<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
REGISTRATION STATEMENT
ON FORM S-8
Under
THE SECURITIES ACT OF 1933
ON2.COM INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
COLORADO 84-1280679
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
375 GREENWICH STREET,
NEW YORK, NY 10013
(212) 941-2400
- --------------------------------------------------------------------------------
(Address of registrant's Principal Executive Offices)
AMENDED AND RESTATED 1999 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
- --------------------------------------------------------------------------------
(Full title of the plan)
Barry M. Shereck, Chief Financial Officer
375 Greenwich Street,
New York, NY 10013
(212) 941-2400
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Copies of all communications to:
Gary J. Kocher
Warren M. Clemans
Preston Gates & Ellis LLP
701 Fifth Avenue, Suite 5000
Seattle, WA 98104
(206) 623-7580
<TABLE>
<CAPTION>
Title of each class of Proposed maximum Proposed maximum
securities to be Amount to be offering price per aggregate offering Amount of registration
registered registered (1) share (2) price (2) fee (2)
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
common stock, no par
value 5,500,000 $22.50 $123,750,000 $32,670
</TABLE>
(1) Includes an indeterminate number of additional shares that may be
issued to adjust the number of shares issued pursuant to the stock option plan
described herein as the result of any future stock split, stock dividend or
similar adjustment of On2.com's outstanding common stock.
(2) Estimated pursuant to Rule 457(c) solely for purposes of
calculating amount of registration fee, based upon the average of the high and
low prices reported on February 28, 2000, as reported on the American Stock
Exchange.
The Exhibit Index appears after the Signature Page of this registration
statement.
<PAGE>
PART II. INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents are hereby incorporated by reference into this
registration statement:
(a) On2.com's Transition Report on Form 10-KSB for the period from
October 1, 1998 to December 31, 1998, filed with the Securities and Exchange
Commission on September 28, 1999 and amended on October 21, 1999, which
contains audited consolidated financial statements for the most recent fiscal
year for which such statements have been filed.
(b) Quarterly Reports on Form 10-QSB filed with the Securities and
Exchange Commission on June 10, 1999, August 23, 1999 and November 15, 1999.
(c) The description of On2.com's common stock, which is contained in
the Registration Statement on Form 10-SB filed on October 3, 1997 (Commission
File No. 000-23171) in the section entitled "Item 8: Description of
Securities," as amended by the registrant's Amendment No. 1 to Form 10-SB
filed on April 7, 1998 (Commission File No. 000-23171).
In addition, all documents subsequently filed 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 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.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
The validity of the securities that may be offered under the Amended
and Restated 1999 Incentive and Nonqualified Stock Option Plan will be passed
upon for On2.com Inc. ("On2.com") by Preston Gates & Ellis LLP, 701 Fifth
Avenue, Suite 5000, Seattle, Washington 98104. Attorneys who are partners or
employed by Preston Gates & Ellis LLP who have provided advice with respect
to this matter in the aggregate own fewer than 1,000 shares of On2.com's
common stock.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
On2.com's Articles of Incorporation and Bylaws permit it to
indemnify its officers and directors to the fullest extent permitted by law.
The laws of the State of Colorado permit, and in some cases require,
corporations to indemnify officers, directors, agents and employees who are
or who have been a party to or are threatened to be made a party to
litigation against judgments, fines, settlements and reasonable expenses
under certain circumstances. Under Colorado law, a director may not be
relieved of liability for (i) breach of the director's duty of loyalty, (ii)
knowing violation of the law, or (iii) any transaction from which the
director directly or indirectly derived an improper personal benefit. On2.com
believes that its right to indemnify its officers and directors is necessary
to attract and retain qualified persons to serve in those capacities. On2.com
has been advised that, in the opinion of the Securities and Exchange
Commission, indemnification for liabilities under the Securities Act is
against public policy and is unenforceable.
On2.com maintains directors' and officers' liability insurance under
which On2.com's directors and officers are insured against loss (as defined
in the policy) as a result of claims brought against them for their wrongful
acts in such capacities.
ITEM 8. EXHIBITS.
The Exhibits to this registration statement are listed in the Index
to Exhibits on page 5.
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 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
<PAGE>
(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 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered herein, 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 Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director,
officer, or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of New York, State of New York, on
this 29th day of February, 2000.
ON2.COM INC.
/s/ Barry M. Shereck
--------------------------------
Barry M. Shereck
Chief Financial Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Barry M. Shereck and David S. Silver,
his or her attorney-in-fact, for him or her in any and all capacities, to
sign any amendments to this registration statement, and to file the same,
with exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorneys-in-fact, or their substitutes, may 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 on February 29, 2000.
/s/ Daniel Miller President, Chief Executive Officer, Director
- ------------------------------ (principal executive officer)
Daniel Miller
/s/ Barry M. Shereck Chief Financial Officer (principal financial
- ------------------------------ and accounting officer)
Barry M. Shereck
/s/ David Silver Chief Operating Officer, Director
- ------------------------------
David Silver
/s/ Jack L. Rivkin Director
- -------------------------------
Jack L. Rivkin
/s/ Ajmal Khan Director
- -------------------------------
Ajmal Khan
/s/ Stephen D. Klein Director
- -------------------------------
Stephen D. Klein
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
- -------------------------------------------------------
<S> <C>
5.1 Opinion of Counsel regarding legality
23.1 Consent of Independent Public Accountant
23.2 Consent of Counsel (included in Exhibit 5.1)
24 Power of Attorney (contained within signature page)
4
<PAGE>
99.1 Amended and Restated 1999 Incentive and Nonqualified Stock Option Plan
99.2 1997 Amended and Restated Stock Option Plan (incorporated by reference in 1999 Plan)
99.3 1998 Stock Option Plan (incorporated by reference in 1999 Plan)
</TABLE>
5
<PAGE>
EXHIBITS 5.1 AND 23.2
{LETTERHEAD OF PRESTON GATES & ELLIS LLP}
February 29, 2000
On2.com Inc.
375 Greenwich Street,
New York, NY 10013
Re: Amended and Restated 1999 Incentive and Nonqualified Stock Option
Plan (the "Plan")
Ladies and Gentlemen:
In connection with the registration of 5,500,000 shares of common
stock, no par value per share (the "Common Shares") of On2.com Inc. (the
"Company") with the Securities and Exchange Commission on a Registration
Statement on Form S-8 (the "Registration Statement"), relating to the
issuance by the Company, if any, of the Common Shares, we have examined such
documents, records and matters of law as we have considered relevant. Based
upon such examination and upon our familiarity as counsel for the Company
with its general affairs, it is our opinion that:
The Common Shares when issued in conformity with the terms and
conditions of the Plan, will be legally issued, fully paid, and nonassessable.
We consent to the use of this opinion in the registration statement
filed with the Securities and Exchange Commission in connection with the
registration of the Shares and to the reference to our firm under the heading
"Interests of Named Experts and Counsel" in the registration statement.
Very truly yours,
PRESTON GATES & ELLIS LLP
By /s/ Gary J. Kocher
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
{LETTERHEAD OF ARTHUR ANDERSEN LLP}
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated September 15,
1999 included in On2.com Inc's Form 10-KSB for the year ended December 31,
1998 and to all references to our Firm included in this registration
statement.
/s/ Arthur Andersen LLP
New York, New York
February 21, 2000
<PAGE>
EXHIBIT 99.1
ON2.COM INC.
1999 INCENTIVE AND NONQUALIFIED
STOCK OPTION PLAN
AMENDED AND RESTATED
---------------------------------------
1. PURPOSE
The purpose of this Stock Option Plan (the "Plan") is to encourage
and enable key employees (which term, as used herein, shall include
officers), and directors, of On2.com Inc. or a parent (if any) or subsidiary
thereof (collectively, unless the context otherwise requires, the "Company"),
consultants, and advisors to the Company, and other persons or entities
providing goods or services to the Company to acquire a proprietary interest
in the Company through the ownership of common stock of the Company, and to
provide members of the Company's executive management team and Board of
Directors with an additional incentive to promote the success of the Company.
As used herein, the term "parent" or "subsidiary" shall mean any present or
future corporation which is or would be a "parent corporation" or "subsidiary
corporation" of the Company as the term is defined in section 424 of the
Internal Revenue Code of 1986, as amended (the "Code") (determined as if the
Company were the employer corporation). Directors, consultants, advisors, and
other persons or entities providing goods or services to the Company and
entitled to receive options hereunder are hereinafter collectively referred
to as the "Associates," and the relationship of the Associates to the Company
is hereinafter referred to as an "association with" the Company. An employee
or Associate to whom an option has been granted is referred to as a
"Grantee." Such ownership will provide such Grantees with a more direct stake
in the future welfare of the Company and encourage them to remain employed by
or associated with the Company. It is also expected that the Plan will
encourage qualified persons to seek and accept employment or association with
the Company.
2. ADMINISTRATION
(a) The Plan shall be administered by the Board of
Directors (the "Board").
(b) As it applies to the administration of the Plan, a
majority of the members of the Board shall constitute a quorum, and the
action of a majority of the members of the Board present at a meeting at
which a quorum is present, as well as actions taken pursuant to the unanimous
written consent of all the members of the Board without holding a meeting,
shall be deemed to be actions of the Board. All actions of the Board and all
interpretations and decisions made by the Board with respect to any question
arising under the Plan shall be final and conclusive and shall be binding
upon the Company and all other interested parties. The Board may delegate any
or all of its functions hereunder to a committee of the Board consisting of
at least two Members, which committee shall conform to all applicable stock
exchange requirements and requirements of law.
(c) Subject to the terms and conditions of the Plan,
the Board shall be responsible for the overall management and administration
of the Plan and shall have such authority as shall be necessary or
appropriate in order to carry out its responsibilities, including, without
limitation, the authority to (i) interpret and construe the Plan and to
determine the terms of all options or Restricted Stock awards granted
pursuant to the Plan, including, but not limited to, the persons to whom, and
the time or times at which grants shall be made, the number of options or
shares to be included in the grants, the number of options which shall be
treated as incentive stock options (in the case of options granted to
employees) as described in section 422 of the Code, the number of options
which do not qualify as incentive stock options ("nonqualified options"), and
the terms and conditions thereof; (ii) to adopt rules and regulations and to
prescribe forms for the operation and administration of the Plan; and (iii)
to take any other action not inconsistent with the provisions of the Plan
that it may deem necessary or appropriate.
3. ELIGIBILITY AND PARTICIPATION
<PAGE>
(a) Key employees and Associates of the Company are
eligible to receive options and/or Restricted Stock. Each option or
Restricted Stock award shall be granted, and the number of shares and the
vesting schedule of such shares subject thereto shall be determined by the
Board.
(b) Options and Restricted Stock awards shall be
evidenced by written agreements which shall, among other things (i) designate
the option as either an incentive stock option or a nonqualified stock
option, (ii) specify the number of shares covered by the option or award;
(iii) specify the exercise price, determined in accordance with Section 7
hereof, for the shares subject to the option; (iv) specify the option period
determined in accordance with Section 6 hereof; (v) specify the restrictions
and conditions governing a Restricted Stock award; (vi) set forth
specifically or incorporate by reference the applicable provisions of the
Plan; and (vii) contain such other terms and conditions consistent with the
Plan as the Board may, in its discretion, prescribe.
(c) Without limiting the generality of subsection (c)
of this Section 3, the Board may, in its sole discretion and on such terms as
it deems appropriate, require as a condition to the grant of an option to an
employee or Associate that the employee or Associate surrender for
cancellation some or all of the unexercised options that have been previously
granted to him or her under the Plan or otherwise. An option, the grant of
which is condition upon such surrender, may have an option price lower (or
higher) than the exercise price of such surrendered option, may cover the
same (or lesser or greater) number of shares as such surrendered option, may
contain such other terms as the Board deems appropriate, and shall be
exercisable in accordance with its terms, without regard to the number of
shares, prices, exercise period or any other term or condition of such
surrendered option.
4. SHARES SUBJECT TO THE PLAN
The stock to be offered and delivered under the Plan,
pursuant to the grant of Restricted Stock or the exercise of an option, shall
be shares of the Company's authorized Common Stock, no par value per share
(the "Common Stock"), and may be unissued shares or reacquired shares, as the
Board may from time to time determine. Subject to adjustment as provided in
Section 13 hereof, the aggregate number of shares to be delivered under the
Plan shall not exceed five million five hundred thousand (5,500,000) shares.
If an option or Restricted Stock award expires or terminates for any reason
during the term of the Plan prior to the exercise thereof in full, the shares
subject to but not delivered under such option shall be available for options
or awards thereafter granted.
5. INCENTIVE STOCK OPTIONS
(a) An option designated by the Board as an "incentive
stock option" is intended to qualify as an "incentive stock option" within
the meaning of section 422 of the Code. An incentive stock option shall be
granted only to an employee of the Company.
(b) No incentive stock option shall provide any person
with a right to purchase shares to the extent that such right first becomes
exercisable during a prescribed calendar year and the sum of (i) the fair
market value (determined as of the date of grant) of the shares subject to
such incentive stock option which first become available for purchase during
such calendar year, plus (ii) the fair market value (determined as of the
date of grant) of all shares subject to incentive stock options previously
granted to such person under all plans of the Company first become available
for purchase during such calendar year exceeds $100,000.
(c) Without prior written notice to the Board, a
Grantee may not dispose of shares acquired pursuant to the exercise of an
incentive stock option until after the later of (i) the second anniversary of
the date on which the incentive stock option was granted, or (ii) the first
anniversary of the date on which the shares were acquired; PROVIDED, HOWEVER,
that a transfer to a trustee, receiver, or other fiduciary in any insolvency
proceeding, as described in section 422(c)(3) of the Code, shall not be
deemed to be such a disposition. The optionee shall make appropriate
arrangements with the Company for any taxes which the Company is obligated to
collect in connection with any disposition of shares acquired pursuant to the
exercise of an incentive stock option, including any Federal, state or local
withholding taxes.
(d) Should Section 422 of the Code be amended during
the term of the Plan, the Board may modify the Plan consistently with such
amendment.
6. RESTRICTED STOCK AWARDS.
(a) The Board may make grants of Restricted Stock (as
defined below) to eligible employees. Whenever the Board deems it appropriate
to grant Restricted Stock, notice shall be given to the employee stating the
number of shares
<PAGE>
of Restricted Stock granted and the terms and conditions to which the
Restricted Stock is subject. This notice, when accepted in writing by the
Participant shall become an grant agreement between the Company and the
Participant. Restricted Stock may be awarded by the Board in its discretion
without cash consideration. As used herein, "Restricted Stock" shall mean
Company Stock awarded upon the terms and subject to the restrictions set
forth in this Section 6.
(b) No shares of Restricted Stock may be sold,
assigned, transferred, pledged, hypothecated, or otherwise encumbered or
disposed of until the restrictions on such shares as set forth in the
Participant's grant agreement have lapsed or been removed pursuant to
paragraph (d) or (e) below or pursuant to Sections 11 or 12 below.
(c) Upon the acceptance by an employee of an award of
Restricted Stock, such employee shall, subject to the restrictions set forth
in paragraph (b) above, have all the rights of a shareholder with respect to
such shares of Restricted Stock, including, but not limited to, the right to
vote such shares of Restricted Stock and the right to receive all dividends
and other distributions paid thereon. Certificates representing Restricted
Stock shall be held by the Company until the restrictions lapse and the
employee shall provide the Company with appropriate stock powers endorsed in
blank.
(d) The Board shall establish as to each award of
Restricted Stock the terms and conditions upon which the restrictions set
forth in paragraph (b) above shall lapse. The terms and conditions may
include, without limitation, the lapsing of such restrictions as a result of
the Disability, death or retirement of the employee.
(e) Notwithstanding the provisions of paragraph (b)
above, the Board may at any time, in its sole discretion, accelerate the time
at which any or all restrictions will lapse or remove any and all such
restrictions.
(f) Each employee shall agree at the time his or her
Restricted Stock is granted, and as a condition thereof, to pay to the
Company, or make arrangements satisfactory to the Company regarding the
payment to the Company, the aggregate amount of federal, state and local
income and payroll taxes that the Company is required to withhold in
connection with the lapse of restrictions on Restricted Stock. Until such
amount has been paid or arrangements satisfactory to the Company have been
made, no stock certificate free of a legend reflecting the restrictions set
forth in paragraph (b) above shall be issued to such employee. As an
alternative to making a cash payment to the Company to satisfy applicable
withholding taxes, if the grant so provides, the employee may elect to (i) to
deliver shares of Company Stock for which the employee has good title, free
and clear of all liens and encumbrances and which such employee either (A)
has held for at least six months, or (B) has purchased on the open market
(valued at their fair market value, determined pursuant to Section 9) or (ii)
to have the Company or appropriate Subsidiary retain that number of shares of
Company Stock (valued at their fair market value) that would satisfy all or a
specified portion of the applicable withholding taxes.
7. TERM OF OPTION PERIOD
The term during which options or Restricted Stock awards may be
granted under the Plan shall expire on June 14, 2009 and the option period
during which each option may be exercised shall, subject to the provisions of
Section 12 hereof, be during such period, expiring not later than the tenth
anniversary (the fifth anniversary in the case of incentive stock options
granted to a person who owns (within the meaning of section 424(d) of the
Code) more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company at the time such option is granted) of the
date the option is granted, as may be determined by the Board.
8. OPTION PRICE
The price at which shares may be purchased upon exercise of a
particular option shall be such price as may be fixed by the Board but in no
event less than the minimum required in order to comply with any applicable
law, rule or regulation and, in the case of incentive stock options, shall
not be less than one-hundred percent (100%), or in the case of incentive
stock options granted to an optionee who is a ten percent (10%) stockholder
(within the meaning of Section 7 hereof), shall not be less than one-hundred
and ten percent (110%), of the fair market value (as defined in Section 9) of
such shares on the date such option is granted.
<PAGE>
9. STOCK AS FORM OF EXERCISE PAYMENT; CASHLESS EXERCISE
(a) Stock as Form of Exercise Payment.
(i) At the discretion of the Board, a
Grantee who owns shares of Common Stock may elect to use such shares, with
the value thereof to be determined as the "fair market value" of such shares
on the day prior to the date of exercise of the option, to pay all or part of
the option price required under the Plan.
(ii) As used herein, "fair market value"
shall be deemed to be the closing price of the Common Stock on such day, if
the Common Stock is then traded on a national securities exchange, or the
closing bid price of the Common Stock on such day, if such stock is traded on
the NASDAQ National Market System or Small-Cap Market System or, if not so
traded, the average of the closing bid and asked prices thereof on such day.
(iii) If the "fair market value" of such
shares cannot be determined pursuant to Section 9(a)(ii) above, the "fair
market value" of such shares shall be determined in good faith (using
customary valuation methods) by resolution of the members of the Board, based
on the best information available to the Board.
(b) Cashless Exercise.
(i) A Grantee may exercise a vested
option, in whole or in part, at any time and from time to time, at or prior
to the expiration date thereof, by surrendering it to the Company, together
with a duly executed and completed exercise notice in the form attached to
such Grantee's grant agreement. Upon a cashless exercise, the Grantee shall
be entitled to receive that number of shares of the Common Stock of the
Company equal to the quotient obtained by dividing ((A-B)*C) by A, where:
A = The fair market value of one (1)
share of the Common Stock of the
Company on the date of exercise of
the option;
B = The per share exercise price; and
C = The total number of shares of
Common Stock of the Company subject
to purchase upon exercise of the
option.
If the above calculation results in a number less than one (1), then no
shares of the Common Stock of the Company shall be issuable or issued
pursuant to an exercise.
(ii) As used herein, "fair market value"
shall have the meaning set forth in Section 8(a)(ii) above.
(iii) Surrendered options shall be
canceled by the Company. In the event of a partial exercise, the Company will
forthwith issue and deliver to the Grantee a new option of like tenor for the
number of option shares represented by the option after giving effect to the
partial exercise.
10. EXERCISE OF OPTIONS
(a) Each option granted shall be exercisable in whole
or in part at any time, or from time to time, during the option period as the
Board may provide in the terms of such option; provided that the election to
exercise an option shall be made in accordance with applicable federal and
state laws and regulations.
(b) No option may at any time be exercised with
respect to a fractional share.
(c) No shares shall be delivered pursuant to the
exercise of any option, in whole or in part, until (i) such shares are
qualified for delivery under such securities laws and regulations as may be
deemed by the Board to be applicable thereto, (ii) such shares are listed on
each securities exchange on which the Common Stock may then be listed, (iii)
payment in full of the option price is received by the Company in cash or
stock as provided in Section 9, and (iv) until payment in cash of any
applicable withholding taxes is received by the Company. Unless prior to the
exercise of the option the shares of the Common Stock issuable upon such
exercise have been registered with the Securities and Exchange Commission
pursuant to the Securities Act of 1933, as amended (the "Act"), the notice of
exercise shall be accompanied by a representation or agreement of the
individual exercising the option to the Company to the effect that such
shares are being acquired for
<PAGE>
investment and not with a view to the resale or distribution thereof or such
other documentation as may be required by the Company unless in the opinion
of counsel to the Company such representation, agreement, or documentation is
not necessary to comply with the Act. No holder of an option, or such
holder's legal representative, legatee, or distributee shall be or be deemed
to be a holder of any shares subject to such option unless and until a
certificate or certificates therefor is issued in his name.
11. ACCELERATION OF VESTING
(a) An option shall automatically be vested and
immediately exercisable in full, and any restrictions on Restricted Stock
awards shall terminate, upon the occurrence of any of the following events:
(i) Any person within the meaning of
Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "1934 Act"), other than the Company, has
become the beneficial owner, within the meaning of Rule 13d-3
under the 1934 Act, of thirty percent (30%) or more of the
combined voting power of the Company's then outstanding voting
securities, unless such ownership by such person has been
approved by the Board immediately prior to the acquisition of
such securities by such person;
(ii) The first day on which shares of the
Common Stock are purchased pursuant to a tender offer or
exchange offer, unless such offer is made by the Company or
unless such offer has been approved or not opposed by the
Board;
(iii) The stockholders of the Company have
approved (A) an agreement to merge or consolidate with or into
another corporation and the Company is not the survivor of
such merger or consolidation, or (B) an agreement to sell or
otherwise dispose of all or substantially all of the Company's
assets (including a plan of liquidation) (a "Corporate
Transaction"). However, such option shall not automatically
vest if and to the extent that (i) such option is, in
connection with the Corporate Transaction, either to be
assumed by the successor corporation or parent thereof or to
be replaced with a comparable option for the purchase of
shares of the capital stock of the successor corporation, or;
or (ii) such option is to be replaced with a cash incentive
program of the successor corporation that preserves the spread
existing at the time of the Corporate Transaction and provides
for subsequent payout in accordance with the same vesting
schedule applicable to such option. The determination of
option comparability under clause (i) above shall be made by
the Board, and its determination shall be conclusive and
binding.
All such options shall terminate and cease
to remain outstanding immediately following the consummation
of the Corporate Transaction, except to the extent assumed by
the successor corporation. Any such options that are assumed
or replaced in the Corporate Transaction pursuant to items (i)
and (ii) of the preceding paragraph and do not otherwise
accelerate at that time shall be accelerated in the event the
holder's employment or services should subsequently terminate
within two years following such Corporate Transaction, unless
such employment or services are terminated by the successor
corporation for Cause or by the holder voluntarily without
Good Reason. Notwithstanding the foregoing, no Incentive Stock
Option shall become exercisable pursuant to this Section
11(a)(iii) without the holder's consent, if the result would
be to cause such Option not to be treated as an incentive
stock option.
As used herein, "Cause" means dishonesty,
fraud, misconduct, unauthorized use or disclosure of
confidential information or trade secrets, or conviction or
confession of a crime punishable by law (except minor
violations), in each case as determined by the Board (or the
administrator of any substituted plan), and its determination
shall be conclusive and binding. "Good Reason" means the
occurrence of any of the following events or conditions: (i) a
change in the holder's title or position that is accompanied
by a reduction in the holder's annual base salary, except in
connection with the termination of the holder's employment for
Cause, for Disability or as a result of his or her death, or
by the holder other than for Good Reason; (ii) the successor
corporation's requiring the holder (without the holder's
consent) to be based at any place outside a 35-mile radius of
his or her place of employment prior to a Corporate
Transaction, except for reasonably required travel on
successor corporation business; or (iii) any material breach
by the successor corporation of any provision of the plan.
(iv) During any period of two consecutive
years, individuals who at the beginning of such period
constitute the Board cease for any reason to constitute at
least a majority thereof, unless the
<PAGE>
election or the nomination for the election by the Company's
stockholders of each new director was approved by a vote of
at least a majority of the directors then still in office who
were directors at the beginning of the period.
(b) Other than upon the occurrence of any of the
events described in Section 11(a), the Board shall have the authority at any
time or from time to time to accelerate the vesting of any individual option
and to permit any stock option not theretofore exercisable to become
immediately exercisable.
12. TRANSFER OF OPTIONS
Options granted under the Plan may not be transferred
except (i) with the prior written consent of the Company, (ii) by will or the
laws of descent and distribution, (iii) pursuant to a domestic relations
order, as defined by the Code or (iv) pursuant to Title I of the Employee
Retirement Income Securities Act or the Rules thereunder. During the lifetime
of the Grantee, options may be exercised only by such Grantee or by such
Grantee's guardian or legal representative.
13. TERMINATION OF EMPLOYMENT
(a) Except as specifically provided in this Section
13, if the Grantee's employment or association with the Company shall
terminate for any reason before the option has vested in full, then the
unvested portion of the option shall automatically terminate on the date of
termination of employment or association and all rights and interests of the
Grantee in and to such unvested portion shall thereupon terminate.
(b) After the date on which an incentive stock option
vests, if the Grantee's employment by the Company is terminated for any
reason, the incentive stock option shall be exercisable for the lesser of (i)
three (3) months from the date of such termination of employment or (ii) the
balance of such incentive stock option's term; PROVIDED, HOWEVER, that in the
event that the termination is as a result of the death or Disability (within
the meaning of section 22(e)(3) of the Code) of the Grantee, the incentive
stock options held by such Grantee which were otherwise exercisable on the
date of his termination of employment shall expire unless exercised by such
Grantee, or, in the case of the death of a Grantee, by his heirs, legatees,
or personal representatives, within a period of twelve (12) months after the
date of termination of employment. In no event, however, shall any incentive
stock option be exercisable after ten years from the date it was granted.
Nothing in the Plan or in any option shall confer upon any Grantee the right
to continue in the employ of the Company or interfere in any way with the
right of the Company to terminate the employment of a Grantee at any time.
The Board's determination that a Grantee's employment has terminated and the
date thereof shall be final and conclusive on all persons affected thereby.
(c) The Board may, if it determines that to do so
would be in the Company's best interests, provide in a specific case or cases
for the exercise of options which would otherwise terminate upon termination
of employment with the Company for any reason, upon such terms and conditions
as the Board determines to be appropriate.
(d) In the case of a Grantee on an approved leave of
absence, the Board may, if it determines that to do so would be in the best
interests of the Company, provide in a specific case for continuation of
options during such leave of absence, such continuation to be on such terms
and conditions as the Board determines to be appropriate. Leaves of absence
for such period and purposes conforming to the personnel policy of the
Company as may be approved by the Board shall not be deemed terminations or
interruptions of employment.
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) If the Company's outstanding common stock is
hereafter changed by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split, combination, or exchange of
shares or the like, or dividends payable in shares of Common Stock, an
appropriate adjustment shall be made by the Board in the aggregate number of
shares available under the Plan and in the number of shares and price per
share subject to outstanding options. If the Company shall be reorganized,
consolidated, or merged with another corporation, or if all or substantially
all of the assets of the Company shall be sold or exchanged, the holder of an
option shall, after the occurrence of such a corporate event, be entitled to
receive upon the exercise of his option the same number and kind of shares of
stock or the same amount of property, cash, or securities as he would have
been entitled to receive upon the happening of any such corporate event as if
he had exercised such option and had been, immediately prior to such event,
the holder of the number of shares covered by such option. All adjustments
made pursuant to this paragraph to the terms or conditions of an incentive
stock option shall be subject to the requirements of section 424 of the Code.
<PAGE>
(b) Any adjustment in the number of shares shall apply
proportionately to only the unexercised portion of any option granted
hereunder. If fractions of a share would result from any such adjustment, the
adjustment shall be revised to the next higher whole number of shares.
15. TERMINATION, MODIFICATION, AND AMENDMENT
(a) The Plan shall terminate on June 14, 2009, which
is ten (10) years from the earlier of the date of its adoption by the Board
or the date on which the Plan is approved by the stockholders of the Company
and no option shall be granted after termination of the Plan.
(b) The Plan may from time to time be terminated,
modified, or amended by the affirmative vote of a majority of the votes cast
at a duly held stockholders' meeting at which a quorum representing a
majority of all outstanding voting stock is, either in person or by proxy,
present and voting on the plan, or pursuant to any other procedure allowed
under applicable state law.
(c) The Board may at any time terminate the Plan or
from time to time make such modifications or amendments of the Plan as it may
deem advisable including, without limitation, modifications to reflect
changes in applicable law; PROVIDED, HOWEVER, that the Board shall not (i)
modify or amend the Plan in any way that would disqualify any incentive stock
option issued pursuant to the Plan as an incentive stock option as defined in
section 422 of the Code or (ii) without approval by the affirmative vote of a
majority of the votes cast at a duly held stockholders' meeting at which a
quorum representing a majority of all outstanding voting stock is, either in
person or by proxy, present and voting on the Plan, or pursuant to any other
procedure allowed under applicable state law, increase (except as provided by
Section 14) the maximum number of shares as to which options may be granted
under the Plan.
(d) No termination, modification, or amendment of the
Plan, may, without the consent of the Grantee, adversely affect the rights
conferred by such option.
16. GRANTS UNDER 1997 AND 1998 PLANS
Options granted under the Duck Corporation 1997 Amended and
Restated Stock Option Plan or the Duck Corporation 1998 Stock Option Plan
will continue to be governed by the terms of the plan pursuant to which they
were granted unless such grantees agree that their grants will be governed by
the terms of this Plan.
17. SPECIAL PROVISIONS RELATING TO CALIFORNIA RESIDENTS
Notwithstanding anything to the contrary herein, the
following provisions shall govern all options granted under the Plan to
residents of the State of California (referred to herein as "California
Options"). The following provisions are intended to comply with Rule
260.140.41 of the Regulations of the Department of Corporations of the State
of California (the "California Regulations"). When issuing California
Options, the Company shall indicate on the options that they are issued
subject to these special provisions.
(a) The total number of shares granted pursuant to the
Plan is as set forth in Section 4 of the Plan.
(b) The option price or purchase price of each Share
optioned under the Plan under a California Option shall be determined by the
Board at the time of the action for the granting of the option but shall not,
in any event, be less than eighty-five percent (85%) of the Fair Market Value
of the Common Stock on the date of grant. With respect to any California
Option granted to any person who owns stock possessing more than ten percent
(10%) of the total combined voting power or value of all classes of stock of
the Company, the option price shall be at least one hundred ten percent
(110%) of the Fair Market Value of the Common Stock on the date of grant.
(c) The exercise period with respect to California
Options shall not exceed one hundred twenty (120) months from the date of
grant.
(d) California Options shall not be transferable other
than by will or the laws of descent and distribution, by instrument to an
inter vivos or testamentary trust in which the options are to be passed to
beneficiaries upon the death of the trustor (settlor), or by gift to
"immediate family" as that term is defined in 17 C.F.R. 240.16a-1(e).
(e) In the event of a stock split, reverse stock
split, stock dividend, recapitalization, combination or reclassification of
the Company's stock, the number of shares subject to a California Option
shall be adjusted in accordance with the provision of Section 13 of this Plan.
<PAGE>
(f) California Options shall, at a minimum, be
exercisable at a rate of twenty percent (20%) per year from the date of grant.
(g) Unless employment is terminated for cause as
defined by applicable law, the terms of the Plan or option grant or a
contract of employment, the right to exercise a California Option in the
event of termination of employment with the Company, to the extent that the
California Option is exercisable on the date of such termination of
employment, is as follows: at least six (6) months from the date of
termination if termination was caused by death or disability and at least
thirty (30) days from the date of termination if termination was caused by
other than death or disability.
(h) There shall be no California Options granted under
the Plan later than ten (10) years from the date the Plan was adopted or the
date the Plan is approved by the shareholders, whichever is earlier.
(i) The Plan shall be approved by the shareholders
within twelve (12) months after the date of adoption of the Plan by the Board
of Directors. No option may be exercised before shareholder approval is
obtained.
(j) The Company will comply with Section 260.140.46 of
the California Code of Regulations regarding information required to be
received by employees of the Company residing in the State of California.
The provisions of subsection (a) of Section 11 shall not
apply to California Options with the effect that there shall be no reference
in the Plan to the acceleration of the exercise period for California Options
in relation to mergers, consolidations and takeovers in which the Company is
not the surviving entity.
18. EFFECTIVE DATE
The Plan became effective on June 15, 1999 upon the
adoption by the Board subject to the approval by the affirmative vote of the
holders of a majority of the outstanding shares of the Company
[which occurred on ___, 2000]. All options granted prior to the date of such
stockholder approval shall be subject to such approval.
<PAGE>
EXHIBIT 99.2
THE DUCK CORPORATION
AMENDED AND RESTATED
1997 STOCK OPTION PLAN
ARTICLE I -- GENERAL
1.1 PURPOSE. This plan (the "Plan") authorizes the grant of
options ("Options") to purchase shares of the Company's Common Stock, par
value $.001 per share ("Common Stock"), to officers and other selected
employees of The Duck Corporation (the "Company") and its related companies
(as defined in Section 3.8) to induce them to continue as employees of the
Company or such related companies and to reward them for improvement in the
Company's long-term performance.
1.2 ADMINISTRATION.
(a) The Board of Directors of the Company (the
"Board") shall appoint from among its members a committee (the "Committee")
consisting of no fewer than two directors, each of whom shall be a
"Non-Interested Director," as defined in Rule 16b-3(b)(2)(3) of the Rules and
Regulations promulgated under the Securities Exchange Act of 1934, as amended
(the "Act").
(b) The Committee shall have the power, subject to and
within the limits of the Plan:
(1) to determine from time to time which
of the eligible persons shall be granted Options under the Plan, which
Options shall be "Incentive Options" and "Non-Qualified Options," as each is
hereinafter defined, the term of each granted Option, the time or times
during the term of each Option within which all or portions of such Option
may be exercised, and the number of shares covered by each Option;
(2) to construe and interpret the Plan and
awards granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Committee, in the exercise of this
power, shall generally determine all questions of policy and expediency that
may arise and may correct any defect, omission or inconsistency in the Plan
or in any agreement evidencing an award hereunder in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective;
(3) to prescribe the terms and provisions of
each award granted;
(4) to authorize payments in accordance with
Section 2.5; and
(5) generally, to exercise such powers and
to perform such acts in connection with the Plan as are deemed necessary or
expedient to promote the best interests of the Company.
(c) The Board at any time may revest administration of
the Plan, including all powers and duties of the Committee, in the Board,
provided that each member of the Board shall be a "disinterested person" as
defined in Section 1.2. In such event, all references herein to the Committee
shall be deemed to refer to the Board.
(d) All actions of the Committee shall be final,
conclusive and binding. No member of the Committee shall be liable for any
action taken or decision made in good faith relating to the Plan or any award
hereunder.
1.3 ELIGIBILITY. The Committee may grant Options under the Plan
to any full-time employee of the Company or of any related company
(determined at the date of grant) who is a corporate officer, division or
subsidiary president, administrative or professional employee or other
selected employee capable of making a substantial contribution to the success
of the Company. Awards may be granted to officers and employees who are also
members of the Board. In granting awards and determining their form and
amount, the Committee shall consider functions, responsibilities and
potential contributions of the individual and such other factors as the
Committee deems relevant.
<PAGE>
1.4 EFFECTIVE DATE AND EXPIRATION DATE OF PLAN. The Plan shall
be effective April 30, 1997. The Plan shall be deemed approved upon the
affirmative vote of the holders of a majority of the shares of the Company's
capital stock present, or represented, and entitled to vote at such meeting
or upon the receipt of the written consent of the holders of a majority of
the shares of the Company's capital stock entitled to vote thereon, in either
case in accordance with the Delaware General Corporation Law. No Options
shall be granted under the Plan after March 31, 2007.
1.5 AGGREGATE LIMITATION ON AWARDS.
(a) Shares of Common Stock which may be issued
pursuant to awards granted under the Plan may be either authorized and
unissued voting shares of Common Stock or authorized and issued shares of
Common Stock purchased or acquired by the Company for this or any other
purpose. Subject to Section 3.9 (relating to adjustments upon changes in
stock), the maximum number of shares of Common Stock which may be subject to
Options under the Plan shall be 905,000.
(b) If any Option granted under the Plan expires
unexercised or is terminated, cancelled or surrendered (other than in
connection with the surrender of an Option pursuant to Section 2.5) for any
reason without having been exercised in full, the number of shares of Common
Stock theretofore subject to such Option, or the unexercised, terminated,
surrendered, cancelled or unearnable portion thereof, shall be added to the
remaining number of shares of Common Stock available for grant under the Plan.
ARTICLE II -- OPTIONS
2.1 GRANT OF OPTIONS. The Committee may from time to time,
subject to the provisions of the Plan and such other terms and conditions at
it may prescribe, grant to eligible employees one or more Options to purchase
shares of Common Stock under the Plan. Options granted hereunder may be
incentive stock options ("Incentive Options") under Section 422A of the
Internal Revenue Code of 1986, as amended. Section 422A and the Internal
Revenue Code of 1986, as each may be in effect from time to time, are
hereinafter referred to, respectively, as "Section 422A" and the "Code."
Options granted hereunder which are not Incentive Options are referred to as
"Non-Qualified Options."
2.2 OPTION AGREEMENTS. The grant of an Option shall be
evidenced by a written option agreement (the "Option Agreement"),
substantially in the form of Exhibit I annexed hereto, together with such
modifications thereto as the Committee shall approve, executed by the Company
and the optionee, stating the number of shares of Common Stock subject to the
Option, designating whether and to what extent the Option is an Incentive
Option and containing such investment representations and other terms and
conditions as the Committee may from time to time determine, or as may be
required by Section 422A or any other applicable law.
2.3 OPTION PRICE. The purchase price (the "Purchase Price") for
the Common Stock covered by any Incentive Option granted under the Plan shall
in no case be less than 100% of the fair market value of such Common Stock at
the time the Option is granted (as determined in accordance with Section 3.7
of this Plan). The Purchase Price of the shares as to which an Option shall
be exercised shall be paid in full at the time of exercise, as provided in
Section 2.5, (i) in cash, (ii) by tendering to the Company shares of Common
Stock then owned by optionee having a fair market value (as determined in
accordance with Section 3.7 of this Plan) equal to the Purchase Price, (iii)
through the use of Surrender Value (as defined in Section 2.5), or (iv) a
combination of the foregoing (i), (ii) and (iii).
2.4 TERM OF OPTION. The term of each Option granted under the
Plan shall be for such period as the Committee shall determine, but not more
than 10 years from the date of grant thereof in the case of an Incentive
Option. Each Option shall be subject to earlier termination as provided in
Section 2.6 or under Section 2.7, if applicable.
2.5 EXERCISE OF OPTION.
(a) Each Option granted under the Plan shall be
exercisable on such date or dates during the term thereof and for such number
of shares of Common Stock as may be provided in the Option Agreement
evidencing its grant; PROVIDED, that an Option shall not be exercisable for
less than one share (or the remaining number of shares subject to the Option
if that number is less than one).
(b) To exercise an Option as to all or part of the
shares covered thereby, an optionee shall furnish to the Secretary of the
Company, at the Company's principal office, written notice of such exercise,
together with the Purchase Price for the shares as to which the Option is
being exercised, and shall execute such instrument as the Committee shall
direct that makes the optionee a party to such agreement as shall then be in
effect among the holders of the Company's capital stock of any class
restricting the transferability of shares of Common Stock (the "Stockholders
Agreement") (if the optionee is not
<PAGE>
already a party to the Stockholders Agreement as to the shares to be so
acquired). The notice shall specify the number of shares of the Common Stock
then being purchased.
(c) If the Value of the Common Stock subject to an
Option (as determined in accordance with this Section of the Plan) exceeds
the Purchase Price, at the election of the optionee, all or part of an
Option, to the extent it is currently exercisable, may be surrendered in
exchange for an amount equal to the excess of the aggregate Section 2.5(c)
Value of the shares of Common Stock covered by the surrender over the
aggregate Purchase Price for such shares of Common Stock (the difference
being referred to in this Plan as "Surrender Value"). For purposes of this
Section of the Plan, "Section 2.5(c) Value" shall mean the per share price at
which the Company last offered shares of Common Stock for sale (whether as
such Common Stock or after giving effect to the conversion, exchange or
exercise of another security of the Company) in an arms' length transaction
(the "Most Recent Offering Price") or, if more recent, the Option Price of
options granted under this Plan.
(d) Payment of the Purchase Price shall be made in
cash or in Surrender Value as determined pursuant to Section 2.5(c), in
shares of Common Stock or by any combination of the foregoing. To the extent
that payment is made in shares of Common Stock, the number of shares to be
taken in payment of the Purchase Price shall be determined by dividing the
Purchase Price of the shares as to which an Option is being exercised by the
fair market value (as determined in accordance with Section 3.7 of this Plan)
of one share of Common Stock on the date of payment.
(e) The shares surrendered when payment is made by
Surrender Value or in shares of Common Stock shall not be available for the
grant of future Options under this Plan.
(f) In the discretion of the Committee, the Option
Agreement may provide that shares may be issued in the name of the optionee
and another person jointly with rights of survivorship.
(g) During the life of the optionee, only optionee or
an optionee's guardian or legal representative may exercise an Option.
2.6 TERMINATION OF EMPLOYMENT. If the Company or a related
company shall terminate an optionee's employment with the Company or a
related company for any reason, or if an optionee shall terminate his
employment with the Company or a related company voluntarily, the optionee
shall have the right to exercise each Option granted to the optionee at any
time during the Permitted Exercise Period (as defined below in this Section)
but, unless otherwise determined by the Committee, only to the extent the
Option is exercisable at the time of such termination of employment. As used
in this Plan, the Permitted Exercise Period means the period of time
commencing with the grant of the Option and ending on the earlier of (i) the
date which is 90 days after shares of Common Stock first become listed on a
national securities exchange or first become eligible for trading on a
national trading system (such as NASDAQ) and (ii) the expiration of the term
of the Option, such that in no event shall an Option be exercisable after the
expiration of its term, as determined under Section 2.4.
2.7 INCENTIVE OPTIONS.
(a) Incentive Options shall be subject to the
additional terms and conditions of this Section 2.7.
(b) No Incentive Option shall be issued hereunder to
any individual who, at the time the Incentive Option is granted, owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any related company.
(c) To the extent that the aggregate fair market value
(determined in accordance with Section 3.7 of this Plan as of the time the
Incentive Option is granted) of the Common Stock with respect to which any
Incentive Options granted are exercisable for the first time by an optionee
during any calendar year (under all employee benefit plans of the Company and
its related companies) exceeds $100,000 (or such larger maximum as may be
permitted under the Code for incentive stock options granted to an individual
employee at the time the Incentive Option is granted), such options shall be
treated as Non-Qualified Options.
(d) Any optionee who disposes of shares of Common
Stock acquired by or pursuant to the exercise of an Incentive Option by sale
or exchange either (1) within two years after the date of the grant of the
Incentive Option under which the shares were acquired, or (2) within one year
of the acquisition of such shares, shall notify the Secretary of the Company,
at the Company's principal office, of such disposition, the amount realized,
the exercise price and the date of exercise of such shares. To the extent
required by law or applicable regulation, the Company shall have the right to
withhold
<PAGE>
from other sums which it may owe the optionee, or to accept remittance by the
optionee of sums in lieu thereof, an amount sufficient to satisfy any
Federal, state and local withholding tax requirements relating to such a
disposition.
(e) Each Option Agreement with respect to Incentive
Options shall contain such other provisions as may be required by Section
422A or any other applicable law.
2.8 SIX-MONTH HOLDING PERIOD. In the case of all Options
granted under the Plan, at least six months must elapse from the date of
grant of the Option to the date of disposition of the Common Stock to which
such Option relates. Each optionee, or his legal representative if such
optionee shall die during such six-month period, agrees to hold any shares of
Common Stock issued upon exercise of any Option subject to the foregoing
restriction on the disposition thereof.
2.9 STOCKHOLDERS AGREEMENT. If the Stockholders Agreement at
the time in effect does not provide for the right company to exercise a of
repurchase as to any shares of Common Stock from an employee of the Company
following the termination of such employee's employment, the following
provisions shall apply:
(a) If, at any time while the Company still continues
as a private corporation, (i) the optionee voluntarily leaves the Company, or
(ii) the Company terminates the optionee's employment for any reason
(including the death or disability of the optionee), the Company shall have
the option to repurchase from the optionee or his assigns at the Repurchase
Price (determined according to Section 2.9(b)) all or any portion of the
shares of Common Stock acquired by the employee upon the exercise of Options
granted under this Plan. The Company must exercise such option to repurchase
by written notice to the employee at his address on the Company's books and
records within 90 days after the later of (i) the optionee's departure and
(ii) the exercise of the Option by an optionee during the Permitted Exercise
Period. The Company shall be entitled to a period of one year in which to
complete payment of the Repurchase Price for the shares of Common Stock so
repurchased.
(b) The purchase price per share to be paid upon the
exercise of the repurchase option provided in Section 2.9(a) (the "Repurchase
Price") shall be the fair market value per share of Common Stock, as
determined in accordance with this Section of the Plan. If at the time of
such determination, Common Stock is listed for trading on a national
securities exchange or otherwise publicly traded, then the Repurchase Value
shall be Fair Market Value (as determined in accordance with Section 3.7 for
shares that are publicly traded) as of the end of the most recently completed
calendar quarter prior to the date on which the Company has exercised its
option under Section 2.9(a) to repurchase the optionee's Common Stock. If at
the time of such determination, Common Stock is neither so listed nor so
traded, the Committee shall determine the Repurchase Value by valuing the
Company's then outstanding Common Stock with its good faith judgment as to
the fair market value per share of Common Stock of the end of the most
recently completed calendar quarter prior to the date has exercised its
option under Section 2.9(a) to repurchase the optionee's Common Stock. If the
Repurchase Price as so determined by the Committee is 15% or more less than
the Most Recent Offering Price, the Committee shall provide a brief
explanation of the factors considered by it in determining the Repurchase
Price and at any time within 14 days of notification of the Repurchase Price,
the optionee may elect to appoint a Qualified Appraiser (as defined below in
this Section), who shall be reasonably acceptable to the Company and the
Committee, to render its judgment as to the Repurchase Price within 30 days
after the report of the Committee. If the Repurchase Price as determined by
the Appraiser is at least 15% greater than the Repurchase Price as determined
by the Committee, then the Repurchase Price will be that determined by the
Qualified Appraiser and the fees of the Qualified Appraiser will be paid by
the Company; PROVIDED, that the Company shall further have the right to
appoint a second Qualified Appraiser to determine the Repurchase Price within
30 days after the Company's receipt of the determination by the optionee's
Qualified Appraiser, in which case the Repurchase Price shall be the
mathematical average of the two determinations. As used in this Plan,
"Qualified Appraiser" shall mean an appraiser having a national reputation
that is qualified to appraise software development and licensing businesses
in the United States and is reputable in his, her or its field, and who is
not affiliated with the Company or any stockholder or their respective
Affiliates.
ARTICLE III -- MISCELLANEOUS
3.1 GENERAL RESTRICTION. Each award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that any listing or registration of the shares of Common Stock or any consent
or approval of any governmental body, or any other agreement or consent, is
necessary or desirable as a condition to the granting of an award or issuance
of Common Stock or cash in satisfaction thereof, such award may not be
consummated unless each such requirement is satisfied in a manner acceptable
to the Committee.
<PAGE>
3.2 NON-ASSIGNABILITY. No award under the Plan shall be
assignable or transferable by the recipient thereof, except by will or by the
laws of descent and distribution or other than pursuant to a qualified
domestic relations order (as defined by the Code) or Title I of the Employee
Retirement Income Security Act, or the rules thereunder.
3.3 WITHHOLDING TAXES. Whenever the Company proposes to or is
required to issue or transfer shares of Common Stock under the Plan, the
Company shall have the right to withhold or to require the participant to
remit to the Company an amount sufficient to satisfy any Federal, state or
local withholding tax requirements, but only if and to the extent required by
the Code or regulations promulgated thereunder. Whenever payments by the
Company under the Plan are to be made, such payments shall be net of an
amount sufficient to satisfy any Federal, state or local withholding tax
requirements.
3.4 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or in any
agreement entered into pursuant to it shall confer upon any participant the
right to continue in the employment of the Company or a related company or
affect any right which the Company or a related company may have to terminate
the employment of such participant.
3.5 NON-UNIFORM DETERMINATION. The determinations of the
Committee relating to the Plan (including, without limitation, its
determinations of the persons to receive awards, the form, amount, timing and
payment of such awards, the terms and provisions of such awards, and the
surrender of Options in lieu of their exercise) need not be uniform and may
be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan, whether or not such persons are similarly
situated.
3.6 NO RIGHTS AS SHAREHOLDERS. Recipients of Options under the
Plan shall have no rights as shareholders of the Company unless and until
certificates for shares of Common Stock are issued to them.
3.7 FAIR MARKET VALUE. Except as may be required by Section
422A or any other applicable law, as used in the Plan, "fair market value" on
any date shall be the simple average of the high and low prices of the Common
Stock on such date on the principal national securities exchange on which the
Common Stock is traded, or on NASDAQ if traded thereon and not on any
national securities exchange, or if not so traded, as determined by the
Committee.
3.8 RELATED COMPANY. As used in the Plan, "related company"
means any corporation in which the Company at the time in question owns,
directly or indirectly, stock possessing 50 percent or more of the total
combined voting power of all classes of stock and any corporation which at
the time in question owns, directly or indirectly, a similar interest in the
Company.
3.9 ADJUSTMENTS FOR CERTAIN CHANGES. The aggregate number of
shares of Common Stock available for awards under the Plan, and the number of
shares of Common Stock covered by each outstanding Option and the price per
share thereof, shall all be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a
stock split, stock dividend or any other increase or decrease in such shares
effective without receipt of consideration by the Company.
3.10 CHANGE IN CONTROL.
(a) In the event of a change in control (as defined in
Section 3.10(b)), each unexpired Option shall be exercisable, beginning
immediately, as to all remaining shares subject to the Option.
(b) For purposes of this Plan, a "change in control"
shall occur if (i) any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Act) other than the Company, any "person" who on
April 30, 1997 was a director or officer of the Company, any trustee or other
fiduciary holding Common Stock under an employee benefit plan of the Company
or a related company, or any corporation which is owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of Common Stock, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Act) of more than fifty percent
(50%) of the then outstanding voting stock of the Company, or (ii) during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board (and any new director whose election by the Board
or whose nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result 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 entity) more than fifty percent (50%) of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation,
or (iv) the stockholders of the
<PAGE>
Company approve a plan of complete liquidation of the Company or an agreement
for the sale or disposition by the Company or all or substantially all of the
Company's assets.
3.11 AMENDMENT OR TERMINATION OF THE PLAN. The Board, without
further approval of the stockholders, may at any time terminate the Plan or
any part thereof and may from time to time amend the Plan as it may deem
advisable, including, with respect to Incentive Options, by making any
changes deemed necessary or desirable to comply with Section 422A and any
regulations thereunder, provided, however, that without shareholder approval,
the Board may not (a) increase the aggregate number of shares of Common Stock
which may be issued under the Plan (other than increases permitted under
Section 3.9), (b) extend the term of the Plan, (c) extend the period during
which an Incentive Option may be exercised beyond 10 years, (d) otherwise
materially increase the benefits accruing to optionees or (e) materially
modify the requirements as to eligibility for participation in the Plan.
Termination or amendment of the Plan shall not, without the consent of the
individual, affect any right of such individual (including without limitation
any right under Section 3.10) under an award previously granted.
<PAGE>
EXHIBIT 99.3
THE DUCK CORPORATION
1998 STOCK OPTION PLAN
ARTICLE I -- GENERAL
1.1 PURPOSE. This plan (the "Plan") authorizes the grant of
options ("Options") to purchase shares of the Company's Common Stock, par
value $.001 per share ("Common Stock"), to officers and other selected
employees of The Duck Corporation (the "Company") and its related companies
(as defined in Section 3.8) to induce them to continue as employees of the
Company or such related companies and to reward them for improvement in the
Company's long-term performance.
1.2 ADMINISTRATION.
(a) The Board of Directors of the Company (the
"Board") shall appoint from among its members a committee (the "Committee")
consisting of no fewer than two directors, each of whom shall be a
"Non-Employee Director," as defined in Rule 16b-3(b)(3)(i) of the Rules and
Regulations promulgated under the Securities Exchange Act of 1934, as amended
(the "Act").
(b) The Committee shall have the power, subject to and
within the limits of the Plan:
(1) to determine from time to time which
of the eligible persons shall be granted Options under the Plan, which
Options shall be "Incentive Options" and "Non-Qualified Options," as each is
hereinafter defined, the term of each granted Option, the time or times
during the term of each Option within which all or portions of such Option
may be exercised, and the number of shares covered by each Option;
(2) to construe and interpret the Plan and
awards granted under it, and to establish, amend and revoke rules and
regulations for its administration. The Committee, in the exercise of this
power, shall generally determine all questions of policy and expediency that
may arise and may correct any defect, omission or inconsistency in the Plan
or in any agreement evidencing an award hereunder in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective;
(3) to prescribe the terms and provisions of
each award granted;
(4) to authorize payments of Surrender Value
in accordance with Section 2.5; and
(5) generally, to exercise such powers and
to perform such acts in connection with the Plan as are deemed necessary or
expedient to promote the best interests of the Company.
(c) The Board at any time may revest administration of
the Plan, including all powers and duties of the Committee, in the Board;
provided, that each member of the Board shall be a "disinterested person" as
defined in Section 1.2. In such event, all references herein to the Committee
shall be deemed to refer to the Board.
(d) All actions of the Committee shall be final,
conclusive and binding. No member of the Committee shall be liable for any
action taken or decision made in good faith relating to the Plan or any award
hereunder.
1.3 ELIGIBILITY. The Committee may grant Options under the Plan
to any full-time employee of the Company or of any related company
(determined at the date of grant) who is a corporate officer, division or
subsidiary president, administrative or professional employee or other
selected employee capable of making a substantial contribution to the success
of the Company. Awards may be granted to officers and employees who are also
members of the Board. In granting awards and determining their form and
amount, the Committee shall consider functions, responsibilities and
potential contributions of the individual and such other factors as the
Committee deems relevant.
1.4 EFFECTIVE DATE AND EXPIRATION DATE OF PLAN. The Plan shall
be effective October 1, 1998. The Plan shall be deemed approved upon the
affirmative vote of the holders of a majority of the shares of the Company's
capital stock present, or represented, and entitled to vote at such meeting
or upon the receipt of the written consent of the holders of a majority of
<PAGE>
the shares of the Company's capital stock entitled to vote thereon, in either
case in accordance with the Delaware General Corporation Law. No Options
shall be granted under the Plan after September 30, 2008.
1.5 AGGREGATE LIMITATION ON AWARDS.
(a) Shares of Common Stock which may be issued
pursuant to awards granted under the Plan may be either authorized and
unissued voting shares of Common Stock or authorized and issued shares of
Common Stock purchased or acquired by the Company for this or any other
purpose. Subject to Section 3.9 (relating to adjustments upon changes in
stock), the maximum number of shares of Common Stock which may be subject to
Options under the Plan shall be 900,000 shares.
(b) If any Option granted under the Plan expires
unexercised or is terminated, cancelled or surrendered (other than in
connection with the surrender of an Option pursuant to Section 2.5) for any
reason without having been exercised in full, the number of shares of Common
Stock theretofore subject to such Option, or the unexercised, terminated,
surrendered, cancelled or unearnable portion thereof, shall be added to the
remaining number of shares of Common Stock available for grant under the Plan.
ARTICLE II -- OPTIONS
2.1 GRANT OF OPTIONS. The Committee may from time to time,
subject to the provisions of the Plan and such other terms and conditions at
it may prescribe, grant to eligible employees one or more Options to purchase
shares of Common Stock under the Plan. Options granted hereunder may be
incentive stock options ("Incentive Options") under Section 422A of the
Internal Revenue Code of 1986, as amended. Section 422A and the Internal
Revenue Code of 1986, as each may be in effect from time to time, are
hereinafter referred to, respectively, as "Section 422A" and the "Code."
Options granted hereunder which are not Incentive Options are referred to as
"Non-Qualified Options."
2.2 OPTION AGREEMENTS. The grant of an Option shall be
evidenced by a written option agreement (the "Option Agreement"),
substantially in the form of Exhibit I annexed hereto, together with such
modifications thereto as the Committee shall approve, executed by the Company
and the optionee, stating the number of shares of Common Stock subject to the
Option, designating whether and to what extent the Option is an Incentive
Option and containing such investment representations and other terms and
conditions as the Committee may from time to time determine, or as may be
required by Section 422A or any other applicable law.
2.3 OPTION PRICE. The purchase price (the "Purchase Price") for
the Common Stock covered by any Incentive Option granted under the Plan shall
in no case be less than 100% of the fair market value of such Common Stock at
the time the Option is granted (as determined in accordance with Section 3.7
of this Plan). The Purchase Price of the shares as to which an Option shall
be exercised shall be paid in full at the time of exercise, as provided in
Section 2.5, (i) in cash, (ii) by tendering to the Company shares of Common
Stock then owned by optionee having a fair market value (as determined in
accordance with Section 3.7 of this Plan) equal to the Purchase Price, (iii)
through the use of Surrender Value (as defined in Section 2.5), or (iv) a
combination of the foregoing (i), (ii) and (iii).
2.4 TERM OF OPTION. The term of each Option granted under the
Plan shall be for such period as the Committee shall determine, but not more
than 10 years from the date of grant thereof in the case of an Incentive
Option. Each Option shall be subject to earlier termination as provided in
Section 2.6.
2.5 EXERCISE OF OPTION.
(a) Each Option granted under the Plan shall be
exercisable on such date or dates during the term thereof and for such number
of shares of Common Stock as may be provided in the Option Agreement
evidencing its grant; PROVIDED, that an Option shall not be exercisable for
less than one share (or the remaining number of shares subject to the Option
if that number is less than one).
(b) To exercise an Option as to all or part of the
shares covered thereby, an optionee shall furnish to the Secretary of the
Company, at the Company's principal office, written notice of such exercise,
together with the Purchase Price for the shares as to which the Option is
being exercised, and shall execute such instrument as the Committee shall
direct that makes the optionee a party to such agreement as shall then be in
effect among the holders of the Company's capital stock of any class
restricting the transferability of shares of Common Stock (the "Stockholders
Agreement") (if the optionee is not already a party to the Stockholders
Agreement as to the shares to be so acquired). The notice shall specify the
number of shares of the Common Stock then being purchased.
<PAGE>
(c) If the Section 2.5 Value of shares of the Common
Stock subject to an Option (as determined in accordance with this Section of
the Plan) exceeds the Purchase Price, at the election of the optionee, all or
part of an Option, to the extent it is currently exercisable, may be
surrendered in exchange for an amount equal to the excess of the aggregate
Section 2.5(c) Value of the shares of Common Stock covered by the surrender
over the aggregate Purchase Price for such shares of Common Stock (the
difference being referred to in this Plan as "Surrender Value"). As used
herein, "Section 2.5(c) Value" shall mean the per share price at which the
Company last offered shares of Common Stock for sale (whether as such Common
Stock or after giving effect to the conversion, exchange or exercise of
another security of the Company) in an arms' length transaction (the "Most
Recent Offering Price") or, if more recent, the Option Price of options
granted under this Plan.
(d) To the extent that payment an optionee pays the
Purchase Price in shares of Common Stock, the number of shares to be taken in
payment of the Purchase Price shall be determined by dividing the Purchase
Price of the shares of Common Stock as to which an Option is being exercised
by the fair market value (as determined in accordance with Section 3.7 of
this Plan) of one share of Common Stock on the date of payment.
(e) The shares of Common Stock surrendered when
payment is made by Surrender Value or in shares of Common Stock shall not be
available for the grant of future Options under this Plan.
(f) In the discretion of the Committee, the Option
Agreement may provide that shares of Common Stock may be issued in the name
of the optionee and another person jointly with rights of survivorship.
(g) During the life of the optionee, only an optionee
or an optionee's guardian or legal representative may exercise an Option.
2.6 TERMINATION OF EMPLOYMENT.
(a) If an optionee's employment with the Company or a
related company shall terminate for cause, as defined in any written
employment agreement to which the optionee is subject, or, if there is no
such agreement, as determined by the Committee, or if an optionee shall
terminate his employment with the Company or a related company voluntarily,
all Options the optionee holds shall expire immediately upon such
termination. Any optionee referred to in this Section 2.6(a) is referred to
as a "Cause-Terminated Optionee."
(b) If the employment with the Company or a related
company of an optionee (other than a Cause-Terminated Optionee) ends after
that optionee has become eligible for a formal or an early retirement benefit
under any retirement benefit plan maintained by the Company, that optionee
shall have the right to exercise each Option granted to that optionee within
36 months after the end of that optionee's employment (or with such shorter
period as may be specified in the related Option Agreement) to the extent the
Option is exercisable at the time of exercise.
(c) If the employment with the Company or a related
company of an optionee (other than a Cause-Terminated Optionee) ends as a
result of that optionee's total disability, that optionee shall have the
right to exercise each Option granted to that optionee as to all unexercised
shares until the expiration of its term. For purposes of the foregoing
sentence, "total disability" shall mean a permanent mental or physical
disability as determined by the Committee.
(d) If an optionee shall die while any Option granted
to the optionee is still exercisable under Section 2.6(b), (c) or (e), any
such Option may be exercised as to all unexercised shares within a period of
one year from the date of that optionee's death by the executor or
administrator of that optionee's estate of by the person or persons to whom
that optionee shall have transferred such right by will or by the laws of
descent or distribution.
(e) Unless otherwise provided in the Option Agreement
evidencing the grant, in all other cases of termination or expiration of
employment an optionee (other than a Cause-Terminated Optionee) whose
employment has terminated or expired shall have the right to exercise each
Option granted to that optionee only within three months after his or her
termination, but only to the extent the Option is exercisable at the time of
such termination of employment.
(f) Notwithstanding anything to the contrary in this
Section 2.6, in no event shall an Option be exercisable after the expiration
of its term, as determined under Section 2.4.
2.7 INCENTIVE OPTIONS.
(a) Incentive Options shall be subject to the
additional terms and conditions of this Section 2.7.
<PAGE>
(b) No Incentive Option shall be issued hereunder to
any individual who, at the time the Incentive Option is granted, owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any related company.
(c) To the extent that the aggregate fair market value
(determined in accordance with Section 3.7 of this Plan as of the time the
Incentive Option is granted) of the Common Stock with respect to which any
Incentive Options granted are exercisable for the first time by an optionee
during any calendar year (under all employee benefit plans of the Company and
its related companies) exceeds $100,000 (or such larger maximum as may be
permitted under the Code for incentive stock options granted to an individual
employee at the time the Incentive Option is granted), such options shall be
treated as Non-Qualified Options.
(d) Any optionee who disposes of shares of Common
Stock acquired by or pursuant to the exercise of an Incentive Option by sale
or exchange either (1) within two years after the date of the grant of the
Incentive Option under which the shares were acquired, or (2) within one year
of the acquisition of such shares, shall notify the Secretary of the Company,
at the Company's principal office, of such disposition, the amount realized,
the exercise price and the date of exercise of such shares. To the extent
required by law or applicable regulation, the Company shall have the right to
withhold from other sums which it may owe the optionee, or to accept
remittance by the optionee of sums in lieu thereof, an amount sufficient to
satisfy any Federal, state and local withholding tax requirements relating to
such a disposition.
(e) Each Option Agreement with respect to Incentive
Options shall contain such other provisions as may be required by Section
422A or any other applicable law.
2.8 SIX-MONTH HOLDING PERIOD. In the case of all Options
granted under the Plan, at least six months must elapse from the date of
grant of the Option to the date of disposition of the Common Stock to which
such Option relates. Each optionee, or his legal representative if such
optionee shall die during such six-month period, agrees to hold any shares of
Common Stock issued upon exercise of any Option subject to the foregoing
restriction on the disposition thereof.
2.9 STOCKHOLDERS AGREEMENT. If the Stockholders Agreement at
the time in effect does not provide for the Company to exercise a right of
repurchase as to any shares of Common Stock from an employee of the Company
following the termination of such employee's employment, the following
provisions shall apply:
(a) If, at any time while the Company still continues
as a private corporation, (i) the optionee voluntarily leaves the Company, or
(ii) the Company terminates the optionee's employment for any reason
(including the death or disability of the optionee), the Company shall have
the option to repurchase from the optionee or his assigns at the Repurchase
Price (determined according to Section 2.9(b)) all or any portion of the
shares of Common Stock the employee upon the exercise of Options granted
under this Plan. The Company must exercise such acquired option to repurchase
by written notice to the employee at his address on the Company's books and
records within 90 days after the optionee's departure. The Company shall be
entitled to a period of one year after such exercise is made in which to
complete payment of the Repurchase Price for the shares of Common Stock so
repurchased.
(b) The purchase price per share to be paid upon the
exercise of the repurchase option provided in Section 2.9(a) (the "Repurchase
Price") shall be the fair market value per share of Common Stock, as
determined in accordance with this Section of the Plan. If at the time of
such determination, Common Stock is listed for trading on a national
securities exchange or otherwise publicly traded, then the Repurchase Value
shall be Fair Market Value (as determined in accordance with Section 3.7 for
shares that are publicly traded) as of the end of the most recently completed
calendar quarter prior to the date on which the Company has exercised its
option under Section 2.9(a) to repurchase the optionee's Common Stock. If at
the time of such determination, Common Stock is neither so listed nor so
traded, the Committee shall determine the Repurchase Value by valuing the
Company's then outstanding Common Stock with its good faith judgment as to
the fair market value per share of Common Stock of the end of the most
recently completed calendar quarter prior to the date has exercised its
option under Section 2.9(a) to repurchase the optionee's Common Stock. If the
Repurchase Price as so determined by the Committee is 15% or more less than
the Most Recent Offering Price, the Committee shall provide a brief
explanation of the factors considered by it in determining the Repurchase
Price and at any time within 14 days of notification of the Repurchase Price,
the optionee may elect to appoint a Qualified Appraiser (as defined below in
this Section), who shall be reasonably acceptable to the Company and the
Committee, to render its judgment as to the Repurchase Price within 30 days
after the report of the Committee. If the Repurchase Price as determined by
the Appraiser is at least 15% greater than the Repurchase Price as determined
by the Committee, then the Repurchase Price will be that determined by the
Qualified Appraiser and the fees of the Qualified Appraiser will be paid by
the Company; PROVIDED, that the Company shall further have the right to
appoint a second Qualified Appraiser to determine the
<PAGE>
Repurchase Price within 30 days after the Company's receipt of the
determination by the optionee's Qualified Appraiser, in which case the
Repurchase Price shall be the mathematical average of the two determinations.
As used in this Plan, "Qualified Appraiser" shall mean an appraiser having a
national reputation that is qualified to appraise software development and
licensing businesses in the United States and is reputable in his, her or its
field, and who is not affiliated with the Company or any stockholder or their
respective Affiliates.
ARTICLE III -- MISCELLANEOUS
3.1 GENERAL RESTRICTION. Each award under the Plan shall be
subject to the requirement that, if at any time the Committee shall determine
that any listing or registration of the shares of Common Stock or any consent
or approval of any governmental body, or any other agreement or consent, is
necessary or desirable as a condition to the granting of an award or issuance
of Common Stock or cash in satisfaction thereof, such award may not be
consummated unless each such requirement is satisfied in a manner acceptable
to the Committee.
3.2 NON-ASSIGNABILITY. No award under the Plan shall be
assignable or transferable by the recipient thereof, except by will or by the
laws of descent and distribution or other than pursuant to a qualified
domestic relations order (as defined by the Code) or Title I of the Employee
Retirement Income Security Act, or the rules thereunder.
3.3 WITHHOLDING TAXES. Whenever the Company proposes to or is
required to issue or transfer shares of Common Stock under the Plan, the
Company shall have the right to withhold or to require the participant to
remit to the Company an amount sufficient to satisfy any Federal, state or
local withholding tax requirements, but only if and to the extent required by
the Code or regulations promulgated thereunder. Whenever payments by the
Company under the Plan are to be made, such payments shall be net of an
amount sufficient to satisfy any Federal, state or local withholding tax
requirements.
3.4 NO RIGHT TO EMPLOYMENT. Nothing in the Plan or in any
agreement entered into pursuant to it shall confer upon any participant the
right to continue in the employment of the Company or a related company or
affect any right which the Company or a related company may have to terminate
the employment of such participant.
3.5 NON-UNIFORM DETERMINATION. The determinations of the
Committee relating to the Plan (including, without limitation, its
determinations of the persons to receive awards, the form, amount, timing and
payment of such awards, the terms and provisions of such awards, and the
surrender of Options in lieu of their exercise) need not be uniform and may
be made by it selectively among persons who receive, or are eligible to
receive, awards under the Plan, whether or not such persons are similarly
situated.
3.6 NO RIGHTS AS SHAREHOLDERS. Recipients of Options under the
Plan shall have no rights as shareholders of the Company unless and until
certificates for shares of Common Stock are issued to them.
3.7 FAIR MARKET VALUE. Except as may be required by Section
422A or any other applicable law, as used in the Plan, "fair market value" on
any date shall be the simple average of the high and low prices of the Common
Stock on such date on the principal national securities exchange on which the
Common Stock is traded, or on NASDAQ if traded thereon and not on any
national securities exchange, or if not so traded, as determined by the
Committee.
3.8 RELATED COMPANY. As used in the Plan, "related company"
means any corporation in which the Company at the time in question owns,
directly or indirectly, stock possessing 50 percent or more of the total
combined voting power of all classes of stock and any corporation which at
the time in question owns, directly or indirectly, a similar interest in the
Company.
3.9 ADJUSTMENTS FOR CERTAIN CHANGES. The aggregate number of
shares of Common Stock available for awards under the Plan, and the number of
shares of Common Stock covered by each outstanding Option and the price per
share thereof, shall all be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a
stock split, stock dividend or any other increase or decrease in such shares
effective without receipt of consideration by the Company.
3.10 CHANGE IN CONTROL.
(a) In the event of a change in control (as defined in
Section 3.10(b)), each unexpired Option shall be exercisable, beginning
immediately, as to all remaining shares subject to the Option.
<PAGE>
(b) For purposes of this Plan, a "change in control"
shall occur if (i) any "person" or "group" (within the meaning of Sections
13(d) and 14(d)(2) of the Act) other than the Company, any "person" who on
April 30, 1997 was a director or officer of the Company, any trustee or other
fiduciary holding Common Stock under an employee benefit plan of the Company
or a related company, or any corporation which is owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of Common Stock, is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Act) of more than fifty percent
(50%) of the then outstanding voting stock of the Company, or (ii) during any
period of two consecutive years, individuals who at the beginning of such
period constitute the Board (and any new director whose election by the Board
or whose nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority thereof, or (iii) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result 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 entity) more than fifty percent (50%) of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation,
or (iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company or all or substantially all of the Company's assets.
3.11 AMENDMENT OR TERMINATION OF THE PLAN. Without further
approval of the stockholders, the Board may at any time terminate the Plan or
any part thereof and may from time to time amend the Plan as it may deem
advisable, including, with respect to Incentive Options, by making any
changes deemed necessary or desirable to comply with Section 422A and any
regulations thereunder; PROVIDED, that without shareholder approval, the
Board may not (a) increase the aggregate number of shares of Common Stock
which may be issued under the Plan (other than increases permitted under
Section 3.9), (b) extend the term of the Plan, (c) extend the period during
which an Incentive Option may be exercised beyond 10 years, (d) otherwise
materially increase the benefits accruing to optionees or (e) materially
modify the requirements as to eligibility for participation in the Plan.
Termination or amendment of the Plan shall not, without the consent of the
individual, affect any right of such individual (including without limitation
any right under Section 3.10) under an award previously granted.
