<PAGE>
As filed with the Securities and Exchange Commission on December 29, 1999
Registration No. 333-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------------------------
TERAYON COMMUNICATION SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 77-0328533
(State of Incorporation) (I.R.S. Employer Identification No.)
-----------------------------
2952 Bunker Hill Lane
Santa Clara, California 95054
(Address of principal executive offices)
-----------------------------
1999 Non-Officer Equity Incentive Plan
(Full title of the plans)
Edward Lopez
General Counsel
2952 Bunker Hill Lane
Santa Clara, California 95054
(408) 727-4400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------------
Copies to:
Karyn S. Tucker Esq.
Cooley Godward LLP
One Maritime Plaza, 20th Fl.
San Francisco, California 94111
(415) 693-2000
----------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================
Proposed Maximum Proposed Maximum
Title of Securities Amount to be Offering Price Per Aggregate Offering Amount of
to be Registered Registered Share (1) Price (1) Registration Fee
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Common
Stock, par value
$0.001 per share,
issuable pursuant
to outstanding
options under the
1999 Non-Officer
Equity Incentive
Plan 860,000 $40.37-$64.37(1)(a) $ 42,167,800 $11,132.30
========================================================================================================
Shares of Common
Stock, par value
$0.001 per share,
reserved for future
grant under the
1999 Non-Officer
Equity Incentive
Plan 2,140,000 69.25(1)(b) 148,195,000 39,123.48
========================================================================================================
Totals 3,000,000 190,362,800 $50,255.78
========================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee. The offering price per share and aggregate offering price are
based upon (a) the weighted average exercise price, for shares subject to
options previously granted under the Terayon Communication Systems, Inc.
("Registrant" or "Company") 1999 Non-Officer Equity Incentive Plan (pursuant to
Rule 457(h) under the Securities Act of 1933, as amended (the "Act")) and (b)
the average of the high and low prices of the Company's Common Stock as reported
on the Nasdaq National Market on December 23 , 1999 for shares available for
grant pursuant to the 1999 Non-Officer Equity Incentive Plan (pursuant to Rule
457(c) under the Act).
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Terayon Communication Systems, Inc. (the
"Company") with the Securities and Exchange Commission are incorporated by
reference into this Registration Statement:
(a) The Company's latest annual report on Form 10-K filed pursuant to
Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or either (1) the Company's latest prospectus filed pursuant to
Rule 424(b) under the Securities Act of 1933, as amended (the "Act"), that
contains audited financial statements for the Company's latest fiscal year for
which such statements have been filed, or (2) the Company's effective
registration statement on Form 10 or 20-F filed under the Exchange Act
containing audited financial statements for the Company's latest fiscal year.
(b) All other documents listed below and any future filings we will make
with the SEC under Section 13(a) or 15(d) of the Securities Exchange Act of
1934 or the registration statement referred to in (a) above:
. Quarterly report on the Form 10-Q for the quarter ended March 31, 1999
. Quarterly report on the Form 10-Q for the quarter ended June 30, 1999
. Quarterly report on the Form 10-Q for the quarter ended on September 30,
1999
. Current Report on Form 8-K, filed October 1, 1999 and amended on Form
8-K/A, filed October 4, 1999; and
. Current Report on Form 8-K, filed December 13, 1999, and amended on
Form 8-K/A, filed on December 27, 1999.
(c) The description of the common stock contained in our registration
statement on Form 8-A, as filed on July 20, 1998 with the set filed.
All reports and other documents subsequently filed by the Company 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 herein and to be a part of this
registration statement from the date of the filing of such reports and
documents.
DESCRIPTION OF SECURITIES
Not applicable.
INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
As permitted by Section 145 of the Delaware General Corporation Law, the
Bylaws of the Registrant provide that (i) the Registrant is required to
indemnify its directors and executive officers to the fullest extent permitted
by the Delaware General Corporation Law, (ii) the Registrant may, in its
discretion, indemnify other officers, employees and agents as set forth in the
Delaware General Corporation Law, (iii) to the fullest extent permitted by the
Delaware General Corporation Law, the Registrant is required to advance all
expenses incurred by its directors and executive officers in connection with a
legal proceeding (subject to certain exceptions), (iv) the rights conferred in
the Bylaws are not exclusive, (v) the Registrant is authorized to enter into
indemnification agreements with its directors, officers, employees and agents
and (vi) the Registrant may not retroactively amend the Bylaws provisions
relating to indemnity.
The Registrant has entered into agreements with its directors and executive
officers that require the Registrant to indemnify such persons against expenses,
judgments, fines, settlements and other amounts that such person becomes legally
obligated to pay (including expenses of a derivative action) in connection with
any proceeding, whether actual or threatened, to which any such person may be
made a party by reason of the fact that such person is or was a director or
officer of the Registrant or any of its affiliated enterprises, provided such
person acted in good faith and in a manner such person reasonably believed to be
in or not opposed to the best interests of the Registrant. The indemnification
agreements also set forth certain procedures that will apply in the event of a
claim for indemnification thereunder.
1.
<PAGE>
EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
EXHIBITS
Exhibit
Number
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.3 Consent of Kost Forer & Gabbay (a member of Ernst & Young
International), Independent Auditors.
23.4 Consent of Luboshitz Kasierer (Member Firm of Arthur Andersen),
Independent Public Accountants.
23.5 Consent of Cooley Godward LLP is contained in Exhibit 5.1 to this
Registration Statement.
24 Power of Attorney is contained on the signature pages.
99.1 1999 Non-Officer Equity Incentive Plan.
99.2 Form of Non-Statutory Stock Option Agreement used in connection with
the 1999 Non-Officer Equity Incentive Plan.
UNDERTAKINGS
1. The undersigned registrant hereby undertakes:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) ((S) 230.424(b) of this
chapter) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (a)(i) and (a)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the issuer pursuant to
section 13 or section 15(d) of the Exchange Act that are incorporated by
reference herein.
2.
<PAGE>
(b) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered herein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(c) 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.
2. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Exchange Act) that is
incorporated by reference in 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.
3. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act 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 Securities 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, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Santa Clara, State of California, on the 29th day of
December, 1999.
TERAYON COMMUNICATION SYSTEMS, INC.
By: /s/ Ray M. Fritz
------------------------------
Ray M. Fritz
Chief Financial Officer
POWER OF ATTORNEY
Know All Persons By These Presents, that each person whose signature
appears below constitutes and appoints Dr. Zaki Rakib and Ray M. Fritz, or
either of them, his true and lawful attorney-in-fact and agent, with full power
of substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, and each of them, full power and authority to do and perform each and
every act and thing requisite and necessary to be done in connection therewith,
as fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents, or any of
them, or their or his substitutes or substitute, may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Dr. Zaki Rakib Chief Executive Officer and Director (Principal December 29, 1999
- ----------------------------------------- Executive Officer)
Dr. Zaki Rakib
/s/ Ray M. Fritz Chief Financial Officer (Principal Financial and December 29, 1999
- ----------------------------------------- Accounting Officer)
Ray M. Fritz
/s/ Shlomo Rakib Chairman of the Board of Directors December 29, 1999
- -----------------------------------------
Shlomo Rakib
/s/ Michael D'Avella Director December 29, 1999
- -----------------------------------------
Michael D'Avella
/s/ Alek Krstajic Director December 29, 1999
- -----------------------------------------
Alek Krstajic
</TABLE>
4.
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Christopher J. Schaepe Director December 29, 1999
- -----------------------------------------
Christopher J. Schaepe
/s/ Lewis Solomon Director December 29, 1999
- -----------------------------------------
Lewis Solomon
/s/ Mark Stevens Director December 29, 1999
- -----------------------------------------
Mark Stevens
</TABLE>
5.
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
5.1 Opinion of Cooley Godward LLP.
23.1 Consent of Ernst & Young LLP, Independent Auditors.
23.2 Consent of PricewaterhouseCoopers LLP, Independent Accountants.
23.3 Consent of Kost Forer & Gabbay (a member of Ernst & Young
International), Independent Auditors.
23.4 Consent of Luboshitz Kasierer (Member Firm of Arthur Andersen),
Independent Public Accountants.
23.5 Consent of Cooley Godward LLP is contained in Exhibit 5.1 to this
Registration Statement.
24 Power of Attorney is contained on the signature pages.
99.1 1999 Non-Officer Equity Incentive Plan.
99.2 Form of Non-Statutory Stock Option Agreement used in connection with
the 1999 Non-Officer Equity Incentive Plan.
6.
<PAGE>
Exhibit 5.1
December 29, 1999
Terayon Communication Systems, Inc.
2952 Bunker Hill Lane
Santa Clara, CA 95054
Ladies and Gentlemen:
You have requested our opinion with respect to certain matters in connection
with the filing Terayon Communication Systems, Inc. (the "Company") of a
Registration Statement on Form S-8 (the "Registration Statement") with the
Securities and Exchange Commission covering the offering of up to 3,000,000
shares of the Company's Common Stock, $.001 par value, (the "Shares") pursuant
to its 1999 Non-Officer Equity Incentive Plan (the "Plan").
In connection with this opinion, we have examined the Registration Statement and
related Prospectus, your Certificate of Incorporation and By-laws, as amended,
and such other documents, records, certificates, memoranda and other instruments
as we deem necessary as a basis for this opinion. We have assumed the
genuineness and authenticity of all documents submitted to us as originals, the
conformity to originals of all documents submitted to us as copies thereof, and
the due execution and delivery of all documents where due execution and delivery
are a prerequisite to the effectiveness thereof.
On the basis of the foregoing, and in reliance thereon, we are of the opinion
that the Shares, when sold and issued in accordance with the Plan, the
Registration Statement and related Prospectus, will be validly issued, fully
paid, and nonassessable (except as to shares issued pursuant to certain deferred
payment arrangements, which will be fully paid and nonassessable when such
deferred payments are made in full).
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
Cooley Godward LLP
By: /s/ Karyn S. Tucker
---------------------------------
Karyn S. Tucker
7.
<PAGE>
Exhibit 23.1
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Form
S-8) pertaining to the 1999 Non-Officer Equity Incentive Plan of Terayon
Communication Systems, Inc., of our reports, dated January 15, 1999, with
respect to the consolidated financial statements and schedule of Terayon
Communication Systems, Inc. included in its Annual Report (Form 10-K) for the
year ended December 31, 1998, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
San Jose, California
December 22, 1999
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of Terayon Communication Systems, Inc. of our report
dated February 12, 1999 relating to the financial statements of Imedia
Corporation, which appear in the Terayon Communication Systems, Inc. Current
Report on Form 8-K/A of Terayon Communication Systems, Inc. filed on October 4,
1999.
/s/ PricewaterhouseCoopers LLP
San Jose, California
December 22, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the 1999 Non-Officer Equity Incentive Plan of Terayon
Communication Systems, Inc. of our report dated March 16, 1999 (except for
Note 1c, as to which the date is June 30, 1999), with respect to the financial
statements of Telegate Ltd. included in Terayon Communication Systems, Inc.'s
Current Report on Form 8-K dated November 22, 1999, filed with the Securities
and Exchange Commission.
/s/ Kost Forer and Gabbay
Certified Public Accountants (Israel)
A Member of Ernst & Young International
Tel-Aviv, Israel
December 22, 1999
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
(Form S-8) pertaining to the 1999 Non-Officer Equity Incentive Plan of Terayon
Communication Systems, Inc. of our report dated June 23, 1999, with respect to
the consolidated financial statements of Radwiz Ltd. included in Terayon
Communication Systems, Inc.'s Current Report on Form 8-K dated November 22,
1999, filed with the Securities and Exchange Commission.
/s/ Luboshitz Kasierer
Member Firm of Arthur Andersen
Tel-Aviv, Israel
December 22, 1999
<PAGE>
EXHIBIT 99.1
TERAYON COMMUNICATION SYSTEMS
1999 NON-OFFICER EQUITY INCENTIVE PLAN
Adopted September 21, 1999
Stockholder Approval Not Required
1. Purposes.
(a) The purpose of the Plan is to provide a means by which selected
Employees of and Consultants to the Company and its Affiliates who are not
Officers or members of the Boards of Directors of the Company or any of its
Affiliates, may be given an opportunity to benefit from increases in value of
the stock of the Company through the granting of (i) Nonstatutory Stock
Options, (ii) stock bonuses and (iii) rights to purchase restricted stock, all
as described below. The Plan is also intended to provide a means by which the
Company may grant options to persons not previously employed by the Company as
an inducement essential to those persons' entering employment contracts with
the Company. These inducement grants may be made to persons who ultimately are
employed by the Company as Officers.
The Company, by means of the Plan, seeks to retain the services of persons
who are now Employees of or Consultants to the Company or an Affiliate and to
provide incentives for such persons to exert maximum efforts for the success of
the Company and its Affiliates.
The Company intends that the Stock Awards issued under the Plan shall, in
the discretion of the Board or any Committee to which responsibility for
administration of the Plan has been delegated pursuant to subsection 3(c), be
either (i) Options granted pursuant to Section 6 hereof or (ii) stock bonuses or
rights to purchase restricted stock granted pursuant to Section 7 hereof.
2. Definitions.
(a) "Affiliate" means any parent corporation or subsidiary corporation,
whether now or hereafter existing, as those terms are defined in Sections
424(e) and (f) respectively, of the Code.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986, as amended.
(d) "Committee" means a Committee appointed by the Board in accordance
with subsection 3(c) of the Plan.
(e) "Company" means Terayon Communication Systems, a Delaware corporation.
(f) "Consultant" means any person, including an advisor, engaged by the
Company or an Affiliate to render consulting services and who is compensated
for such services, provided that the term "Consultant" shall not include
Directors.
1.
<PAGE>
(g) "Continuous Status as an Employee, Director or Consultant" means that
the service of an individual to the Company, whether as an Employee, Director
or Consultant, is not interrupted or terminated. The Board or the chief
executive officer of the Company may determine, in that party's sole
discretion, whether Continuous Status as an Employee, Director or Consultant
shall be considered interrupted in the case of: (i) any leave of absence
approved by the Board or the chief executive officer of the Company, including
sick leave, military leave, or any other personal leave; or (ii) transfers
between the Company, Affiliates or their successors.
(h) "Director" means a member of the Board.
(i) "Employee" means any person employed by the Company or any Affiliate
of the Company; provided that except as provided below, Officers and Directors
of the Company shall not be considered Employees for purposes of the Plan.
Notwithstanding the foregoing, an Officer shall be considered an Employee for
purposes of granting a Stock Award to that Officer as an inducement essential
to such Officer's entering into an employment contract with the Company if such
Officer was not an employee of the Company immediately prior to the date on
which such Stock Award is granted.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(k) "Fair Market Value" means, as of any date, the value of the common
stock of the Company determined as follows:
(1) If the common stock is listed on any established stock exchange
or traded on the Nasdaq National Market or The Nasdaq SmallCap Market, the Fair
Market Value of a share of common stock shall be the closing sales price for
such stock (or the closing bid, if no sales were reported) as quoted on such
exchange or market (or the exchange or market with the greatest volume of
trading in the Company's common stock) on the last market trading day prior to
the day of determination, as reported in The Wall Street Journal or such other
source as the Board deems reliable.
(2) In the absence of such markets for the common stock, the Fair
Market Value shall be determined in good faith by the Board.
(l) "Non-Employee Director" means a Director who either (i) is not a
current Employee or Officer of the Company or its parent or subsidiary, does
not receive compensation (directly or indirectly) from the Company or its
parent or subsidiary for services rendered as a consultant or in any capacity
other than as a Director (except for an amount as to which disclosure would not
be required under Item 404(a) of Regulation S-K promulgated pursuant to the
Securities Act ("Regulation S-K")), does not possess an interest in any other
transaction as to which disclosure would be required under Item 404(a) of
Regulation S-K, and is not engaged in a business relationship as to which
disclosure would be required under Item 404(b) of Regulation S-K; or (ii) is
otherwise considered a "non-employee director" for purposes of Rule 16b-3.
(m) "Nonstatutory Stock Option" means a stock option not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.
2.
<PAGE>
(n) "Officer" means a person who is an officer of the Company, including
any corporate officer with a title of Vice President or above or any other
Employee of the Company whom the Board or the Committee classifies as an
"Officer."
(o) "Option" means a Nonstatutory Stock Option granted pursuant to the
Plan.
(p) "Option Agreement" means a written agreement between the Company and
an Optionee evidencing the terms and conditions of an individual Option grant.
Each Option Agreement shall be subject to the terms and conditions of the Plan.
(q) "Optionee" means a person to whom an Option is granted pursuant to
the Plan or, if applicable, such other person who holds an outstanding Option.
(r) "Plan" means this 1999 Non-Officer Equity Incentive Plan.
(s) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect with respect to the Company at the time discretion is
being exercised regarding the Plan.
(t) "Securities Act" means the Securities Act of 1933, as amended.
(u) "Stock Award" means any right granted under the Plan, including any
Option, any stock bonus, and any right to purchase restricted stock.
(v) "Stock Award Agreement" means a written agreement between the Company
and a holder of a Stock Award evidencing the terms and conditions of an
individual Stock Award grant. Each Stock Award Agreement shall be subject to
the terms and conditions of the Plan.
3. Administration.
(a) The Plan shall be administered by the Board unless and until the Board
delegates administration to a Committee, as provided in subsection 3(c).
(b) The Board shall have the power, subject to, and within the
limitations of, the express provisions of the Plan:
(1) To determine from time to time which of the persons eligible
under the Plan shall be granted Stock Awards; when and how each Stock Award
shall be granted; whether a Stock Award will be an Option, a stock bonus, a
right to purchase restricted stock, or a combination of the foregoing; the
provisions of each Stock Award granted (which need not be identical), including
the time or times when a person shall be permitted to receive stock pursuant to
a Stock Award; and the number of shares with respect to which a Stock Award
shall be granted to each such person.
(2) To construe and interpret the Plan and Stock Awards granted
under it, and to establish, amend and revoke rules and regulations for its
administration. The Board, in the exercise of this power, may correct any
defect, omission or inconsistency in the Plan or in any
3.
<PAGE>
Stock Award Agreement, in a manner and to the extent it shall deem necessary or
expedient to make the Plan fully effective.
(3) To amend the Plan or a Stock Award as provided in Section 12.
(4) To terminate or suspend the Plan as provided in Section 13.
(5) Generally, to exercise such powers and to perform such acts as
the Board deems necessary or expedient to promote the best interests of the
Company which are not in conflict with the provisions of the Plan.
(c) The Board may delegate administration of the Plan to a committee of
the Board composed of two (2) or more members (the "Committee"), all of the
members of which Committee may be, in the discretion of the Board, Non-
Employee Directors. If administration is delegated to a Committee, the
Committee shall have, in connection with the administration of the Plan, the
powers theretofore possessed by the Board, including the power to delegate to a
subcommittee any of the administrative powers the Committee is authorized to
exercise (and references in this Plan to the Board shall thereafter be to the
Committee or such a subcommittee), subject, however, to such resolutions, not
inconsistent with the provisions of the Plan, as may be adopted from time to
time by the Board. The Board may abolish the Committee at any time and revest
in the Board the administration of the Plan. In addition, notwithstanding
anything in this Section 3 to the contrary, the Board or the Committee may
delegate to a committee of one or more members of the Board the authority to
grant Stock Awards to eligible persons who are not then subject to Section 16
of the Exchange Act.
4. Shares Subject To The Plan.
(a) Subject to the provisions of Section 11 relating to adjustments upon
changes in stock, the stock that may be issued pursuant to Stock Awards shall
not exceed in the aggregate three million (3,000,000) shares of the Company's
Common Stock. If any Stock Award shall for any reason expire or otherwise
terminate, in whole or in part, without having been exercised in full, the
stock not acquired under such Stock Award shall revert to and again become
available for issuance under the Plan.
(b) The stock subject to the Plan may be unissued shares or reacquired
shares, bought on the market or otherwise.
5. Eligibility.
(a) Stock Awards may be granted only to Employees or Consultants.
(b) A Consultant shall not be eligible for the grant of a Stock Award if,
at the time of grant, a Form S-8 Registration Statement under the Securities
Act ("Form S-8") is not available to register either the offer or the sale of
the Company's securities to such Consultant because of the nature of the
services that the Consultant is providing to the Company, or because the
Consultant is not a natural person, or as otherwise provided by the rules
governing the use of Form S-8, unless the Company determines both (i) that such
grant (A) shall be registered in another manner under the Securities Act (e.g.,
on a Form S-3 Registration Statement) or (B) does
4.
<PAGE>
not require registration under the Securities Act in order to comply with the
requirements of the Securities Act, if applicable, and (ii) that such grant
complies with the securities laws of all other relevant jurisdictions.
6. Option Provisions.
Each Option shall be in such form and shall contain such terms and
conditions as the Board shall deem appropriate. The provisions of separate
Options need not be identical, but each Option shall include (through
incorporation of provisions hereof by reference in the Option or otherwise) the
substance of each of the following provisions:
(a) Term. No Option shall be exercisable after the expiration of ten (10)
years from the date it was granted.
(b) Price. The exercise price of each Option shall be not less than
eighty-five percent (85%) of the Fair Market Value of the stock subject to the
Option on the date of grant.
(c) Consideration. The purchase price of stock acquired pursuant to an
Option shall be paid, to the extent permitted by applicable statutes and
regulations, either (i) in cash at the time the Option is exercised, or (ii) at
the discretion of the Board or the Committee, at the time of the grant of the
Option, (A) by delivery to the Company of other common stock of the Company,
(B) according to a deferred payment arrangement (however, in the event the
Company is then incorporated in the state of Delaware, then payment of the
common stock's "par value" as defined in the Delaware General Corporation Law
shall not be made by deferred payment), or other arrangement (which may
include, without limiting the generality of the foregoing, the use of other
common stock of the Company) with the person to whom the Option is granted or
to whom the Option is transferred pursuant to subsection 6(d) or (C) in any
other form of legal consideration that may be acceptable to the Board. In the
case of any deferred payment arrangement, interest shall be compounded at least
annually and shall be charged at the minimum rate of interest necessary to
avoid the treatment as interest, under any applicable provisions of the Code,
of any amounts other than amounts stated to be interest under the deferred
payment arrangement.
(d) Transferability. An Option may be transferable to the extent
provided in the Option Agreement; provided, however, that if the Option
Agreement does not specifically provide for transferability, then such Option
shall not be transferable except by will or by the laws of descent and
distribution. Notwithstanding the foregoing, the person to whom the Option is
granted may, by delivering written notice to the Company, in a form
satisfactory to the Company, designate a third party who, in the event of the
death of the Optionee, shall thereafter be entitled to exercise the Option.
(e) Vesting. The total number of shares of stock subject to an Option
may, but need not, be allotted in periodic installments (which may, but need
not, be equal). The Option Agreement may provide that from time to time during
each of such installment periods, the Option may become exercisable ("vest")
with respect to some or all of the shares allotted to that period, and may be
exercised with respect to some or all of the shares allotted to such period
and/or any prior period as to which the Option became vested but was not fully
exercised. The
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Option may be subject to such other terms and conditions on the time or times
when it may be exercised (which may be based on performance or other criteria)
as the Board may deem appropriate. The provisions of this subsection 6(e) are
subject to any Option provisions governing the minimum number of shares as to
which an Option may be exercised.
(f) Termination of Employment or Relationship as a Director or
Consultant. In the event an Optionee's Continuous Status as an Employee,
Director or Consultant terminates (other than upon the Optionee's death or
disability), the Optionee may exercise the Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination) but only
within such period of time ending on the earlier of (i) the date thirty (30)
days following the termination of the Optionee's Continuous Status as an
Employee, Director or Consultant (or such longer period as specified in the
Option Agreement), or (ii) the expiration of the term of the Option as set
forth in the Option Agreement; provided, however, if the Optionee is terminated
for cause, then the Option shall terminate on the date Optionee's Continuous
Status as an Employee, Director or Consultant ceases. If, at the date of
termination, the Optionee is not entitled to exercise the entire Option, the
shares covered by the unexercisable portion of the Option shall revert to and
again become available for issuance under the Plan. If, after termination, the
Optionee does not exercise the Option within the time specified in the Option
Agreement, the Option shall terminate, and the shares covered by such Option
shall revert to and again become available for issuance under the Plan.
An Optionee's Option Agreement may also provide that if the exercise of the
Option following the termination of the Optionee's Continuous Status as an
Employee, Director, or Consultant (other than upon the Optionee's death or
disability) would result in liability under Section 16(b) of the Exchange Act,
then the Option shall terminate on the earlier of (i) the expiration of the term
of the Option set forth in the Option Agreement, or (ii) the tenth (10th) day
after the last date on which such exercise would result in such liability under
Section 16(b) of the Exchange Act. Finally, an Optionee's Option Agreement may
also provide that if the exercise of the Option following the termination of the
Optionee's Continuous Status as an Employee, Director or Consultant (other than
upon the Optionee's death or disability) would be prohibited at any time solely
because the issuance of shares would violate the registration requirements under
the Securities Act, then the Option shall terminate on the earlier of (i) the
expiration of the term of the Option set forth in the first paragraph of this
subsection 6(f), or (ii) the expiration of a period of three (3) months after
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant during which the exercise of the Option would not be in violation of
such registration requirements.
(g) Disability of Optionee. In the event an Optionee's Continuous Status
as an Employee, Director or Consultant terminates as a result of the Optionee's
disability, the Optionee may exercise the Option (to the extent that the
Optionee was entitled to exercise it as of the date of termination), but only
within such period of time ending on the earlier of (i) the date twelve (12)
months following such termination (or such longer or shorter period specified
in the Option Agreement), or (ii) the expiration of the term of the Option as
set forth in the Option Agreement. If, at the date of termination, the
Optionee is not entitled to exercise the entire Option, the shares covered by
the unexercisable portion of the Option shall revert to and again become
available for issuance under the Plan. If, after termination, the Optionee
does not
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exercise the Option within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
(h) Death of Optionee. In the event of the death of an Optionee during,
or within a period specified in the Option Agreement after the termination of,
the Optionee's Continuous Status as an Employee, Director or Consultant, the
Option may be exercised (to the extent the Optionee was entitled to exercise
the Option as of the date of death) by the Optionee's estate, by a person who
acquired the right to exercise the Option by bequest or inheritance or by a
person designated to exercise the option upon the Optionee's death pursuant to
subsection 6(d), but only within the period ending on the earlier of (i) the
date eighteen (18) months following the date of death (or such longer or
shorter period specified in the Option Agreement), or (ii) the expiration of
the term of such Option as set forth in the Option Agreement. If, at the time
of death, the Optionee was not entitled to exercise the entire Option, the
shares covered by the unexercisable portion of the Option shall revert to and
again become available for issuance under the Plan. If, after death, the
Option is not exercised within the time specified herein, the Option shall
terminate, and the shares covered by such Option shall revert to and again
become available for issuance under the Plan.
7. Terms Of Stock Bonuses And Purchases Of Restricted Stock.
Each stock bonus or restricted stock purchase agreement shall be in such
form and shall contain such terms and conditions as the Board or the Committee
shall deem appropriate. The terms and conditions of stock bonus or restricted
stock purchase agreements may change from time to time, and the terms and
conditions of separate agreements need not be identical, but each stock bonus or
restricted stock purchase agreement shall include (through incorporation of
provisions hereof by reference in the agreement or otherwise) the substance of
each of the following provisions as appropriate:
(a) Purchase Price. The purchase price under each restricted stock
purchase agreement shall be such amount as the Board or Committee shall
determine and designate in such Stock Award Agreement, but in no event shall
the purchase price be less than eighty-five percent (85%) of the stock's Fair
Market Value on the date such Stock Award is made. Notwithstanding the
foregoing, the Board or the Committee may determine that eligible participants
in the Plan may be awarded stock pursuant to a stock bonus agreement in
consideration for past services actually rendered to the Company or for its
benefit.
(b) Transferability. Rights under a stock bonus or restricted stock
purchase agreement shall be transferable only by will or the laws of descent
and distribution, so long as stock awarded under such Stock Award Agreement
remains subject to the terms of the agreement.
(c) Consideration. The purchase price of stock acquired pursuant to a
stock purchase agreement shall be paid either: (i) in cash at the time of
purchase; (ii) at the discretion of the Board or the Committee, according to a
deferred payment arrangement (however, in the event the Company is then
incorporated in the state of Delaware, then payment of the common stock's "par
value" as defined in the Delaware General Corporation Law shall not be made by
deferred payment), or other arrangement with the person to whom the stock is
sold; or (iii) in any
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other form of legal consideration that may be acceptable to the Board or the
Committee in its discretion. Notwithstanding the foregoing, the Board or the
Committee to which administration of the Plan has been delegated may award
stock pursuant to a stock bonus agreement in consideration for past services
actually rendered to the Company or for its benefit.
(d) Vesting. Shares of stock sold or awarded under the Plan may, but
need not, be subject to a repurchase option in favor of the Company in
accordance with a vesting schedule to be determined by the Board or the
Committee.
(e) Termination of Employment or Relationship as a Director or
Consultant. In the event a Participant's Continuous Status as an Employee,
Director or Consultant terminates, the Company may repurchase or otherwise
reacquire any or all of the shares of stock held by that person which have not
vested as of the date of termination under the terms of the stock bonus or
restricted stock purchase agreement between the Company and such person.
8. Covenants Of The Company.
(a) During the terms of the Stock Awards, the Company shall keep
available at all times the number of shares of stock required to satisfy such
Stock Awards.
(b) The Company shall seek to obtain from each regulatory commission or
agency having jurisdiction over the Plan such authority as may be required to
issue and sell shares of stock upon exercise of the Stock Award; provided,
however, that this undertaking shall not require the Company to register under
the Securities Act either the Plan, any Stock Award or any stock issued or
issuable pursuant to any such Stock Award. If, after reasonable efforts, the
Company is unable to obtain from any such regulatory commission or agency the
authority which counsel for the Company deems necessary for the lawful issuance
and sale of stock under the Plan, the Company shall be relieved from any
liability for failure to issue and sell stock upon exercise of such Stock
Awards unless and until such authority is obtained.
9. Use Of Proceeds From Stock.
Proceeds from the sale of stock pursuant to Stock Awards shall constitute
general funds of the Company.
10. Miscellaneous.
(a) The Board shall have the power to accelerate the time at which a
Stock Award may first be exercised or the time during which a Stock Award or
any part thereof will vest pursuant to subsection 6(e) or 7(d), notwithstanding
the provisions in the Stock Award stating the time at which it may first be
exercised or the time during which it will vest.
(b) Neither an Employee nor a Consultant nor any person to whom a Stock
Award is transferred under subsection 6(d) or 7(b) shall be deemed to be the
holder of, or to have any of the rights of a holder with respect to, any shares
subject to such Stock Award unless and until such person has satisfied all
requirements for exercise of the Stock Award pursuant to its terms.
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(c) Nothing in the Plan or any instrument executed or Stock Award granted
pursuant thereto shall confer upon any Employee or Consultant or other holder
of Stock Awards any right to continue in the employ of the Company or any
Affiliate (or to continue serving as a Consultant) or shall affect the right of
the Company or any Affiliate to terminate the employment of any Employee with
or without cause or the right to terminate the relationship of any Consultant
subject to the terms of such Consultant's agreement with the Company or any
Affiliate.
(d) The Company may require any person to whom a Stock Award is granted,
or any person to whom a Stock Award is transferred pursuant to subsection 6(d)
or 7(b), as a condition of exercising or acquiring stock under any Stock Award,
(1) to give written assurances satisfactory to the Company as to such person's
knowledge and experience in financial and business matters and/or to employ a
purchaser representative reasonably satisfactory to the Company who is
knowledgeable and experienced in financial and business matters, and that he or
she is capable of evaluating, alone or together with the purchaser
representative, the merits and risks of exercising the Stock Award; and (2) to
give written assurances satisfactory to the Company stating that such person is
acquiring the stock subject to the Stock Award for such person's own account
and not with any present intention of selling or otherwise distributing the
stock. The foregoing requirements, and any assurances given pursuant to such
requirements, shall be inoperative if (i) the issuance of the shares upon the
exercise or acquisition of stock under the Stock Award has been registered
under a then currently effective registration statement under the Securities
Act, or (ii) as to any particular requirement, a determination is made by
counsel for the Company that such requirement need not be met in the
circumstances under the then applicable securities laws. The Company may, upon
advice of counsel to the Company, place legends on stock certificates issued
under the Plan as such counsel deems necessary or appropriate in order to
comply with applicable securities laws, including, but not limited to, legends
restricting the transfer of the stock.
(e) To the extent provided by the terms of a Stock Award Agreement, the
person to whom a Stock Award is granted may satisfy any federal, state or local
tax withholding obligation relating to the exercise or acquisition of stock
under a Stock Award by any of the following means or by a combination of such
means: (1) tendering a cash payment; (2) authorizing the Company to withhold
shares from the shares of the common stock otherwise issuable to the
participant as a result of the exercise or acquisition of stock under the Stock
Award; or (3) delivering to the Company owned and unencumbered shares of
Company common stock. Notwithstanding the foregoing, the Company shall not be
authorized to withhold shares of Common Stock at rates in excess of the minimum
statutory withholding rates for federal and state tax purposes, including
payroll taxes.
11. Adjustments Upon Changes In Stock.
(a) If any change is made in the stock subject to the Plan, or subject to
any Stock Award (through merger, consolidation, reorganization,
recapitalization, reincorporation, stock dividend, dividend in property other
than cash, stock split, liquidating dividend, combination of shares, exchange
of shares, change in corporate structure or other transaction not involving the
receipt of consideration by the Company), the Plan will be appropriately
adjusted in the type(s) and maximum number of securities subject to the Plan
pursuant to subsection 4(a) and the
9.
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outstanding Stock Awards will be appropriately adjusted in the type(s) and
number of securities and price per share of stock subject to such outstanding
Stock Awards. Such adjustments shall be made by the Board or the Committee,
the determination of which shall be final, binding and conclusive. (The
conversion of any convertible securities of the Company shall not be treated as
a "transaction not involving the receipt of consideration by the Company.")
(b) In the event of a Change in Control (as defined herein): (i) any
surviving corporation or acquiring corporation shall assume any Stock Awards
outstanding under the Plan or shall substitute similar stock awards (including
an award to acquire the same consideration paid to the stockholders in a Change
in Control) for those outstanding under the Plan, or (ii) in the event any
surviving corporation or acquiring corporation refuses to assume such Stock
Awards or to substitute similar stock awards for those outstanding under the
Plan, (A) with respect to Stock Awards held by persons then performing services
as Employees, Directors or Consultants, the vesting (and, if applicable, the
exercisability) of such Stock Awards shall be accelerated prior to such event
and the Stock Awards terminated if not exercised at or prior to such event, and
(B) with respect to any other Stock Awards outstanding under the Plan, such
Stock Awards shall be terminated if not exercised prior to such event.
(c) For purposes of the Plan, a "Change in Control" shall mean: (1) a
dissolution, liquidation or sale of all or substantially all of the assets of
the Company; (2) a merger or consolidation in which the Company is not the
surviving corporation; (3) a reverse merger in which the Company is the
surviving corporation but the shares of the Company's common stock outstanding
immediately preceding the merger are converted by virtue of the merger into
other property, whether in the form of securities, cash or otherwise; or (4)
the acquisition by any person, entity or group within the meaning of Section
13(d) or 14(d) of the Exchange Act, or any comparable successor provisions
(excluding any employee benefit plan, or related trust, sponsored or maintained
by the Company or any Affiliate of the Company) of the beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act, or
comparable successor rule) of securities of the Company representing at least
fifty percent (50%) of the combined voting power entitled to vote in the
election of directors.
12. Amendment Of The Plan and Stock Awards.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 11 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders
of the Company to the extent stockholder approval is necessary for the Plan to
satisfy the requirements of Section 422 of the Code, Rule 16b-3 under the
Exchange Act or any Nasdaq or securities exchange listing requirements. The
Board may in its sole discretion submit any other amendment to the Plan for
stockholder approval.
(b) Rights and obligations under any Stock Award granted before amendment
of the Plan shall not be impaired by any amendment of the Plan unless (i) the
Company requests the consent of the person to whom the Stock Award was granted
and (ii) such person consents in writing.
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(c) The Board at any time, and from time to time, may amend the terms of
any one or more Stock Award; provided, however, that the rights and obligations
under any Stock Award shall not be impaired by any such amendment unless (i)
the Company requests the consent of the person to whom the Stock Award was
granted and (ii) such person consents in writing.
13. Termination Or Suspension Of The Plan.
(a) The Board may suspend or terminate the Plan at any time. No Stock
Awards may be granted under the Plan while the Plan is suspended or after it is
terminated.
(b) Rights and obligations under any Stock Award granted while the Plan
is in effect shall not be impaired by suspension or termination of the Plan,
except with the written consent of the person to whom the Stock Award was
granted.
14. Effective Date Of Plan.
The Plan shall become effective on the date on which it is adopted by the
Board.
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Exhibit 99.2
TERAYON COMMUNICATION SYSTEMS
1999 NON-OFFICER EQUITY INCENTIVE PLAN
NONSTATUTORY STOCK OPTION AGREEMENT
Pursuant to your Stock Option Grant Notice ("Grant Notice") and this Stock
Option Agreement, Terayon Communication Systems (the "Company") has granted you
an option under its 1999 Non-Officer Equity Incentive Plan (the "Plan") to
purchase the number of shares of the Company's Common Stock indicated in your
Grant Notice at the exercise price indicated in your Grant Notice. Defined
terms not explicitly defined in this Stock Option Agreement but defined in the
Plan shall have the same definitions as in the Plan.
The details of your option are as follows:
1. Vesting. Subject to the limitations contained herein, your option
will vest as provided in your Grant Notice, provided that vesting will cease
upon the termination of your Continuous Status as an Employee, Director or
Consultant.
2. Method of Payment. Payment of the exercise price is due in full upon
exercise of all or any part of your option. You may elect to make payment of
the exercise price in cash or by check or in any other manner permitted by your
Grant Notice, which may include one or more of the following:
(a) In the Company's sole discretion at the time your option is
exercised and provided that at the time of exercise the Common Stock is publicly
traded and quoted regularly in The Wall Street Journal, pursuant to a program
developed under Regulation T as promulgated by the Federal Reserve Board that,
prior to the issuance of Common Stock, results in either the receipt of cash (or
check) by the Company or the receipt of irrevocable instructions to pay the
aggregate exercise price to the Company from the sales proceeds.
(i) Provided that at the time of exercise the Common Stock is
publicly traded and quoted regularly in The Wall Street Journal, by delivery of
already-owned shares of Common Stock either that you have held for the period
required to avoid a charge to the Company's reported earnings (generally six
months) or that you did not acquire, directly or indirectly from the Company,
that are owned free and clear of any liens, claims, encumbrances or security
interests, and that are valued at Fair Market Value on the date of exercise.
"Delivery" for these purposes, in the sole discretion of the Company at the time
you exercise your option, shall include delivery to the Company of your
attestation of ownership of such shares of Common Stock in a form approved by
the Company. Notwithstanding the foregoing, you may not exercise your option by
tender to the Company of Common Stock to the extent such tender would violate
the provisions of any law, regulation or agreement restricting the redemption of
the Company's stock.
3. Whole Shares. You may exercise your option only for whole shares of
Common Stock.
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4. Securities Law Compliance. Notwithstanding anything to the contrary
contained herein, you may not exercise your option unless the shares of Common
Stock issuable upon such exercise are then registered under the Securities Act
or, if such shares of Common Stock are not then so registered, the Company has
determined that such exercise and issuance would be exempt from the registration
requirements of the Securities Act. The exercise of your option must also
comply with other applicable laws and regulations governing your option, and you
may not exercise your option if the Company determines that such exercise would
not be in material compliance with such laws and regulations.
5. Term. You may not exercise your option before the commencement of
its term or after its term expires. The term of your option commences on the
Date of Grant and expires upon the earliest of:
(i) the Expiration Date indicated in the Grant Notice;
(ii) the tenth (10th) anniversary of the Date of Grant;
(iii) eighteen (18) months after your death, if you die
during, or within three (3) months after the termination of your Continuous
Status as an Employee, Director or Consultant;
(iv) twelve (12) months after the termination of your
Continuous Status as an Employee, Director or Consultant due to disability;
(v) immediately after the termination of your Continuous
Status as Employee, Director or Consultant for Cause; or
(vi) three (3) months after the termination of your Continuous
Status as an Employee, Director or Consultant for any other reason, provided
that if during any part of such three (3)-month period the option is not
exercisable solely because of the condition set forth in paragraph 4 (Securities
Law Compliance), in which event the option shall not expire until the earlier of
the Expiration Date or until it shall have been exercisable for an aggregate
period of three (3) months after the termination of Continuous Status as an
Employee, Director or Consultant.
For these purposes, "Cause" shall include, but not be limited to, the
commission of any act of fraud, embezzlement or dishonesty, any unauthorized use
or disclosure of confidential information or trade secrets of the Company, or
any other intentional misconduct adversely affecting the business or affairs of
the Company in a material manner. The foregoing definition shall not be deemed
to be inclusive of all the acts or omissions which the Company may consider as
grounds for your dismissal or discharge.
6. Exercise.
(a) You may exercise the vested portion of your option during its
term by delivering a Notice of Exercise (in a form designated by the Company)
together with the exercise
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price to the Secretary of the Company, or to such other person as the Company
may designate, during regular business hours, together with such additional
documents as the Company may then require.
(b) By exercising your option you agree that, as a condition to any
exercise of your option, the Company may require you to enter into an
arrangement providing for the payment by you to the Company of any tax
withholding obligation of the Company arising by reason of (1) the exercise of
your option, (2) the lapse of any substantial risk of forfeiture to which the
shares of Common Stock are subject at the time of exercise, or (3) the
disposition of shares of Common Stock acquired upon such exercise.
7. Transferability. Your option is not transferable, except by will or
by the laws of descent and distribution, and is exercisable during your life
only by you. Notwithstanding the foregoing, by delivering written notice to the
Company, in a form satisfactory to the Company, you may designate a third party
who, in the event of your death, shall thereafter be entitled to exercise your
option.
8. Right of Repurchase. To the extent provided in the Company's bylaws as
amended from time to time, the Company shall have the right to repurchase all or
any part of the shares of Common Stock you acquire pursuant to the exercise of
your option.
9. Option not a Service Contract. Your option is not an employment or
service contract, and nothing in your option shall be deemed to create in any
way whatsoever any obligation on your part to continue in the employ of the
Company or an Affiliate, or of the Company or an Affiliate to continue your
employment. In addition, nothing in your option shall obligate the Company or an
Affiliate, their respective shareholders, Boards of Directors, Officers or
Employees to continue any relationship that you might have as a Director or
Consultant for the Company or an Affiliate.
10. Withholding Obligations.
(a) At the time you exercise your option, in whole or in part, or at
any time thereafter as requested by the Company, you hereby authorize
withholding from payroll and any other amounts payable to you, and otherwise
agree to make adequate provision for (including by means of a "cashless
exercise" pursuant to a program developed under Regulation T as promulgated by
the Federal Reserve Board to the extent permitted by the Company), any sums
required to satisfy the federal, state, local and foreign tax withholding
obligations of the Company or an Affiliate, if any, which arise in connection
with your option.
(b) Upon your request and subject to approval by the Company, in its
sole discretion, and compliance with any applicable conditions or restrictions
of law, the Company may withhold from fully vested shares of Common Stock
otherwise issuable to you upon the exercise of your option a number of whole
shares of Common Stock having a Fair Market Value, determined by the Company as
of the date of exercise, not in excess of the minimum amount of tax required to
be withheld by law. If the date of determination of any tax withholding
obligation is deferred to a date later than the date of exercise of your option,
share withholding
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pursuant to the preceding sentence shall not be permitted unless you make a
proper and timely election under Section 83(b) of the Code, covering the
aggregate number of shares of Common Stock acquired upon such exercise with
respect to which such determination is otherwise deferred, to accelerate the
determination of such tax withholding obligation to the date of exercise of your
option. Notwithstanding the filing of such election, shares of Common Stock
shall be withheld solely from fully vested shares of Common Stock determined as
of the date of exercise of your option that are otherwise issuable to you upon
such exercise. Any adverse consequences to you arising in connection with such
share withholding procedure shall be your sole responsibility.
(c) You may not exercise your option unless the tax withholding
obligations of the Company and/or any Affiliate are satisfied. Accordingly,
you may not be able to exercise your option when desired even though your option
is vested, and the Company shall have no obligation to issue a certificate for
such shares of Common Stock or release such shares of Common Stock from any
escrow provided for herein.
11. Notices. Any notices provided for in your option or the Plan shall be
given in writing and shall be deemed effectively given upon receipt or, in the
case of notices delivered by mail by the Company to you, five (5) days after
deposit in the United States mail, postage prepaid, addressed to you at the last
address you provided to the Company.
12. Governing Plan Document. Your option is subject to all the provisions
of the Plan, the provisions of which are hereby made a part of your option,
and is further subject to all interpretations, amendments, rules and regulations
which may from time to time be promulgated and adopted pursuant to the Plan. In
the event of any conflict between the provisions of your option and those of the
Plan, the provisions of the Plan shall control.
4
