------
sale of shares pursuant to Options granted and Purchases authorized under the
Plan shall be used for general corporate purposes.
18. GOVERNMENTAL REGULATION. The Company's obligation to sell and deliver
-----------------------
shares of the Common Stock under this Plan is subject to the approval of any
governmental authority required in connection with the authorization, issuance
or sale of such shares.
19. WITHHOLDING OF ADDITIONAL INCOME TAXES. Upon the exercise of a Non-
--------------------------------------
Qualified Option, the grant of an Award, the making of a Purchase of Common
Stock for less than its fair market value, the making of a Disqualifying
Disposition (as defined in paragraph 20), the making of a distribution or other
payment with respect to such stock or securities, or the vesting or transfer of
restricted Common Stock acquired on the exercise of a Stock Right hereunder, the
Company may withhold income and/or employment taxes in respect of amounts that
constitute compensation includible in gross income, or otherwise treated by law
as wages for withholding for income or employment tax purposes. The Committee
in its discretion may condition (i) the exercise of an Option, (ii) the grant of
an Award, (iii) the making of a Purchase of Common Stock for less than its fair
market value, or (iv) the vesting or transferability of restricted Common Stock
acquired by exercising a Stock Right, on the grantee's making satisfactory
arrangement for such withholding. Such arrangement may include payment by the
grantee in cash or by check of the amount of the withholding taxes or, at the
discretion of the Company, by the grantee's delivery of previously held shares
of Common Stock or the withholding from the shares of Common Stock otherwise
deliverable upon exercise of Option shares having an aggregate fair market value
equal to the amount of such withholding taxes. The use of any method of payment
other than by cash or check in some cases may require or cause additional
withholding obligations.
20. NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION. By accepting an ISO
----------------------------------------------
granted under the Plan, each ISO Optionee thereby agrees to notify the Company
in writing immediately after such Optionee makes a Disqualifying Disposition of
any Common Stock acquired pursuant to the exercise of an ISO. Generally, a
Disqualifying Disposition is any disposition (including any sale) of such Common
Stock occurring on or before the later of the date (a) two years after the date
the employee was granted the ISO, or (b) one year after the date the employee
acquired Common Stock by exercising the ISO.
<PAGE>
21. NO EXERCISE OF OPTION IF ENGAGEMENT OR EMPLOYMENT TERMINATED FOR
----------------------------------------------------------------
CAUSE. If the employment of the Optionee is terminated for "Cause," this option
shall terminate on the date of such termination and the Option shall thereupon
not be exercisable to any extent whatsoever. "Cause" is conduct, as determined
by the Board of Directors, involving one or more of the following: (i) gross
misconduct by the employee which is materially injurious to the Company; or (ii)
the commission of an act of embezzlement, fraud or deliberate disregard of the
rules or policies of the Company which results in material economic loss, damage
or injury to the Company; or (iii) the unauthorized disclosure of any trade
secret or confidential information of the Company or any third party who has a
business relationship with the Company or the violation of any noncompetition
covenant or assignment of inventions obligation with the Company; or (iv) the
commission of an act which induces any customer or prospective customer of the
Company to break a contract with the Company or to decline to do business with
the Company; or (v) the conviction of the employee of a felony involving any
financial impropriety or which would materially interfere with the employee's
ability to perform his or her services or otherwise be injurious to the Company;
or (vi) the failure of the employee to perform in a material respect his or her
employment obligations without proper cause. In making such determination, the
Board shall act fairly and in utmost good faith. For the purposes of this
Section 21, termination of employment shall be deemed to occur when the employee
receives notice that his employment is terminated.
22. ACCELERATION AND VESTING OF OPTION FOR BUSINESS COMBINATIONS. Upon
------------------------------------------------------------
any merger, consolidation, sale of all (or substantially all) of the assets of
the Company, or other business combination involving the sale or transfer of all
(or substantially all) of the capital stock or assets of the Company in which
the Company is not the surviving entity, or, if it is the surviving entity, does
not survive as an operating going concern in substantially the same line of
business (an "Acquisition"), then the remaining unvested portions of any Option
outstanding to any Optionee shall, immediately prior to the consummation of any
of the foregoing events, become vested and immediately exercisable by the
Optionee according to the following formula and dependent upon the length of the
Optionee's continuous months of employment or engagement by the Company prior to
the consummation of the Acquisition, provided, however, that this Section shall
-----------------
not apply to any reincorporation of the Company in a different State pursuant to
a migratory merger:
For an Optionee:
(i) If the Optionee has been employed by the Company for 36 months or
more, then the remaining unvested portion of any Option held by such Optionee
shall become fully vested and exercisable.
(ii) If the Optionee has been employed by the Company for more than 30 but
less than 36 months, then 80% of the remaining unvested portion of any Option
held by such Optionee shall become fully vested and exercisable.
(iii) If the Optionee has been employed by the Company for more than 24
but less than 30 months, then 50% of the remaining unvested portion of any
Option held by such Optionee shall become fully vested and exercisable.
(iv) If the Optionee has been employed by the Company for more than 18 but
less than 24 months, then 40% of the remaining unvested portion of any Option
held by such Optionee shall become fully vested and exercisable.
<PAGE>
(v) If the Optionee has been employed by the Company for more than 12 but
less than 18 months, then 30% of the remaining unvested portion of any Option
held by such Optionee shall become fully vested and exercisable.
(vi) If the Optionee has been employed by the Company for more than 6 but
less than 12 months, then 20% of the remaining unvested portion of any Option
held by such Optionee shall become fully vested and exercisable.
(vii) If the Optionee has been employed by the Company for more than 1 but
less than 6 months, then 10% of the remaining unvested portion of any Option
held by such Optionee shall become fully vested and exercisable.
23. GOVERNING LAW; CONSTRUCTION. The validity and construction of the
---------------------------
Plan and the instruments evidencing Stock Rights shall be governed by the laws
of the Commonwealth of Massachusetts or the laws of any jurisdiction in which
the Company or its successors in interest may be organized. In construing this
Plan, the singular shall include the plural and the masculine gender shall
include the feminine and neuter, unless the context otherwise requires.
<PAGE>
Exhibit 4.8
EXCEL SWITCHING CORPORATION
---------------------------
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
Excel Switching Corporation, a Massachusetts corporation (the "Company"),
hereby grants as of [DATE] to [NAME OF OPTIONEE] (the "Optionee"), an option to
purchase a maximum of [NUMBER] shares (the "Option Shares") of its Common Stock,
$.01 par value ("Common Stock"), at the price of $[PRICE] per share, on the
following terms and conditions:
1. GRANT UNDER 1997 STOCK OPTION PLAN. This option is granted
----------------------------------
pursuant to and is governed by the Company's 1997 Stock Option Plan (the "Plan")
and, unless the context otherwise requires, terms used herein shall have the
same meaning as in the Plan. Determinations made in connection with this option
pursuant to the Plan shall be governed by the Plan as it exists on this date.
2. GRANT AS NON-QUALIFIED OPTION; OTHER OPTIONS. This option
--------------------------------------------
shall be treated for federal income tax purposes as a Non-Qualified Option
(rather than an incentive stock option). This option is in addition to any other
options heretofore or hereafter granted to the Optionee by the Company or any
Related Corporation (as defined in the Plan), but a duplicate original of this
instrument shall not effect the grant of another option.
3. VESTING OF OPTION IF BUSINESS RELATIONSHIP CONTINUES. If
----------------------------------------------------
the Optionee has continued to serve the Company or any Related Corporation in
the capacity of an employee, officer, director or consultant (such service is
described herein as maintaining or being involved in a "Business Relationship
with the Company") on the following dates, the Optionee may exercise this option
for the number of shares of Common Stock set opposite the applicable date:
Less than one year from the date hereof - 0 shares
One year but less than two years from the - 20% of the Option Shares
date hereof
Two years but less than three years from - an additional 20% of the
the date hereof Option Shares
Three years but less than four years from - an additional 20% of the
the date hereof Option Shares
Four years but less than five years from - an additional 20% of the
the date hereof Option Shares
Five years or more from the date hereof - an additional 20% of the
Option Shares
Notwithstanding the foregoing, in accordance with and subject to the provisions
of the Plan, the Committee may, in its discretion, accelerate the date that any
installment of this Option becomes exercisable. The foregoing rights are
cumulative and (subject to Sections 4 or 5 hereof if the Employee ceases to be
employed by the Company and all Related Corporations) may be exercised up to and
including the date which is ten years from the date this option is granted.
<PAGE>
4. TERMINATION OF BUSINESS RELATIONSHIP.
------------------------------------
(A) TERMINATION OTHER THAN FOR CAUSE. If the Optionee's Business
----------------- ---- --- -----
Relationship with the Company and all Related Corporations is terminated, other
than by reason of death or disability as defined in Section 5 or termination for
Cause as defined in Section 4(c), no further installments of this option shall
become exercisable, and this option shall terminate (and may no longer be
exercised) after the passage of 60 days from the date the Business Relationship
ceases, but in no event later than the scheduled expiration date. In such a
case, the Optionee's only rights hereunder shall be those which are properly
exercised before the termination of this option.
(B) TERMINATION FOR CAUSE. If the Optionee's Business Relationship
---------------------
with the Company is terminated for Cause (as defined in Section 4(c)), this
option shall terminate upon the Optionee's receipt of written notice of such
termination and shall thereafter not be exercisable to any extent whatsoever.
(C) DEFINITION OF CAUSE. "Cause" shall mean conduct involving one or
-------------------
more of the following: (i) gross misconduct by the employee which is materially
injurious to the Company; or (ii) the commission of an act of embezzlement,
fraud or deliberate disregard of the rules or policies of the Company which
results in material economic loss, damage or injury to the Company; or (iii) the
unauthorized disclosure of any trade secret or confidential information of the
Company or any third party who has a business relationship with the Company or
the violation of any noncompetition covenant or assignment of inventions
obligation with the Company; or (iv) the commission of an act which induces any
customer or prospective customer of the Company to break a contract with the
Company or to decline to do business with the Company; or (v) the conviction of
the employee of a felony involving any financial impropriety or which would
materially interfere with the employee's ability to perform his or her services
or otherwise be injurious to the Company; or (vi) the failure of the employee to
perform in a material respect his or her employment obligations without proper
cause. In making such determination, the Board shall act fairly and in utmost
good faith.
5. DEATH; DISABILITY; DISSOLUTION.
------------------------------
(A) DEATH. If the Optionee is a natural person who dies while
-----
involved in a Business Relationship with the Company, this option may be
exercised, to the extent otherwise exercisable on the date of his or her death,
by the Optionee's estate, personal representative or beneficiary to whom this
option has been assigned pursuant to Section 9, at any time within 60 days after
the date of death, but not later than the scheduled expiration date.
(B) DISABILITY. If the Optionee is a natural person whose Business
----------
Relationship with the Company is terminated by reason of his or her disability
(as defined in the Plan), this option may be exercised, to the extent otherwise
exercisable on the date the Business Relationship was terminated, at any time
within 60 days after such termination, but not later than the scheduled
expiration date.
(C) EFFECT OF TERMINATION. At the expiration of such 60-day period
---------------------
provided in paragraphs (a) or (b) of this Section 5 or the scheduled expiration
date, whichever is the earlier, this option shall terminate (and shall no longer
be exercisable) and the only rights hereunder shall be those as to which the
option was properly exercised before such termination.
(D) DISSOLUTION. If the Optionee is a corporation, partnership, trust
-----------
or other entity that is dissolved, is liquidated, becomes insolvent or enters
into a merger or acquisition with respect to
<PAGE>
which the Optionee is not the surviving entity, at a time when the Optionee is
involved in a Business Relationship with the Company, this option shall
immediately terminate as of the date of such event (and shall thereafter not be
exercisable to any extent whatsoever), and the only rights hereunder shall be
those as to which this option was properly exercised before such dissolution or
other event.
6. PARTIAL EXERCISE. This option may be exercised in part at any time
----------------
and from time to time within the above limits, except that this option may not
be exercised for a fraction of a share unless such exercise is with respect to
the final installment of stock subject to this option and cash in lieu of a
fractional share must be paid, in accordance with Paragraph 13(G) of the Plan,
to permit the Optionee to exercise completely such final installment. Any
fractional share with respect to which an installment of this option cannot be
exercised because of the limitation contained in the preceding sentence shall
remain subject to this option and shall be available for later purchase by the
Optionee in accordance with the terms hereof.
7. PAYMENT OF PRICE.
----------------
(A) FORM OF PAYMENT. The option price shall be paid in the
---------------
following manner:
(i) in cash or by check;
(ii) subject to Section 7(b) below, by delivery of shares of the
Company's Common Stock having a fair market value (as determined by the
Committee) equal as of the date of exercise to the option price;
(iii) by delivery of an assignment satisfactory in form and substance to
the Company of a sufficient amount of the proceeds from the sale of the
Option Shares and an instruction to the broker or selling agent to pay that
amount to the Company; or
(iv) by any combination of the foregoing.
(B) LIMITATIONS ON PAYMENT BY DELIVERY OF COMMON STOCK. If the
--------------------------------------------------
Optionee delivers Common Stock held by the Optionee ("Old Stock") to the Company
in full or partial payment of the option price, and the Old Stock so delivered
is subject to restrictions or limitations imposed by agreement between the
Optionee and the Company, an equivalent number of Option Shares shall be subject
to all restrictions and limitations applicable to the Old Stock to the extent
that the Optionee paid for the Option Shares by delivery of Old Stock, in
addition to any restrictions or limitations imposed by this Agreement.
Notwithstanding the foregoing, the Optionee may not pay any part of the exercise
price hereof by transferring Common Stock to the Company unless such Common
Stock has been owned by the Optionee free of any substantial risk of forfeiture
for at least six months.
8. METHOD OF EXERCISING OPTION. Subject to the terms and conditions
---------------------------
of this Agreement, this option may be exercised by written notice to the
Company, at the principal executive office of the Company, or to such transfer
agent as the Company shall designate. Such notice shall state the election to
exercise this option and the number of Option Shares for which it is being
exercised and shall be signed by the person or persons so exercising this
option. Such notice shall be accompanied by payment of the full purchase price
of such shares, and the Company shall deliver a certificate or certificates
representing such shares as soon as practicable after the notice shall be
received. Such certificate or certificates shall be registered in the name of
the person or persons so exercising this option (or, if this option shall be
exercised by the Optionee and if the Optionee shall so request in the notice
exercising this option, shall be registered in the name of the Optionee and
another person jointly, with right of survivorship). In the event this option
shall be exercised, pursuant to Section 5 hereof, by any person or persons other
than the Optionee, such notice shall be accompanied by appropriate proof of the
right of such person or persons to exercise this option.
<PAGE>
9. OPTION NOT TRANSFERABLE. This option is not transferable or
-----------------------
assignable except by will or by the laws of descent and distribution or pursuant
to a valid domestic relations order. Except as set forth in the preceding
sentence, during the Optionee's lifetime, only the Optionee can exercise this
option.
10. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of this
--------------------------------
option imposes no obligation on the Optionee to exercise it.
11. NO OBLIGATION TO CONTINUE BUSINESS RELATIONSHIP. Neither the Plan,
-----------------------------------------------
this Agreement, nor the grant of this option imposes any obligation on the
Company or any Related Corporation to continue to maintain a Business
Relationship with the Optionee.
12. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. The Optionee shall have
---------------------------------------
no rights as a stockholder with respect to the Option Shares until such time as
the Optionee has exercised this option by delivering a notice of exercise and
has paid in full the purchase price for the number of shares for which this
option is to be so exercised in accordance with Section 8. Except as is
expressly provided in the Plan with respect to certain changes in the
capitalization of the Company, no adjustment shall be made for dividends or
similar rights for which the record date is prior to such date of exercise.
13. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. The Plan contains
----------------------------------------
provisions covering the treatment of options in a number of contingencies such
as stock splits and mergers. Provisions in the Plan for adjustment with respect
to stock subject to options and the related provisions with respect to
successors to the business of the Company are hereby made applicable hereunder
and are incorporated herein by reference.
14. WITHHOLDING TAXES. If the Company or any Related Corporation in its
-----------------
discretion determines that it is obligated to withhold any tax in connection
with the exercise of this option, or in connection with the transfer of, or the
lapse of restrictions on, any Common Stock or other property acquired pursuant
to this option, the Optionee hereby agrees that the Company or any Related
Corporation may withhold from the Optionee's wages or other remuneration the
appropriate amount of tax. At the discretion of the Company or Related
Corporation, the amount required to be withheld may be withheld in cash from
such wages or other remuneration or in kind from the Common Stock or other
property otherwise deliverable to the Optionee on exercise of this option. The
Optionee further agrees that, if the Company or Related Corporation does not
withhold an amount from the Optionee's wages or other remuneration sufficient to
satisfy the withholding obligation of the Company or Related Corporation, the
Optionee will make reimbursement on demand, in cash, for the amount
underwithheld.
15. PROVISION OF DOCUMENTATION TO EMPLOYEE. By signing this
--------------------------------------
Agreement the Optionee acknowledges receipt of a copy of this Agreement and a
copy of the Plan.
16. MISCELLANEOUS.
-------------
(A) ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the
------------------------------
entire agreement between the parties relative to the subject matter hereof, and
supersedes all proposals, written or oral, and all other communications between
the parties relating to the subject matter of this Agreement. This Agreement
may be modified, amended or rescinded only by a written agreement executed by
both parties.
<PAGE>
(B) SEVERABILITY. The invalidity, illegality or unenforceability of
------------
any provision of this Agreement shall in no way affect the validity, legality or
enforceability of any other provision.
(C) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors and
assigns, subject to the limitations set forth in Section 9 hereof.
(D) GOVERNING LAW. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to the principles of the conflicts of laws thereof. The
preceding choice of law provision shall apply to all claims, under any theory
whatsoever, arising out of the relationship of the parties contemplated herein.
17. ACCELERATION OF VESTING OF OPTION FOR BUSINESS COMBINATIONS.
-----------------------------------------------------------
Subject to and in accordance with Section 22 of the Plan, upon the merger,
consolidation, sale of all or substantially all of the Company's stock or assets
or other business combination involving the Company as otherwise set forth in
Section 22 of the Plan (an "Acquisition"), this option shall, immediately prior
to the consummation of such Acquisition, become vested and exercisable by the
Optionee as set forth in Section 22 of the Plan.
IN WITNESS WHEREOF, the Company and the Optionee have caused this
instrument to be executed as of the date first above written.
EXCEL SWITCHING CORPORATION
255 INDEPENDENCE DRIVE
______________________________________ HYANNIS, MA 02601
OPTIONEE
______________________________________ BY:___________________________________
PRINT NAME OF OPTIONEE ROBERT P. MADONNA
______________________________________ ______________________________________
STREET ADDRESS TITLE
______________________________________
CITY STATE ZIP CODE
<PAGE>
Exhibit 4.9
EXCEL SWITCHING CORPORATION
INCENTIVE STOCK OPTION AGREEMENT
--------------------------------
Excel Switching Corporation, a Massachusetts corporation (the
"Company"), hereby grants as of [DATE] to [NAME OF EMPLOYEE] (the "Employee"),
an option to purchase a maximum of [NUMBER] shares (the "Option Shares") of its
Common Stock, $.01 par value ("Common Stock"), at the price of $[PRICE] per
share, on the following terms and conditions:
1. GRANT UNDER 1997 STOCK OPTION PLAN. This option is granted
----------------------------------
pursuant to and is governed by the Company's 1997 Stock Option Plan (the "Plan")
and, unless the context otherwise requires, terms used herein shall have the
same meaning as in the Plan. Determinations made in connection with this option
pursuant to the Plan shall be governed by the Plan as it exists on this date.
2. GRANT AS INCENTIVE STOCK OPTION; OTHER OPTIONS. This option is
----------------------------------------------
intended to qualify as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"). This option is in
addition to any other options heretofore or hereafter granted to the Employee by
the Company or any Related Corporation (as defined in the Plan), but a duplicate
original of this instrument shall not effect the grant of another option.
3. VESTING OF OPTION IF EMPLOYMENT CONTINUES. If the Employee has
-----------------------------------------
continued to be employed by the Company or any Related Corporation on the
following dates, the Employee may exercise this option for the number of shares
of Common Stock set opposite the applicable date:
Less than one year from the date hereof - 0 shares
One year but less than two years from the - 20% of the Option Shares
date hereof
Two years but less than three years from - an additional 20% of the
the date hereof Option Shares
Three years but less than four years from - an additional 20% of the
the date hereof Option Shares
Four years or more from the date hereof - an additional 20% of the
Option Shares
Notwithstanding the foregoing, in accordance with and subject to the provisions
of the Plan, the Committee may, in its discretion, accelerate the date that any
installment of this Option becomes exercisable. The foregoing rights are
cumulative and (subject to Sections 4 or 5 hereof if the Employee ceases to be
employed by the Company and all Related Corporations) may be exercised on or
before the date which is ten years from the date this option is granted.
<PAGE>
4. TERMINATION OF EMPLOYMENT.
-------------------------
(A) TERMINATION OTHER THAN FOR CAUSE. If the Employee ceases to be
--------------------------------
employed by the Company and all Related Corporations, other than by reason
of death or disability as defined in Section 5 or termination for Cause as
defined in Section 4(c), no further installments of this option shall
become exercisable, and this option shall terminate (and may no longer be
exercised) after the passage of ninety days from the Employee's last day of
employment, but in no event later than the scheduled expiration date. In
such a case, the Employee's only rights hereunder shall be those which are
properly exercised before the termination of this option.
(B) TERMINATION FOR CAUSE. If the employment of the Employee is
---------------------
terminated for Cause (as defined in Section 4(c)), this option shall
terminate upon the Employee's receipt of written notice of such termination
and shall thereafter not be exercisable to any extent whatsoever.
(C) DEFINITION OF CAUSE. "Cause" shall mean conduct involving one or
-------------------
more of the following: (i) gross misconduct by the employee which is
materially injurious to the Company; or (ii) the commission of an act of
embezzlement, fraud or deliberate disregard of the rules or policies of the
Company which results in material economic loss, damage or injury to the
Company; or (iii) the unauthorized disclosure of any trade secret or
confidential information of the Company or any third party who has a
business relationship with the Company or the violation of any
noncompetition covenant or assignment of inventions obligation with the
Company; or (iv) the commission of an act which induces any customer or
prospective customer of the Company to break a contract with the Company or
to decline to do business with the Company; or (v) the conviction of the
employee of a felony involving any financial impropriety or which would
materially interfere with the employee's ability to perform his or her
services or otherwise be injurious to the Company; or (vi) the failure of
the employee to perform in a material respect his or her employment
obligations without proper cause. In making such determination, the Board
shall act fairly and in utmost good faith.
5. DEATH; DISABILITY.
-----------------
(A) DEATH. If the Employee dies while in the employ of the Company or
-----
any Related Corporation, this option may be exercised, to the extent
otherwise exercisable on the date of his or her death, by the Employee's
estate, personal representative or beneficiary to whom this option has been
assigned pursuant to Section 10, at any time within 180 days after the date
of death, but not later than the scheduled expiration date.
(B) DISABILITY. If the Employee ceases to be employed by the Company
----------
and all Related Corporations by reason of his or her disability (as defined
in the Plan), this option may be exercised, to the extent otherwise
exercisable on the date of the termination of his or her employment, at any
time within 180 days after such termination, but not later than the
scheduled expiration date.
(C) EFFECT OF TERMINATION. At the expiration of the 180-day period
---------------------
provided in paragraphs (a) or (b) of this Section 5 or the scheduled
expiration date, whichever is the earlier, this option shall terminate (and
shall no longer be exercisable) and the only rights hereunder shall be
those as to which the option was properly exercised before such
termination.
<PAGE>
6. PARTIAL EXERCISE. This option may be exercised in part at any
----------------
time and from time to time within the above limits, except that this option may
not be exercised for a fraction of a share unless such exercise is with respect
to the final installment of stock subject to this option and cash in lieu of a
fractional share must be paid, in accordance with Paragraph 13(G) of the Plan,
to permit the Employee to exercise completely such final installment. Any
fractional share with respect to which an installment of this option cannot be
exercised because of the limitation contained in the preceding sentence shall
remain subject to this option and shall be available for later purchase by the
Employee in accordance with the terms hereof.
7. PAYMENT OF PRICE. (a) The option price shall be paid in the
----------------
following manner:
(i) in cash or by check;
(ii) subject to Section 7(b) below, by delivery of shares of the
Company's Common Stock having a fair market value (as
determined by the Committee) equal as of the date of exercise
to the option price;
(iii) by delivery of an assignment satisfactory in form and substance
to the Company of a sufficient amount of the proceeds from the
sale of the Option Shares and an instruction to the broker or
selling agent to pay that amount to the Company; or
(iv) by any combination of the foregoing.
(B) LIMITATIONS ON PAYMENT BY DELIVERY OF COMMON STOCK. If the
--------------------------------------------------
Employee delivers Common Stock held by the Employee ("Old Stock") to the
Company in full or partial payment of the option price, and the Old Stock
so delivered is subject to restrictions or limitations imposed by agreement
between the Employee and the Company, an equivalent number of Option Shares
shall be subject to all restrictions and limitations applicable to the Old
Stock to the extent that the Employee paid for the Option Shares by
delivery of Old Stock, in addition to any restrictions or limitations
imposed by this Agreement. Notwithstanding the foregoing, the Employee may
not pay any part of the exercise price hereof by transferring Common Stock
to the Company unless such Common Stock has been owned by the Employee free
of any substantial risk of forfeiture for at least six months.
(C) PERMITTED PAYMENT BY RECOURSE NOTE. In addition, if this
----------------------------------
paragraph is initialed below by the person signing this Agreement on behalf
of the Company, the option price may be paid by delivery of the Employee's
personal recourse promissory note bearing interest payable not less than
annually at the applicable Federal rate, as defined in Section 1274(d) of
the Code.
__________
(initials)
8. METHOD OF EXERCISING OPTION. Subject to the terms and conditions
---------------------------
of this Agreement, this option may be exercised by written notice to the Company
at its principal executive office, or to such transfer agent as the Company
shall designate. Such notice shall state the election to exercise this option
and the number of Option Shares for which it is being exercised and shall be
signed by the person or persons so exercising this option. Such notice shall be
accompanied by payment of the full purchase price of such shares, and the
Company shall deliver a certificate or certificates representing such shares
<PAGE>
as soon as practicable after the notice shall be received. Such certificate or
certificates shall be registered in the name of the person or persons so
exercising this option (or, if this option shall be exercised by the Employee
and if the Employee shall so request in the notice exercising this option, shall
be registered in the name of the Employee and another person jointly, with right
of survivorship). In the event this option shall be exercised, pursuant to
Section 5 hereof, by any person or persons other than the Employee, such notice
shall be accompanied by appropriate proof of the right of such person or persons
to exercise this option.
9. OPTION NOT TRANSFERABLE. This option is not transferable or
-----------------------
assignable except by will or by the laws of descent and distribution. During
the Employee's lifetime only the Employee can exercise this option.
10. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of
--------------------------------
this option imposes no obligation on the Employee to exercise it.
11. NO OBLIGATION TO CONTINUE EMPLOYMENT. Neither the Plan, this
------------------------------------
Agreement, nor the grant of this option imposes any obligation on the
Company or any Related Corporation to continue the Employee in employment.
12. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. The Employee shall have
---------------------------------------
no rights as a stockholder with respect to the Option Shares until
such time as the Employee has exercised this option by delivering a notice of
exercise and has paid in full the purchase price for the shares so exercised in
accordance with Section 9. Except as is expressly provided in the Plan with
respect to certain changes in the capitalization of the Company, no adjustment
shall be made for dividends or similar rights for which the record date is prior
to such date of exercise.
13. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. The Plan contains
----------------------------------------
provisions covering the treatment of options in a number of contingencies such
as stock splits and mergers. Provisions in the Plan for adjustment with respect
to stock subject to options and the related provisions with respect to
successors to the business of the Company are hereby made applicable hereunder
and are incorporated herein by reference.
14. EARLY DISPOSITION. The Employee agrees to notify the Company in
-----------------
writing immediately after the Employee transfers any Option Shares, if such
transfer occurs on or before the later of (a) the date two years after the date
of this Agreement or (b) the date one year after the date the Employee acquired
such Option Shares. The Employee also agrees to provide the Company with any
information concerning any such transfer required by the Company for tax
purposes.
15. WITHHOLDING TAXES. If the Company or any Related Corporation in its
-----------------
discretion determines that it is obligated to withhold any tax in connection
with the exercise of this option, or in connection with the transfer of, or the
lapse of restrictions on, any Common Stock or other property acquired pursuant
to this option, the Employee hereby agrees that the Company or any Related
Corporation may withhold from the Employee's wages or other remuneration the
appropriate amount of tax. At the discretion of the Company or Related
Corporation, the amount required to be withheld may be withheld in cash from
such wages or other remuneration or in kind from the Common Stock or other
property otherwise deliverable to the Employee on exercise of this option. The
Employee further agrees that, if the Company or any Related Corporation does not
withhold an amount from the Employee's wages or other remuneration sufficient to
satisfy the withholding obligation of the Company or Related Corporation, the
Employee will make reimbursement on demand, in cash, for the amount
underwithheld.
<PAGE>
16. PROVISION OF DOCUMENTATION TO EMPLOYEE. By signing this
---------------------------------------
Agreement the Employee acknowledges receipt of a copy of this Agreement and a
copy of the Plan.
17. MISCELLANEOUS.
-------------
(A) NOTICES. All notices hereunder shall be in writing and shall be
-------
deemed given when sent by certified or registered mail, postage prepaid,
return receipt requested, to the address set forth below. The addresses
for such notices may be changed from time to time by written notice given
in the manner provided for herein.
(B) ENTIRE AGREEMENT; MODIFICATION. This Agreement constitutes the
------------------------------
entire agreement between the parties relative to the subject matter hereof,
and supersedes all proposals, written or oral, and all other communications
between the parties relating to the subject matter of this Agreement. This
Agreement may be modified, amended or rescinded only by a written agreement
executed by both parties.
(C) SEVERABILITY. The invalidity, illegality or unenforceability of
------------
any provision of this Agreement shall in no way affect the validity,
legality or enforceability of any other provision.
(D) SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective successors
and assigns, subject to the limitations set forth in Section 10 hereof.
(E) GOVERNING LAW. This Agreement shall be governed by and
-------------
interpreted in accordance with the laws of the [STATE], without giving
effect to the principles of the conflicts of laws thereof.
18. ACCELERATION OF VESTING OF OPTION FOR BUSINESS COMBINATIONS.
------------------------------------------------------------
Subject to and in accordance with Section 22 of the Plan, upon the merger,
consolidation, sale of all or substantially all of the Company's stock or assets
or other business combination involving the Company as otherwise set forth in
Section 22 of the Plan (an "Acquisition"), this option shall, immediately prior
to the consummation of such Acquisition, become vested and exercisable by the
Optionee as set forth in Section 22 of the Plan.
<PAGE>
IN WITNESS WHEREOF, the Company and the Employee have caused this
instrument to be executed as of the date first above written.
____________________________________ EXCEL SWITCHING CORPORATION
EMPLOYEE 255 Independence Drive
Hyannis, MA 02601
____________________________________
Print Name of Employee
By:__________________________________
____________________________________ Robert P. Madonna, President
Street Address
____________________________________
City State Zip Code
<PAGE>
Exhibit 4.10
EXCEL SWITCHING CORPORATION
Non-Qualified Stock Option Agreement for Non-Employee Directors
---------------------------------------------------------------
Excel Switching Corporation, a Massachusetts corporation (the "Company"),
hereby grants as of [Date] to [Optionee] (the "Optionee") an option to purchase
a maximum of [#Shares] shares of its Common Stock, par value $.01 per share (the
"Option Shares"), at the price of [Price] per share, on the following terms and
conditions:
1. GRANT UNDER 1997 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN. This option
--------------------------------------------------------
is granted pursuant to and is governed by the Company's 1997 Non-Employee
Director Stock Option Plan (the "Plan") and, unless the context otherwise
requires, terms used herein shall have the meanings assigned to them in the
Plan. Determinations made in connection with this option pursuant to the Plan
shall be governed by the Plan as it exists on the date hereof. In the event of
any conflict between this Agreement and the provisions of the Plan, the Plan
shall govern.
2. GRANT AS NON-QUALIFIED OPTION; OTHER OPTIONS. This option is intended
--------------------------------------------
to be a non-qualified option (rather than an incentive stock option) granted
pursuant to Section 4 of the Plan, and the Board of Directors of the Company
(the "Board") intends to take appropriate action, if necessary, to achieve this
result. This option is in addition to any other options heretofore or hereafter
granted to the Optionee by the Company, but a duplicate original of this
instrument shall not effect the grant of another option.
3. EXERCISE OF OPTION IF SERVICE AS A DIRECTOR CONTINUES. Unless sooner
-----------------------------------------------------
terminated pursuant to Section 4 hereof, this option shall vest in the Optionee
and thus become exercisable in accordance with the vesting schedule set forth
below, provided that the Optionee has continuously served as a member of the
Board through such vesting date. This option shall expire on the date which is
ten (10) years from the date this option is granted.
(i) Subject to subsection (ii) below, this option shall vest as follows:
NUMBER OF OPTION SHARES FOR WHICH
OPTION WILL BE
EXERCISABLE (CUMULATIVE) DATE OF VESTING
------------------------- ---------------
1/3 Immediately upon Grant Date
1/3 One year from Grant Date
1/3 Two years from Grant Date
(ii) Notwithstanding subsection (i) of this Section, if the Optionee attends
less than 75% of the Board meetings held in any fiscal year (a "Default Year"),
then (i) the Optionee shall forfeit his or her exercise rights with respect to
the option installment which vested on the preceding annual vesting date, in
proportion to the percentage of Board meetings actually attended by such
Optionee during the Default Year, and (ii) in the event that the Optionee does
not own a sufficient number of exercisable options to satisfy the forfeiture
obligation described above, the Optionee shall forfeit his right to receive the
next succeeding annual installment of the option, in proportion to the
percentage of Board meetings which the optionee actually attended in the Default
Year. By way of illustration, if the Optionee attends only 50%
<PAGE>
of the actual meetings of the Board of Directors (whether regular or special)
held in any fiscal year, then the Optionee shall forfeit the right to exercise
50% of the option installment which became exercisable on the preceding annual
vesting date. If, however, the Optionee had already exercised 75% of the
preceding option installment, and did not own any additional unexercised options
available to satisfy the forfeiture obligation, the Optionee would forfeit the
remaining 25% of the prior installment, and would also forfeit the right to
receive or exercise 25% of the next succeeding annual option installment.
4. TERMINATION OF OPTION RIGHTS.
-------------------------------
(A) In the event the Optionee ceases to be a member of the Board for any
reason other than death or permanent disability, any then unexercised portion of
this option shall, to the extent not then vested, immediately terminate and
become void. Any portion of this option which is vested but has not been
exercised at the time the Optionee so ceases to be a member of the Board may be
exercised, to the extent it is then vested, by the Optionee at any time prior to
the scheduled expiration date of the option.
(B) In the event that the Optionee ceases to be a member of the Board by
reason of his or her death or permanent disability, this option shall be
immediately and automatically accelerated and become fully vested and the
unexercised portion of this option shall be exercisable by the Optionee (or by
the Optionee's personal representative, heir or legatee, in the event of death)
for a period of one year thereafter. Any portion of this option which is then
exercisable but has not been exercised at the time the Optionee so ceases to be
a member of the Board of Directors may be exercised, to the extent then
exercisable, by the Optionee at any time prior to the scheduled expiration date
of the option.
(C) No portion of this option may be exercised if the Optionee is removed
from the Board of Directors for any one of the following reasons: (i)
disloyalty, gross negligence, dishonesty or breach of fiduciary duty to the
Company; or (ii) the commission of an act of embezzlement, fraud or deliberate
disregard of the rules or policies of the Company which results in loss, damage
or injury to the Company, whether directly or indirectly; or (iii) the
unauthorized disclosure of any trade secret or confidential information of the
Company; or (iv) the commission of an act which constitutes unfair competition
with the Company or which induces any customer of the Company to break a
contract with the Company; or (v) the conduct of any activity on behalf of any
organization or entity which is a competitor of the Company (unless such conduct
is approved by a majority of the members of the Board of Directors).
5. EXERCISE. To the extent then exercisable, the Optionee may exercise
--------
this option in whole or in part at any time and from time to time as provided by
the terms of this Agreement and the Plan, except that this option may not be
exercised for a fraction of a share unless such exercise is with respect to the
final installment of stock subject to this option and a fractional share (or
cash in lieu thereof) would otherwise be required to be issued to permit the
Optionee to exercise completely such final installment. Any fractional share
with respect to which an installment of this option cannot be exercised because
of the limitation contained in the preceding sentence shall remain subject to
this option and shall be available for later purchase by the Optionee in
accordance with the terms hereof. There shall be no such exercise at any one
time as to fewer than one hundred (100) shares or all of the remaining shares
then purchasable by the person or persons exercising the option, if fewer than
one hundred (100) shares.
6. PAYMENT OF PRICE. The option price is payable in United States dollars
and may be paid: (a) in cash or by check, or any combination of the foregoing,
equal in amount to the option price; (b) in whole or in part in shares of the
Common Stock of the Company already owned by the person or persons exercising
the option or shares subject to the option being exercised (subject to such
restrictions and guidelines as the Board may adopt from time to time), valued at
fair market value determined in
<PAGE>
accordance with the provisions of Section 5 of the Plan; or (c) consistent with
applicable law, through the delivery of an assignment to the Company of a
sufficient amount of the proceeds from the sale of Option Shares acquired upon
exercise of this option and an authorization to the broker or selling agent to
pay that amount to the Company, which sale shall be at the Optionee's direction
at the time of exercise.
7. METHOD OF EXERCISING OPTION. Subject to the terms and conditions of the
---------------------------
Plan and this Agreement, this option may be exercised by written notice to the
Company by mail or in person, addressed to the Chief Financial Officer at 255
Independence Drive, Hyannis, Massachusetts 02601, its principal executive
offices. Such notice shall state the election to exercise this option and the
number of shares in respect of which it is being exercised and shall be signed
by the person or persons so exercising this option. Such notice shall be
accompanied by payment of the full purchase price of such shares. The Company's
transfer agent shall, on behalf of the Company, prepare a certificate or
certificates representing Option Shares acquired upon exercise of this option,
shall register the Optionee (or the Optionee's personal representative, heir or
legatee if this option is being exercised pursuant to Section 4 hereof) as the
owner of the Option Shares on the books of the Company and shall cause the fully
executed certificate(s) representing such shares to be delivered to the Optionee
(or the Optionee's personal representative, heir or legatee if this option is
being exercised pursuant to Section 4 hereof) as soon as practicable after
payment of the option price in full. In the event this option shall be
exercised, pursuant to Section 4 hereof, by any person or persons other than the
Optionee, such notice shall be accompanied by appropriate proof of the right of
such person or persons to exercise this option. All shares that shall be
purchased upon the exercise of this option as provided herein shall be fully
paid and non-assessable.
8. OPTION NOT TRANSFERABLE. This option is not transferable or assignable
-----------------------
except by will or by the laws of descent and distribution or pursuant to a
domestic relations order. During the Optionee's lifetime only the Optionee can
exercise this option.
9. NO OBLIGATION TO EXERCISE OPTION. The grant and acceptance of this
--------------------------------
option imposes no obligation on the Optionee to exercise it.
10. NO RIGHTS AS STOCKHOLDER UNTIL EXERCISE. The Optionee shall have no
---------------------------------------
rights as a stockholder with respect to any of the Option Shares until a stock
certificate therefor has been issued to the Optionee and is fully paid for.
Except as is expressly provided in Section 10 of the Plan with respect to
certain changes in the capitalization of the Company, no adjustment shall be
made for dividends or similar rights for which the record date is prior to the
date such stock certificate is issued.
11. CAPITAL CHANGES AND BUSINESS SUCCESSIONS. The Plan contains extensive
----------------------------------------
provisions designed to preserve options at full value in a number of
contingencies. Therefore, provisions in the Plan for adjustment with respect to
stock subject to options and the related provisions with respect to successors
to the business of the Company are hereby made applicable hereunder and are
incorporated herein by reference.
12. WITHHOLDING TAXES. The Optionee hereby agrees that the Company may
-----------------
withhold from the Optionee's wages or any other remuneration the appropriate
amount of federal, state and local taxes attributable to the Optionee's exercise
of any installment of this option. At the Company's discretion, the amount
required to be withheld may be withheld in cash from such wages or other
remuneration, or in kind from the Common Stock otherwise deliverable to the
Optionee on exercise of this option. The Optionee further agrees that, if the
Company does not withhold an amount from the Optionee's wages or other
remuneration sufficient to satisfy the Company's withholding obligation, the
Optionee will
<PAGE>
reimburse the Company on demand, in cash, for the amount underwithheld as
determined by the Company in its sole discretion.
13. GOVERNING LAW. This Agreement shall be governed by and interpreted in
-------------
accordance with the laws of the Commonwealth of Massachusetts, without giving
effect to the principles of conflicts of law thereof. The preceding choice of
law provision shall apply to all claims, under any theory whatsoever, arising
out of the relationship of the parties contemplated herein.
14. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement of
----------------
the parties with respect to the subject matter hereof and supersedes any and all
correspondence, discussions or agreements between the parties relating to the
subject matter of this Agreement.
IN WITNESS WHEREOF the Company and the Optionee have caused this instrument
to be executed, and the Optionee whose signature appears below acknowledges
receipt of a copy of the Plan and acceptance of an original copy of this
Agreement.
__________________________________ EXCEL SWITCHING CORPORATION
Optionee 255 Independence Drive
__________________________________ Hyannis, MA 02601
Street Address
__________________________________ By:_________________________________
City State Zip Code Name:
Title:
<PAGE>
Exhibit 5.1
May 1, 1998
Excel Switching Corporation
255 Independence Drive
Hyannis, Massachusetts 02601
Re: Registration Statement on Form S-8 Relating to each of the Stock
Option Program, the 1997 Stock Option Plan, the 1997 Non-Employee
Director Stock Option Plan and the 1997 Employee Stock Purchase Plan
of Excel Switching Corporation (all of the foregoing are
hereinafter referred to collectively as the "Plans")
Dear Sir or Madam:
Reference is made to the above-captioned Registration Statement on
Form S-8 (the "Registration Statement") to be filed by Excel Switching
Corporation (the "Company") with the Securities and Exchange Commission under
the Securities Act of 1933 relating to an aggregate of 14,139,480 shares of
Common Stock, par value $.01 per share, of the Company issuable pursuant to the
Plans (the "Shares").
We have examined, and are familiar with, and have relied as to factual
matters solely upon, copies of the Plans, the Restated Articles of Organization
and the Restated By-Laws of the Company, the minute books and stock records of
the Company and originals of such other documents, certificates and proceedings
as we have deemed necessary for the purpose of rendering this opinion.
Based on the foregoing, we are of the opinion that the Shares have
been duly authorized and, when issued and paid for in accordance with the terms
of the related Plan and the terms of any agreement relating to any of the
options granted thereunder, will be validly issued, fully paid and
nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement.
Very truly yours,
/s/ Testa, Hurwitz & Thibeault, LLP
TESTA, HURWITZ & THIBEAULT, LLP
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-8 of our reports dated
January 21, 1998 included in Excel Switching Corporation's Annual Report on Form
10-K for the fiscal year ended December 27, 1997 and to all references to our
Firm included in this Registration Statement.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
May 1, 1998
