<PAGE> 1
As filed with the Securities and Exchange Commission on November 12, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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PEGASUS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2605174
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3811 TURTLE CREEK BOULEVARD, SUITE 1100 75219
DALLAS, TEXAS 75219 (Zip Code)
(Address of Executive Offices)
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AMENDED 1996 STOCK OPTION PLAN
(Full Title of the Plan)
JOHN F. DAVIS III
PEGASUS SYSTEMS, INC.
3811 TURTLE CREEK BOULEVARD, SUITE 1100
DALLAS, TEXAS 75219
(214) 528-5656
(Name, address and telephone number, including area code, of agent for service)
----------------------------------
With Copies To:
GUY KERR, ESQ.
LOCKE PURNELL RAIN HARRELL
(A PROFESSIONAL CORPORATION)
2200 ROSS AVENUE, SUITE 2200
DALLAS, TEXAS 75201-6776
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
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TITLE PROPOSED PROPOSED MAXIMUM
OF SECURITIES AMOUNT TO MAXIMUM AGGREGATE OFFERING AMOUNT OF
TO BE REGISTERED BE REGISTERED OFFERING PRICE PRICE (1) REGISTRATION FEE
PER SHARE (1)
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<S> <C> <C> <C> <C>
Common Stock, 866,667 shares $16.29 $14,118,005 $4,279.00
$.01 Par Value
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</TABLE>
(1) Estimated in accordance with Rule 457(h) under the Securities Act of 1933,
as amended, solely for purposes of calculating the registration fee, based on
the average of the high and low prices reported on the Nasdaq National Market on
November 5, 1997.
In addition, pursuant to Rule 416 under the Securities Act of 1933, as
amended, this Registration Statement also covers shares of Common Stock of the
Company issuable to prevent dilution resulting from stock splits, stock
dividends or similar transactions.
<PAGE> 2
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
The information specified by Item 1 and Item 2 of Part I of Form S-8
is omitted from this filing in accordance with the provisions of Rule 428 under
the Securities Act of 1933, as amended (the "Securities Act"), and the
introductory Note to Part I of Form S-8.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The documents set forth below are incorporated by reference in this
Registration Statement. All documents subsequently filed by Pegasus Systems,
Inc. (the "Company") pursuant to Sections 13(a), 13(c), 14 and 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), prior to the
filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference into this Registration
Statement and to be a part hereof from the date of filing of such documents.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein shall be deemed to be modified or superseded for purposes
of this Registration Statement to the extent a statement contained herein or in
any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Registration Statement.
(1) The Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1997;
(2) The Company's Prospectus on Form 424(b) filed with the
Securities and Exchange Commission on August 7, 1997; and
(3) The description of the Common Stock which is contained in the
Company's Registration Statement on Form 8-A filed with the
Securities and Exchange Commission on August 4, 1997 pursuant
to Section 12 of the Exchange Act, and all amendments thereto
and reports which have been filed for the purpose of updating
such description.
ITEM 4. DESCRIPTION OF SECURITIES.
Not Applicable.
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ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL")
provides, in effect, that any person made a party to any action by reason of
the fact that he is or was a director, officer, employee or agent of the
Company may and, in certain cases, must be indemnified by the Company against,
in the case of a non-derivative action, judgments, fines, amounts paid in
settlement and reasonable expenses (including attorney's fees) incurred by him
or her as a result of such action, and in the case of a derivative action,
against expenses (including attorney's fees), if in either type of action he or
she acted in good faith and in a manner he or she reasonably believed to be in
or not opposed to the best interests of the Company. This indemnification does
not apply, in a derivative action, to matters as to which it is adjudged that
the director, officer, employee or agent is liable to the Company, unless upon
court order it is determined that, despite such adjudication of liability, but
in view of all the circumstances of the case, he or she is fairly and
reasonably entitled to indemnity for expenses, and, in a non-derivative action,
to any criminal proceeding in which such person had reasonable cause to believe
his conduct was unlawful.
Article Eight of the Company's Second Amended and Restated Certificate
of Incorporation provides that no director of the Company shall be liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director to the fullest extent permitted by the DGCL.
Article Eight of the Company's Second Amended and Restated Certificate
of Incorporation also provides that the Company may indemnify to the fullest
extent permitted by Delaware law any and all of its directors and officers, or
former directors and officers, or any person who may have served at the
Company's request as a director or officer of another corporation, partnership,
joint venture, trust or other enterprise. In addition, Section 7.7 of the
Company's Amended and Restated Bylaws provides that the Company shall indemnify
to the fullest extent permitted by Delaware law any and all of its directors
and officers, or former directors and officers, or any person who may have
served at the Company's request as a director or officer of another
corporation, partnership, joint venture, trust or other enterprise and may
indemnify to the fully extent permitted by Delaware law any employees and
agents of the Company.
Reference is made to the Rights Agreement filed as Exhibit 4.3 to the
Company's Registration Statement on Form S-1 (File No. 333-28595) (the "S-1
Registration Statement") declared effective on August 6, 1997, pursuant to
which certain holders of capital stock of the Company named therein have agreed
to indemnify officers and directors of the Company against certain liabilities
under the Securities Act or the Exchange Act in the event Registrable
Securities (as defined therein) held by such holders are included in the
securities to be registered pursuant to a public offering by the Company.
The Company has purchased directors' and officers' liability
insurance. Subject to conditions, limitations and exclusions in the policy,
the insurance covers amounts required to be paid for a claim or claims made
against directors and officers for any act, error, omission,
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misstatement, misleading statement or breach of duty by directors and officers
in their capacity as directors and officers of the Company.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable.
ITEM 8. EXHIBITS.
<TABLE>
<S> <C>
5.1 Opinion of Locke Purnell Rain Harrell (A Professional Corporation).
23.1 Consent of Price Waterhouse LLP, Independent Accountants.
23.2 Consent of Locke Purnell Rain Harrell (A Professional Corporation) (included in opinion filed as
Exhibit 5.1).
24.1 Power of Attorney (included on the signature pages of this Registration Statement).
99.1 Amended 1996 Stock Option Plan.
</TABLE>
ITEM 9. UNDERTAKINGS.
The Company 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;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in this Registration Statement.
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 end 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 a 20% change in the
maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement;
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(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
this Registration Statement or any material change to
such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed with or furnished to the Commission by
the Company pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(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.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act
(and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange
Act) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering
of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Company pursuant to the foregoing
provisions, or otherwise, the Company 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 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities
(other than the payment by the Company of expenses incurred or
paid by a director, officer or controlling person of the
Company 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 Company 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 Securities Act and will be governed by the
final adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the Company certifies that it has reasonable grounds to believe that
it meets all of the requirements for filing on Form S-8 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Dallas, State of Texas on November
12, 1997.
PEGASUS SYSTEMS, INC.
By:/s/ John F. Davis, III
----------------------------------
John F. Davis, III
Chief Executive Officer, President
and Director
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<PAGE> 7
POWER OF ATTORNEY
KNOW ALL MEN AND WOMEN BY THESE PRESENTS, that each person whose
signature appears below hereby constitutes and appoints each of John F. Davis,
III, Jerome L. Galant and Ric L. Floyd, and each of them, his or her true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done on and about the
premises as fully and to all intents and purposes as he or she might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or any of them, or their substitute or substitutes, may lawfully do
or cause to be done by virtue hereof.
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>
SIGNATURES TITLE DATE
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<S> <C> <C>
/s/ John F. Davis, III Chief Executive Officer, November 12, 1997
----------------------------- President and Director
John F. Davis, III (Principal Executive Officer)
/s/ Jerome L. Galant Chief Financial Officer November 12, 1997
----------------------------- (Principal Financial and
Jerome L. Galant Accounting Officer)
/s/ John W. Biggs Director November 12, 1997
-----------------------------
John W. Biggs
/s/ Donald R. Dixon Director November 12, 1997
-----------------------------
Donald R. Dixon
/s/ William C. Hammett, Jr. Director November 12, 1997
-----------------------------
William C. Hammett, Jr.
/s/ Ian Malcolm Highet Director November 12, 1997
-----------------------------
Ian Malcolm Highet
/s/ Rockwell A. Schnabel Director November 12, 1997
-----------------------------
Rockwell A. Schnabel
/s/ Paul Travers Director November 12, 1997
-----------------------------
Paul Travers
/s/ Mark C. Wells Director November 12, 1997
-----------------------------
Mark C. Wells
/s/ Bruce Wolff Director November 12, 1997
-----------------------------
Bruce Wolff
</TABLE>
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
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NUMBER
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<S> <C>
5.1 Opinion of Locke Purnell Rain Harrell (A Professional Corporation).
23.1 Consent of Price Waterhouse LLP, Independent Accountants.
23.2 Consent of Locke Purnell Rain Harrell (A Professional Corporation) (included in opinion filed
as Exhibit 5.1).
24.1 Power of Attorney (included on the signature pages of this Registration Statement).
99.1 Amended 1996 Stock Option Plan.
</TABLE>
<PAGE> 1
EXHIBIT 5.1
November 12, 1997
Pegasus Systems, Inc.
3811 Turtle Creek Boulevard, Suite 1100
Dallas, Texas 75219
Re: Registration of 866,667 shares of Common Stock, par value $.01
per share, pursuant to a Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as special counsel for Pegasus Systems, Inc., a Delaware
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act"), pursuant to a
Registration Statement on Form S-8 (the "Registration Statement"), of 866,667
shares of Common Stock, par value $.01 per share, of the Company (the "Common
Stock") to be offered pursuant to the Pegasus Systems, Inc. Amended 1996 Stock
Option Plan (the "Option Plan").
Based upon our examination of such papers and documents and the
investigation of such matters of law as we have deemed relevant or necessary in
rendering this opinion, we hereby advise you that we are of the opinion that:
1. The Company is a corporation duly incorporated and validly
existing in good standing under the laws of the State of Delaware.
2. Assuming, with respect to shares of Common Stock issued after
the date hereof, (i) the receipt of proper consideration for the issuance
thereof in excess of par value thereof, (ii) the availability of a sufficient
number of shares of Common Stock authorized by the Company's Certificate of
Incorporation then in effect, (iii) compliance with the terms of any agreement
entered into in connection with any options under the Option Plan, and (iv) no
change occurs in the applicable law or the pertinent facts, the shares of Common
Stock purchasable upon the exercise of any option granted under the Option Plan
will upon issuance be duly authorized and validly issued, fully paid and
non-assessable shares of Common Stock.
<PAGE> 2
Pegasus Systems, Inc.
November 12, 1997
Page 2
We consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement filed by the Company with the Securities and Exchange
Commission for the registration under the Securities Act, of 866,667 shares of
Common Stock of the Company covered by the Option Plan. By so consenting, we
do not thereby admit that our firm's consent is required by Section 7 of the
Securities Act.
Very truly yours,
LOCKE PURNELL RAIN HARRELL
(A Professional Corporation)
By: /s/ Guy Kerr
----------------------------
Guy Kerr
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated February 21, 1997, except as to Note
13, which is as of May 12, 1997 and Note 15, which is as of August 6, 1997,
relating to the financial statements of Pegasus Systems, Inc. which appears on
page F-2 of Pegasus Systems, Inc.'s Registration Statement on Form S-1 dated
August 6, 1997. We also consent to the application of such report to the
Financial Statement Schedule for the year ended December 31, 1996 listed under
item 16(b) of such Registration Statement on Form S-1 when such schedule is read
in conjunction with the financial statements referred to in our report. The
audit referred to in such report also included this schedule.
PRICE WATERHOUSE LLP
Dallas, Texas
November 11, 1997
<PAGE> 1
EXHIBIT 99.1
PEGASUS SYSTEMS, INC.
AMENDED 1996 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to Employees and Consultants of
the Company and any Parent or Subsidiary and to promote the success of the
Company's business. Options granted under the Plan may be Incentive Stock
Options or Nonstatutory Stock Options, as determined by the Administrator at the
time of grant of an option and subject to the applicable provisions of Section
422 of the Code and the regulations promulgated thereunder.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or the Compensation Committee
appointed by the Board.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means the Compensation Committee appointed by the Board
of Directors.
(e) "Common Stock" means the Common Stock of the Company.
(f) "Company" means Pegasus Systems, Inc.
(g) "Consultant" means any person who is engaged by the Company or any
Parent or Subsidiary to render consulting or advisory services and is
compensated for such services, and any director of the Company whether
compensated for such services or not. If and in the event the Company registers
any class of any equity security pursuant to the Exchange Act, the term
Consultant shall thereafter not include directors who are not compensated for
their services or are paid only a director's fee by the Company.
(h) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company, any Parent or Subsidiary
is not interrupted or terminated. Continuous Status as an Employee or Consultant
shall not be considered interrupted in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. A leave of
absence approved by the Company shall include sick leave, military leave, or any
other personal leave. For purposes of Incentive Stock Options, no such leave may
exceed 90 days, unless reemployment upon expiration of such leave is guaranteed
by statute or contract, including Company policies. If reemployment upon
expiration of a leave of absence approved by the Company is not so guaranteed,
on the 181st day of such leave any Incentive Stock Option held by the Optionee
shall cease to be treated as an Incentive Stock Option and shall be treated for
tax purposes as a Nonstatutory Stock Option.
<PAGE> 2
(i) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(j) "Employee" means any person, including officers and directors,
employed by the Company or any Parent or Subsidiary of the Company. The payment
of a director's fee by the Company shall not be sufficient to constitute
"employment" by the Company.
(k) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(l) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange or
a national market system, including without limitation the Nasdaq National
Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its Fair Market
Value shall be the closing sales price for such stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, its Fair Market Value
shall be the mean between the high bid and low asked prices for the Common Stock
on the last market trading day prior to the day of determination; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value shall be determined in good faith by the Administrator.
(m) "Incentive Stock Option" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(n) "Nonstatutory Stock Option" means an Option not intended to qualify
as an Incentive Stock Option.
(o) "Option" means a stock option granted pursuant to the Plan.
(p) "Optioned Stock" means the Common Stock subject to an Option.
(q) "Optionee" means an Employee or Consultant who receives an Option.
(r) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(s) "Permitted Transferee" means a member of a holder's immediate
family, trusts for the benefit of such immediate family members, and
partnerships in which the holder and such immediate family members are the only
partners, provided that no consideration is provided for the transfer.
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<PAGE> 3
(t) "Plan" means this Amended 1996 Stock Option Plan.
(u) "Section 16(b)" means Section 16(b) of the Securities Exchange Act
of 1934, as amended.
(v) "Share" means a share of the Common Stock, as adjusted in accordance
with Section 11 below.
(w) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 650,000 Shares. The Shares may be authorized, but unissued, or
reacquired Common Stock.
If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an option exchange program
authorized by the Administrator, the unpurchased Shares which were subject
thereto shall become available for future grant or sale under the Plan (unless
the Plan has terminated); provided, however, that Shares that have actually been
issued under the Plan shall not be returned to the Plan and shall not become
available for future distribution under the Plan, except that if unvested Shares
are repurchased by the Company at their original purchase price, such Shares
shall become available for future grant under the Plan.
4. Administration of the Plan.
(a) Initial Plan Procedure. Prior to the date, if any, upon which the
Company becomes subject to the Exchange Act, the Plan shall be administered by
the Board or the Compensation Committee appointed by the Board.
(b) Plan Procedure after the Date, if any, upon Which the Company
becomes Subject to the Exchange Act. With respect to Option grants made to
Employees or Consultants, the Plan shall be administered by (A) the Board or (B)
the Compensation Committee designated by the Board, which committee shall be
constituted to satisfy the legal requirements, if any, relating to the
administration of incentive stock option plans of state corporate and securities
laws, of the Code, and of any stock exchange or national market system upon
which the Common Stock is then listed or traded (the "Applicable Laws"). Once
appointed, such Committee shall serve in its designated capacity until otherwise
directed by the Board. The Board may increase the size of the Committee and
appoint additional members, remove members (with or without cause) and
substitute new members, fill vacancies (however caused), and remove all members
of the Committee and thereafter directly administer the Plan, all to the extent
permitted by Applicable Laws.
(c) Powers of the Administrator. Subject to the provisions of the Plan
and approval of any relevant authorities, including the approval, if required,
of any stock exchange
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<PAGE> 4
or national market system upon which the Common Stock is then listed, the
Administrator shall have the authority, in its discretion:
(i) to determine the Fair Market Value of the Common Stock, in
accordance with Section 2(l) of the Plan;
(ii) to select the Consultants and Employees to whom Options may
from time to time be granted hereunder;
(iii) to determine whether and to what extent Options are granted
hereunder;
(iv) to determine the number of shares of Common Stock to be covered
by each such award granted hereunder;
(v) to approve forms of agreement for use under the Plan;
(vi) to determine the terms and conditions, not inconsistent with
the terms of the Plan, of any award granted hereunder. Such terms and conditions
may include, but are not limited to, the exercise price, the time or times when
Options may be exercised, any vesting acceleration or waiver of forfeiture
restrictions, and any restriction or limitation regarding any Option or the
Shares relating thereto, based in each case on such factors as the
Administrator, in its sole discretion, shall determine;
(vii) to determine whether and under what circumstances an Option
may be settled in cash under Section 9(e)1 instead of Common Stock;
(viii) to reduce the exercise price of any Option to the then
current Fair Market Value if the Fair Market Value of the Common Stock covered
by such Option has declined since the date the Option was granted;
(ix) to provide for the early exercise of Options for the purchase
of unvested Shares, subject to such terms and conditions as the Administrator
may determine; and
(x) to construe and interpret the terms of the Plan and awards
granted pursuant to the Plan.
(d) Effect of Administrator's Decision. All decisions, determinations
and interpretations of the Administrator shall be final and binding on all
Optionees and any other holders of any Options.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if otherwise
eligible, be granted additional Options.
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<PAGE> 5
(b) Each Option shall be designated in the written option agreement as
either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options.
For purposes of this Section 5(b), Incentive Stock Options shall be
taken into account in the order in which they were granted, and the Fair Market
Value of the Shares shall be determined as of the time the Option with respect
to such Shares is granted.
(c) The Plan shall not confer upon any Optionee any right with respect
to the continuation of the Optionee's employment or consulting relationship with
the Company, nor shall it interfere in any way with the Optionee's right or the
Company's right to terminate the Optionee's employment or consulting
relationship at any time, with or without cause.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the stockholders of
the Company, as described in Section 18 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 14 of the
Plan.
7. Term of Option. The term of each Option shall be the term stated in the
Option Agreement; provided, however, that the term shall be no more than ten
(10) years from the date of grant thereof. However, in the case of an Incentive
Stock Option granted to an Optionee who, at the time the Option is granted, owns
stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the term of the
Option shall be five (5) years from the date of grant thereof or such shorter
term as may be provided in the Option Agreement.
8. Option Exercise Price and Consideration.
(a) The per share exercise price for the Shares to be issued pursuant to
exercise of an Option shall be such price as is determined by the Board, but
shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110% of the Fair
Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in
the preceding paragraph, the per Share exercise price shall be no less than 100%
of the Fair Market Value per Share on the date of grant.
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(ii) In the case of a Nonstatutory Stock Option, the per share
exercise price shall be determined by the Administrator but shall, in no event,
be less than fifty percent (50%) of the Fair Market Value per Share on the date
of grant.
(b) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined by
the Administrator (and, in the case of an Incentive Stock Option, shall be
determined at the time of grant) and may consist entirely of (1) cash, (2)
check, (3) promissory note, (4) other Shares which (x) in the case of Shares
acquired upon exercise of an Option have been owned by the Optionee for more
than six months on the date of surrender and (y) have a Fair Market Value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which such Option shall be exercised, (5) delivery of a properly executed
exercise notice together with such other documentation as the Administrator and
the broker, if applicable, shall require to effect an exercise of the Option and
delivery to the Company of the sale or loan proceeds required to pay the
exercise price, or (6) any combination of the foregoing methods of payment. In
making its determination as to the type of consideration to accept, the
Administrator shall consider if acceptance of such consideration may be
reasonably expected to benefit the Company.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option granted
hereunder shall be exercisable at such times and under such conditions as
determined by the Administrator, including performance criteria with respect to
the Company and/or the Optionee, and as shall be permissible under the terms of
the Plan.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of
such exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may, as authorized by the Administrator, consist of any
consideration and method of payment allowable under Section 8(b) of the Plan.
Until the issuance (as evidenced by the appropriate entry on the books of the
Company or of a duly authorized transfer agent of the Company) of the stock
certificate evidencing such Shares, no right to vote or receive dividends or any
other rights as a stockholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Company shall issue (or cause to
be issued) such stock certificate promptly upon exercise of the Option. No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the stock certificate is issued, except as provided in
Section 12 of the Plan.
Exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Employment or Consulting Relationship. Upon
termination of an Optionee's Continuous Status as an Employee or Consultant,
other than upon the Optionee's
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death or Disability, the Optionee may exercise his or her Option, but only
within such period of time as is specified in the Notice of Grant, and only to
the extent that the Optionee was entitled to exercise it at the date of
termination (but in no event later than the expiration of the term of such
Option as set forth in the Notice of Grant). In the absence of a specified time
in the Notice of Grant, the Option shall remain exercisable for three (3) months
following the Optionee's termination. In the case of an Incentive Stock Option,
such period of time for exercise shall not exceed three (3) months from the date
of termination. If, on the date of termination, the Optionee is not entitled to
exercise the Optionee's entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If, after termination, the
Optionee does not exercise his or her Option within the time specified by the
Administrator, the Option shall terminate, and the Shares covered by such Option
shall revert to the Plan.
Notwithstanding the above, in the event of an Optionee's change in
status from Consultant to Employee or Employee to Consultant, an Optionee's
Continuous Status as an Employee or Consultant shall not automatically terminate
solely as a result of such change in status. However, in such event, an
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option three months and one day following such change of status.
(c) Disability of Optionee. In the event of termination of an Optionee's
Continuous Status as an Employee or Consultant as a result of his or her
Disability, the Optionee may, but only within twelve (12) months from the date
of such termination (and in no event later than the expiration date of the term
of his or her Option as set forth in the Option Agreement), exercise the Option
to the extent the Optionee was otherwise entitled to exercise it on the date of
such termination. To the extent that the Optionee is not entitled to exercise
the Option on the date of termination, or if the Optionee does not exercise the
Option to the extent so entitled within the time specified herein, the Option
shall terminate, and the Shares covered by the Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Notice of Grant), by the Optionee's estate or by a person
who has acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall immediately revert to the Plan. If, after death, the
Optionee's estate or a person who acquires the right to exercise the Option by
bequest or inheritance does not exercise the Option within the time specified
herein, the Option shall terminate, and the Shares covered by such Option shall
revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy
out for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
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(f) Rule 16b-3. Options granted to persons subject to Section 16(b) of
the Exchange Act must comply with Rule 16b-3 and shall contain such additional
conditions or restrictions as may be required thereunder to qualify for the
maximum exemption from Section 16 of the Exchange Act with respect to Plan
transactions.
10. Stock Withholding to Satisfy Withholding Tax Obligations. At the
discretion of the Administrator, Optionees may satisfy withholding obligations
as provided in this Section 10. When an Optionee incurs tax liability in
connection with an Option which tax liability is subject to tax withholding
under applicable tax laws, and the Optionee is obligated to pay the Company an
amount required to be withheld under applicable tax laws, the Optionee may
satisfy the withholding tax obligation by electing to have the Company withhold
from the Shares to be issued upon exercise of the Option that number of Shares
having a Fair Market Value equal to the amount required to be withheld. The Fair
Market Value of the Shares to be withheld shall be determined on the date that
the amount of tax to be withheld is to be determined (the "Tax Date").
All elections by an Optionee to have Shares withheld for this purpose shall
be made in writing in a form acceptable to the Administrator and shall be
subject to the following restrictions:
(a) the election must be made on or prior to the applicable Tax Date;
(b) once made, the election shall be irrevocable as to the particular
Shares of the Option as to which the election is made;
(c) all elections shall be subject to the consent or disapproval of the
Administrator.
In the event the election to have Shares withheld is made by an Optionee
and the Tax Date is deferred under Section 83 of the Code because no election is
filed under Section 83(b) of the Code, the Optionee shall receive the full
number of Shares with respect to which the Option is exercised but such Optionee
shall be unconditionally obligated to tender back to the Company the proper
number of Shares on the Tax Date.
11. Transferability of Options and Rights. Incentive Stock Options granted
under the Plan shall not be transferable otherwise than by will or the laws of
descent and distribution, or pursuant to a qualified domestic relations order as
defined by the Code or Title I of the Employee Retirement Income Security Act of
1974, as amended, or the rules thereunder. Incentive Stock Options shall be
exercisable during the lifetime of the Employee only by the Employee or by the
Employee's guardian or legal representative (unless such exercise would
disqualify it as an Incentive Stock Option). Unless the Committee otherwise
provides in an agreement regarding the award of non-qualified stock options or
rights (not granted in connection with an Incentive Stock Option), non-qualified
stock options or rights (not granted in connection with Incentive Stock Options)
may be transferred by the holder to Permitted Transferees, provided that there
cannot be any consideration for the transfer.
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12. Adjustments Upon Changes in Capitalization or Merger.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed dissolution
or liquidation of the Company, the Administrator shall notify each Optionee as
soon as practicable prior to the effective date of such proposed transaction.
The Administrator in its discretion may provide for an Optionee to have the
right to exercise his or her Option until ten (10) days prior to such
transaction as to all of the Optioned Stock covered thereby, including Shares as
to which the Option would not otherwise be exercisable. In addition, the
Administrator may provide that any Company repurchase option applicable to any
Shares purchased upon exercise of an Option shall lapse as to all such Shares,
provided the proposed dissolution or liquidation takes place at the time and in
the manner contemplated. To the extent it has not been previously exercised, an
Option will terminate immediately prior to the consummation of such proposed
action.
(c) Acquisition Events
(1) Consequences of Acquisition Events. Upon the occurrence of an
Acquisition Event (as defined below), or the execution by the Company of any
agreement with respect to an Acquisition Event, the Board shall take any one or
more of the following actions with respect to then outstanding Options: (i)
provide that outstanding Options shall be assumed or equivalent Options shall be
substituted by the acquiring or succeeding entity (or an affiliate thereof),
provided that any such Options substituted for Incentive Stock Options shall
satisfy, in the determination of the Board, the requirements of Section 424(a)
of the Code; (ii) upon written notice to the Optionees, provide that all then
unexercised Options will become exercisable in full as of a specified date (the
"Acceleration Date") prior to the Acquisition Event and will terminate
immediately prior to the consummation of such Acquisition Event, except to the
extent exercised by the Optionees between the Acceleration Date and the
consummation of the Acquisition Event or (iii) in the event of an Acquisition
Event under the terms of which holders of Common Stock will receive upon
consummation thereof a cash payment for each share of Common Stock surrendered
pursuant to such Acquisition Event (the "Acquisition Price") provide that all
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outstanding Options shall terminate upon consummation of such Acquisition Event
and each Optionee shall receive, in exchange therefor, a cash payment equal to
the amount (if any) by which (A) the Acquisition Price multiplied by the number
of shares of Common Stock subject to such outstanding Options (whether or not
then exercisable), exceeds (B) the aggregate exercise price of such Options.
An "Acquisition Event" shall mean: (a) any merger or consolidation which
results in the voting securities of the Company outstanding immediately prior
thereto continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving or acquiring entity) less than
60% of the combined voting power of the voting securities of the Company or such
surviving or acquiring entity outstanding immediately after such merger or
consolidation; (b) any sale of all or substantially all of the assets of the
Company; (c) the complete liquidation of the Company; or (d) the acquisition of
"beneficial ownership" (as defined in Rule 13d-3 under the Exchange Act) of
securities of the Company representing 50% or more of the combined voting power
of the Company's then outstanding securities (other than through a merger or
consolidation or an acquisition of securities directly from the Company) by any
"person", as such term is used in Sections 13(d) and 14(d) of the Exchange Act
other than the Company, any trustee or other fiduciary holding securities under
an employee benefit plan of the Company, or any entity owned directly or
indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company.
(2) Assumption of Options Upon Certain Events. The Board may grant
options under the Plan in substitution for stock and stock-based awards held by
employees of another entity who become Employees as a result of a merger or
consolidation of the employing entity with the Company or the acquisition by the
Company of property or stock of the employing entity. The substitute options
shall be granted on such terms and conditions as the Board considers appropriate
in the circumstances.
13. Time of Granting Options. The date of grant of an Option shall, for all
purposes, be the date on which the Administrator makes the determination
granting such Option, or such other date as is determined by the Administrator.
Notice of the determination shall be given to each Employee or Consultant to
whom an Option is so granted within a reasonable time after the date of such
grant.
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made which would impair the rights of any Optionee
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with Rule 16b-3 under the Exchange
Act or with Section 422 of the Code (or any other applicable law or regulation,
including the requirements of any stock exchange or national market system upon
which the Common Stock is then listed), the Company shall obtain stockholder
approval of any Plan amendment in such a manner and to such a degree as
required.
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(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted, and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
15. Conditions Upon Issuance of Shares. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder, and
the requirements of any stock exchange or national market system upon which the
Common Stock is then listed or traded, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any of
the aforementioned relevant provisions of law.
16. Reservation of Shares. The Company, during the term of this Plan, shall
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
17. Agreements. Options shall be evidenced by written agreements in such
form as the Administrator shall approve from time to time.
18. Stockholder Approval. Continuance of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such stockholder approval shall be obtained
in the degree and manner required under applicable state and federal law and the
rules of any stock exchange or national market system upon which the Common
Stock is then listed or traded.
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