<PAGE> 1
As filed with the Securities and Exchange Commission on June 23, 1999
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------
GENESIS MICROCHIP INCORPORATED
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------
<TABLE>
<S> <C>
NOVA SCOTIA, CANADA NONE
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
</TABLE>
165 COMMERCE VALLEY DRIVE W.
THORNHILL, ONTARIO
L3T 7V8
(905) 889-5400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------
1997 EMPLOYEE STOCK OPTION PLAN
PARADISE ELECTRONICS, INC. 1997 STOCK OPTION PLAN
(FULL TITLE OF THE PLAN)
------------
PAUL M. RUSSO
GENESIS MICROCHIP CORPORATION
1871 LANDINGS DRIVE
MOUNTAIN VIEW, CA 94043
(650) 428-4277
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------
COPIES TO:
FRANCIS S. CURRIE, ESQ.
ANTON T. COMMISSARIS, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304
(650) 493-9300
------------
<PAGE> 2
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==================================================================================================
TITLE OF EACH CLASS AMOUNT PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO TO BE OFFERING PRICE AGGREGATE REGISTRATION
BE REGISTERED REGISTERED PER SHARE OFFERING PRICE FEE
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares, no par value
approved for issuance under
the 1997 Employee Stock
Option Plan...................... 506,748 $24.69(1) $12,511,608.12 $3,478.00
- --------------------------------------------------------------------------------------------------
Common Shares, no par value
approved for issuance under the
Paradise Electronics, Inc. 1997
Stock Option Plan ............... 533,315(2) $3.72(3) $1,983,931.80 $552.00
- --------------------------------------------------------------------------------------------------
TOTALS 1,040,063 $14,495,539.92 $4,030.00
==================================================================================================
</TABLE>
- -------------
(1) Estimated in accordance with Rule 457(h) under the Securities Act of 1933,
as amended, solely for the purpose of calculating the registration fee. The
computation is based upon the average of the high and low price as reported
on the Nasdaq National Market on June 22, 1999. The indicated number of
shares to be registered represents additional shares issuable under the
listed plans that are not covered by prior registration statements.
(2) All options outstanding under the Paradise Electronics, Inc. 1997 Stock
Option Plan (the "Paradise Options") are exercisable for the Registrant's
Common Shares. The Paradise Options were assumed by the Registrant pursuant
to the Registrant's acquisition of Paradise Electronics, Inc., by way of
merger, effective May 28, 1999. The exercise price per share is determined
by dividing the exercise price for Paradise Options by the conversion ratio
of .19214, which was used in the merger.
(3) Estimated in accordance with Rule 457(h) under the Securities Act of 1933,
as amended, solely for the purpose of calculating the total registration
fee. Computated based on the weighted average exercise price for Paradise
Options.
<PAGE> 3
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
There are hereby incorporated by reference in this Registration Statement
the following documents and information heretofore filed with the Securities and
Exchange Commission:
(a) The Registrant's annual report on Form 20-F for the fiscal year ended
May 31, 1998 (File No. 000- 29592), filed pursuant to Section 13 of
the Securities Exchange Act of 1934 (the "Exchange Act").
(b) The Registrant's Registration Statement on Form 6-K (File No.
000-29592), as filed with the Securities and Exchange Commission on
February 8, 1999.
(c) The Registrant's Quarterly Reports on Forms 6-K and 10-Q for the
fiscal quarters ended August 31, 1998 and February 28, 1999, filed
pursuant to Section 13 of the Exchange Act.
(d) The Registrant's current report on Form 8-K, as filed with the
Securities and Exchange Commission on June 11, 1999 (File No.
000-29592).
(e) The description of the Registrant's Common Shares to be offered hereby
is contained in the Registrant's Registration Statement on Form S-4
filed with the Securities and Exchange Commission on April 23, 1999
(File No. 333-76937), including any amendment or report filed for the
purpose of updating such description.
All documents filed by the Registrant pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act subsequent to this registrations statement, but
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 in this
registration statement and to be part hereof from the date of filing such
documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to Rule 411(b) of the Securities Act of 1933, as amended, we
hereby incorporate by reference Part II Item 20 of the Registrant's Registration
Statement on Form S-4, including any amendments thereto (File No. 333-76937),
filed with the Securities and Exchange Commission on April 23, 1999.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
<PAGE> 4
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit
Number
- -------
<S> <C>
4.1 The Registrant's 1997 Employee Stock Option Plan, as amended on October 27,
1998 is incorporated herein by reference to the Registrant's Registration
Statement on Form S-8 (File No. 333-70469) filed with the Commission on
January 12, 1999.
4.2 Paradise Electronics, Inc. 1997 Stock Option Plan and forms of agreements
thereunder.
5.1 Opinion of Stewart McKelvey Stirling Scales regarding the validity of the
securities being registered.
23.1 Consent of KPMG LLP.
23.2 Consent of counsel (contained in Exhibit 5.1).
24.1 Power of Attorney (contained in pages II-4 and II-5).
</TABLE>
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) 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
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act of 1934) that
is incorporated by reference in the registration statement shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is
<PAGE> 5
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.
<PAGE> 6
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 Thornhill, Ontario, Canada, on this 23rd day of June, 1999.
GENESIS MICROCHIP INCORPORATED
By: /s/ I. Eric Erdman
-------------------------------------
I. Eric Erdman
Chief Financial Officer and Secretary
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Paul M. Russo and I. Eric Erdman, jointly
and severally, his attorneys-in-fact, each with the power of substitution, for
him in any and all capacities, to sign any amendments to this Registration
Statement on Form S-8, 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 each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
/s/ Paul M. Russo Chairman, Chief Executive June 23, 1999
- ------------------------------ Officer and authorized U.S.
Paul M. Russo Representative
/s/ I. Eric Erdman Vice President, Finance and June 23, 1999
- ------------------------------ Administration, Chief Financial
I. Eric Erdman Officer, Chief Accounting
Officer and Secretary
/s/ Brian S. Campbell Director June 23, 1999
- ------------------------------
Brian S. Campbell
/s/ James E. Donegan Director June 23, 1999
- ------------------------------
James E. Donegan
/s/ George A. Duguay Director June 23, 1999
- ------------------------------
George A. Duguay
</TABLE>
II-4
<PAGE> 7
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------------------------------------------
<S> <C> <C>
/s/ Alexander S. Lushtak Director June 23, 1999
- ------------------------------
Alexander S. Lushtak
/s/ Lawrence G. Finch Director June 23, 1999
- ------------------------------
Lawrence G. Finch
/s/ William H. Welling Director June 23, 1999
- ------------------------------
William H. Welling
</TABLE>
II-5
<PAGE> 8
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number EXHIBIT DOCUMENT
- ------- ---------------------------------------------------------------------------
<S> <C>
4.1 The Registrant's 1997 Employee Stock Option Plan, as amended on October 27,
1998 is incorporated herein by reference to the Registrant's Registration
Statement on Form S-8 (File No. 333-70469) filed with the Commission on
January 12, 1999.
4.2 Paradise Electronics, Inc. 1997 Stock Option Plan and forms of agreements
thereunder.
5.1 Opinion of Stewart McKelvey Stirling Scales regarding the validity of the
securities being registered.
23.1 Consent of KPMG LLP.
23.2 Consent of counsel (contained in Exhibit 5.1).
24.1 Power of Attorney (contained in pages II-4 and II-5).
</TABLE>
<PAGE> 1
EXHIBIT 4.2
PARADISE ELECTRONICS, INC.
1997 STOCK OPTION PLAN
ADOPTED BY THE BOARD OF DIRECTORS ON MAY 21, 1997
APPROVED BY THE STOCKHOLDERS ON AUGUST 19, 1997
1. PURPOSES.
(a) The purpose of the Plan is to provide a means by which selected
Employees and Directors of and Consultants to the Company, and its Affiliates,
may be given an opportunity to purchase stock of the Company.
(b) The Company, by means of the Plan, seeks to retain the services of
persons who are now Employees or Directors of or Consultants to the Company or
its Affiliates, to secure and retain the services of new Employees , Directors
and Consultants, and to provide incentives for such persons to exert maximum
efforts for the success of the Company and its Affiliates.
(c) The Company intends that the Options 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 Incentive Stock Options or Nonstatutory Stock Options. All Options shall
be separately designated Incentive Stock Options or Nonstatutory Stock Options
at the time of grant, and in such form as issued pursuant to Section 6, and a
separate certificate or certificates will be issued for shares purchased on
exercise of each type of Option.
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.
<PAGE> 2
(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 Paradise Electronics, Inc., 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
who are paid only a director's fee by the Company or who are not compensated by
the Company for their services as Directors.
(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) "COVERED EMPLOYEE" means the chief executive officer and the four (4)
other highest compensated officers of the Company for whom total compensation is
required to be reported to stockholders under the Exchange Act, as determined
for purposes of Section 162(m) of the Code.
(i) "DIRECTOR" means a member of the Board.
2
<PAGE> 3
(j) "EMPLOYEE" means any person, including Officers and Directors,
employed by the Company or any Affiliate of the Company. Neither service as a
Director nor payment of a director's fee by the Company shall be sufficient to
constitute "employment" by the Company.
(k) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(l) "FAIR MARKET VALUE" means the value of the common stock as determined
in good faith by the Board and in a manner consistent with Section 260.140.50 of
Title 10 of the California Code of Regulations.
(m) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
(n) "LISTING DATE" means the first date upon which any security of the
Company is listed (or approved for listing) upon notice of issuance on any
securities exchange, or designated (or approved for designation) upon notice of
issuance as a national market security on an interdealer quotation system if
such securities exchange or interdealer quotation system has been certified in
accordance with the provisions of Section 25100(o) of the California Corporate
Securities Law of 1968.
(o) "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
3
<PAGE> 4
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.
(p) "NONSTATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(q) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(r) "OPTION" means a stock option granted pursuant to the Plan.
(s) "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.
(t) "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.
(u) "OUTSIDE DIRECTOR" means a Director who either (i) is not a current
employee of the Company or an "affiliated corporation" (within the meaning of
the Treasury regulations promulgated under Section 162(m) of the Code), is not a
former employee of the Company or an "affiliated corporation" receiving
compensation for prior services (other than benefits under a tax qualified
pension plan), was not an officer of the Company or an "affiliated corporation"
at any time, and is not currently receiving direct or indirect remuneration from
the Company or
4
<PAGE> 5
an "affiliated corporation" for services in any capacity other than as a
Director, or (ii) is otherwise considered an "outside director" for purposes of
Section 162(m) of the Code.
(v) "PLAN" means this 1997 Stock Option Plan.
(w) "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.
(x) "SECURITIES ACT" means the Securities Act of 1933, as amended.
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 Options; when and how each Option shall be
granted; whether an Option will be an Incentive Stock Option or a Nonstatutory
Stock Option; the provisions of each Option granted (which need not be
identical), including the time or times such Option may be exercised in whole or
in part; and the number of shares for which an Option shall be granted to each
such person.
(2) To construe and interpret the Plan and Options 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 Option Agreement, in a manner and to the
extent it shall deem necessary or expedient to make the Plan fully effective.
5
<PAGE> 6
(3) To amend the Plan or an Option as provided in Section 11.
(4) 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.
(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 which
may be, in the discretion of the Board, Non-Employee Directors and/or Outside
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 of two
(2) or more Outside Directors 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. Additionally,
prior to the Listing Date, and notwithstanding anything to the contrary
contained herein, the Board may delegate administration of the Plan to a
committee of one or more members of the Board and the term "Committee" shall
apply to any person or persons to whom such authority has been delegated.
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 Options to eligible persons who (1) are not then subject to
Section 16 of the Exchange Act and/or (2) are either (i) not then Covered
Employees and are not expected to be Covered Employees at the time of
recognition of income resulting from such Option, or (ii) not persons with
respect to whom the Company wishes to comply with Section 162(m) of the Code.
6
<PAGE> 7
4. SHARES SUBJECT TO THE PLAN.
(a) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, the stock that may be sold pursuant to Options shall not
exceed in the aggregate six million two hundred thousand (6,200,000) shares of
the Company's common stock. If any Option shall for any reason expire or
otherwise terminate, in whole or in part, without having been exercised in full,
the stock not purchased under such Option 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) Incentive Stock Options may be granted only to Employees. Nonstatutory
Stock Options may be granted only to Employees, Directors or Consultants.
(b) No person shall be eligible for the grant of an Option if, at the time
of grant, such person owns (or is deemed to own pursuant to Section 424(d) of
the Code) stock possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or of any of its Affiliates
unless the exercise price of such Option is at least one hundred ten percent
(110%) of the Fair Market Value of such stock at the date of grant and the
Option is not exercisable after the expiration of five (5) years from the date
of grant.
(c) Subject to the provisions of Section 10 relating to adjustments upon
changes in stock, no person shall be eligible to be granted Options covering
more than one hundred fifty thousand (150,000) shares of the Company's common
stock in any calendar year. This subsection 5(c) shall not apply prior to the
Listing Date and, following the Listing Date, shall not apply until (i) the
earliest of: (A) the first material modification of the Plan (including any
increase to the number of shares reserved for issuance under the Plan in
accordance with Section
7
<PAGE> 8
4); (B) the issuance of all of the shares of common stock reserved for issuance
under the Plan; (C) the expiration of the Plan; or (D) the first meeting of
stockholders at which directors are to be elected that occurs after the close of
the third calendar year following the calendar year in which occurred the first
registration of an equity security under Section 12 of the Exchange Act; or (ii)
such other date required by Section 162(m) of the Code and the rules and
regulations promulgated thereunder.
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 Incentive Stock Option shall be not
less than one hundred percent (100%) of the Fair Market Value of the stock
subject to the Option on the date the Option is granted; the exercise price of
each Nonstatutory Stock 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 the
Option is granted. Notwithstanding the foregoing, an Option (whether an
Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an
exercise price lower than that set forth in the preceding sentence if such
Option is granted pursuant to an assumption or substitution for another option
in a manner satisfying the provisions of Section 424(a) of the Code.
8
<PAGE> 9
(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, except that 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 shall not be transferable except by will or
by the laws of descent and distribution, and shall be exercisable during the
lifetime of the person to whom the Option is granted only by such person. A
Nonstatutory Stock Option shall only be transferable by the Optionee upon such
terms and conditions as are set forth in the Option Agreement for such
Nonstatutory Stock Option, as the Board or the Committee shall determine in its
discretion, except that each Nonstatutory Stock Option may be transferred to the
spouse, children, lineal ancestors and lineal descendants of the Optionee (or to
a trust created solely for the benefit of the Optionee and the foregoing
persons) or to an organization exempt from taxation pursuant to Section
501(c)(3) of the Code or to which tax deductible charitable
9
<PAGE> 10
contributions may be made under Section 170 of the Code (excluding such
organizations classified as private foundations under applicable regulations and
rulings). 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 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 vesting provisions of
individual Options may vary, but for each Option which is not granted to an
officer, Director or Consultant, such option will provide for vesting of at
least twenty percent (20%) per year of the total number of shares subject to the
Option. 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) SECURITIES LAW COMPLIANCE. The Company may require any Optionee, or
any person to whom an Option is transferred under subsection 6(d), as a
condition of exercising any such Option, (1) to give written assurances
satisfactory to the Company as to the Optionee'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
10
<PAGE> 11
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 Option; and (2) to give written assurances satisfactory to the
Company stating that such person is acquiring the stock subject to the Option
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 of the Option 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 require the Optionee to provide
such other representations, written assurances or information which the Company
shall determine is necessary, desirable or appropriate to comply with applicable
securities and other laws as a condition of granting an Option to such Optionee
or permitting the Optionee to exercise such Option. 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.
(g) 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 his or her 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 three (3) months following
the termination of the Optionee's Continuous Status as an Employee, Director or
Consultant, or such longer or shorter period, which shall not be less than
thirty (30) days, specified in the Option
11
<PAGE> 12
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 his or her 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 his or her
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.
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(g), 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.
(h) 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
12
<PAGE> 13
Optionee may exercise his or her 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, which in no event
shall be less than six (6) months, 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 his or
her 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 his or her 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.
(i) 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, which in
no event shall be less than six (6) months, 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
his or her 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
13
<PAGE> 14
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.
(j) EARLY EXERCISE. The Option may, but need not, include a provision
whereby the Optionee may elect at any time while an Employee, Director or
Consultant to exercise the Option as to any part or all of the shares subject to
the Option prior to the full vesting of the Option. Any unvested shares so
purchased shall be subject to a repurchase right in favor of the Company, with
the repurchase price to be equal to the original purchase price of the stock, or
to any other restriction the Board determines to be appropriate; provided,
however, that (i) the right to repurchase at the original purchase price shall
lapse at a minimum rate of twenty percent (20%) per year over five (5) years
from the date the Option was granted, and (ii) such right shall be exercisable
only within (A) the ninety (90) day period following the termination of
employment or the relationship as a Director or Consultant, or (B) such longer
period as may be agreed to by the Company and the Optionee (for example, for
purposes of satisfying the requirements of Section 1202(c)(3) of the Code
(regarding "qualified small business stock"), and (iii) such right shall be
exercisable only for cash or cancellation of purchase money indebtedness for the
shares. Notwithstanding the foregoing, an Option granted to an officer, Director
or Consultant may be subject to additional or greater restrictions.
(k) RIGHT OF REPURCHASE. The Option may, but need not, include a provision
whereby the Company may elect, prior to the Listing Date, to repurchase all or
any part of the vested shares exercised pursuant to the Option; provided,
however, that (i) such repurchase right shall be exercisable only within (A) the
ninety (90) day period following the termination of employment or the
relationship as a Director or Consultant, or (B) such longer period as may be
agreed to by the Company and the Optionee (for example, for purposes of
satisfying the
14
<PAGE> 15
requirements of Section 1202(c)(3) of the Code (regarding "qualified small
business stock")), (ii) such repurchase right shall be exercisable for less than
all of the vested shares only with the Optionee's consent, and (iii) such right
shall be exercisable only for cash or cancellation of purchase money
indebtedness for the shares at a repurchase price equal to the greater of (A)
the stock's Fair Market Value at the time of such termination or (B) the
original purchase price paid for such shares by the Optionee. Notwithstanding
the foregoing, an Option granted to an officer, Director or Consultant may be
subject to additional or greater restrictions.
(l) RIGHT OF FIRST REFUSAL. The Option may, but need not, include a
provision whereby the Company may elect, prior to the Listing Date, to exercise
a right of first refusal following receipt of notice from the Optionee of the
intent to transfer all or any part of the shares exercised pursuant to the
Option.
(m) WITHHOLDING. To the extent provided by the terms of an Option
Agreement, the Optionee may satisfy any federal, state or local tax withholding
obligation relating to the exercise of such Option 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 Optionee as a result of the exercise of the Option; or (3)
delivering to the Company owned and unencumbered shares of the common stock of
the Company.
7. COVENANTS OF THE COMPANY.
(a) During the terms of the Options, the Company shall keep available at
all times the number of shares of stock required to satisfy such Options.
(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
15
<PAGE> 16
stock upon exercise of the Options; provided, however, that this undertaking
shall not require the Company to register under the Securities Act either the
Plan, any Option or any stock issued or issuable pursuant to any such Option.
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 Options unless and until such authority is obtained.
8. USE OF PROCEEDS FROM STOCK.
Proceeds from the sale of stock pursuant to Options shall constitute
general funds of the Company.
9. MISCELLANEOUS.
(a) The Board shall have the power to accelerate the time at which an
Option may first be exercised or the time during which an Option or any part
thereof will vest pursuant to subsection 6(e), notwithstanding the provisions in
the Option stating the time at which it may first be exercised or the time
during which it will vest.
(b) Neither an Optionee nor any person to whom an Option is transferred
under subsection 6(d) 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 Option unless and
until such person has satisfied all requirements for exercise of the Option
pursuant to its terms.
(c) Throughout the term of any Option, the Company shall deliver to the
holder of such Option, not later than one hundred twenty (120) days after the
close of each of the Company's fiscal years during the Option term, a balance
sheet and an income statement. This section shall not apply (i) after the
Listing Date, or (ii) when issuance is limited to key
16
<PAGE> 17
employees whose duties in connection with the Company assure them access to
equivalent information.
(d) Nothing in the Plan or any instrument executed or Option granted
pursuant thereto shall confer upon any Employee, Director, Consultant or
Optionee any right to continue in the employ of the Company or any Affiliate (or
to continue acting as a Director or Consultant) or shall affect the right of the
Company or any Affiliate to terminate the employment of any Employee, with or
without cause, to remove any Director as provided in the Company's By-Laws and
the provisions of the General Corporation Law of the State of Delaware, or to
terminate the relationship of any Consultant subject to the terms of that
Consultant's agreement with the Company or Affiliate to which such Consultant is
providing services.
(e) To the extent that the aggregate Fair Market Value (determined at the
time of grant) of stock with respect to which Incentive Stock Options are
exercisable for the first time by any Optionee during any calendar year under
all plans of the Company and its Affiliates exceeds one hundred thousand dollars
($100,000), the Options or portions thereof which exceed such limit (according
to the order in which they were granted) shall be treated as Nonstatutory Stock
Options.
(f) (1) The Board or the Committee shall have the authority to effect, at
any time and from time to time (i) the repricing of any outstanding Options
under the Plan and/or (ii) with the consent of the affected holders of Options,
the cancellation of any outstanding Options and the grant in substitution
therefor of new Options under the Plan covering the same or different numbers of
shares of common stock, but having an exercise price per share not less than
eighty-five percent (85%) of the Fair Market Value (one hundred percent (100%)
of the Fair Market Value in the case of an Incentive Stock Option or, in the
case of a ten percent (10%) stockholder
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<PAGE> 18
(as defined in subsection 5(b)), not less than one hundred and ten percent
(110%) of the Fair Market Value) per share of common stock on the new grant
date.
(2) Shares subject to an Option canceled under this subsection 9(f)
shall continue to be counted, for the applicable period in which it was granted,
against the maximum award of Options permitted to be granted pursuant to
subsection 5(c) of the Plan. The repricing of an Option under this subsection
9(f), resulting in a reduction of the exercise price, shall be deemed to be a
cancellation of the original Option and the grant of a substitute Option; in the
event of such repricing, both the original and the substituted Options shall be
counted for the applicable period against the maximum awards of Options
permitted to be granted pursuant to subsection 5(c) of the Plan. The provisions
of this subsection 9(f)(2) shall be applicable only to the extent required by
Section 162(m) of the Code.
10. ADJUSTMENTS UPON CHANGES IN STOCK.
(a) If any change is made in the stock subject to the Plan, or subject to
any Option (through merger, consolidation, reorganization, recapitalization,
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
maximum number of securities subject to award to any person during any calendar
year/twelve (12) month period pursuant to subsection 5(c), and the outstanding
Options will be appropriately adjusted in the type(s) and number of securities
and price per share of stock subject to such outstanding Options. Such
adjustments shall be made by the Board or Committee, the determination of which
shall be final, binding and conclusive. (The conversion of any convertible
securities of
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<PAGE> 19
the Company shall not be treated as a "transaction not involving the receipt of
consideration by the Company.")
(b) In the event of: (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; or (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, then: (i) any surviving or acquiring corporation shall assume
Options outstanding under the Plan or shall substitute similar options
(including an option to acquire the same consideration paid to stockholders in
the transaction described in this Subsection 10(b)) for those outstanding under
the Plan, or (ii) in the event any surviving or acquiring corporation refuses to
assume such Options or to substitute similar options for those outstanding under
the Plan, (A) with respect to Options held by persons then performing services
as Employees, Directors or Consultants, the vesting of such Options and the time
during which such Options may be exercised shall be accelerated prior to such
event and the Options terminated if not exercised after such acceleration and at
or prior to such event, and (B) with respect to any other Options outstanding
under the Plan, such Options shall be terminated if not exercised prior to such
event.
11. AMENDMENT OF THE PLAN AND OPTIONS.
(a) The Board at any time, and from time to time, may amend the Plan.
However, except as provided in Section 10 relating to adjustments upon changes
in stock, no amendment shall be effective unless approved by the stockholders of
the Company within twelve (12) months before or after the adoption of the
amendment, where such amendment requires
19
<PAGE> 20
stockholder approval in order for the Plan to satisfy the requirements of Rule
16b-3, Section 422 of the Code or to comply with applicable Nasdaq or stock
exchange listing requirements.
(b) The Board may in its sole discretion submit any other amendment to the
Plan for stockholder approval, including, but not limited to, amendments to the
Plan intended to satisfy the requirements of Section 162(m) of the Code and the
regulations promulgated thereunder regarding the exclusion of performance-based
compensation from the limit on corporate deductibility of compensation paid to
certain executive officers.
(c) It is expressly contemplated that the Board may amend the Plan in any
respect the Board deems necessary or advisable to provide Optionees with the
maximum benefits provided or to be provided under the provisions of the Code and
the regulations promulgated thereunder relating to Incentive Stock Options
and/or to bring the Plan and/or Incentive Stock Options granted under it into
compliance therewith.
(d) Rights and obligations under any Option 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 Option was granted and
(ii) such person consents in writing.
(e) The Board at any time, and from time to time, may amend the terms of
any one or more Options; provided, however, that the rights and obligations
under any Option shall not be impaired by any such amendment unless (i) the
Company requests the consent of the person to whom the Option was granted and
(ii) such person consents in writing.
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<PAGE> 21
12. TERMINATION OR SUSPENSION OF THE PLAN.
(a) The Board may suspend or terminate the Plan at any time. Unless sooner
terminated, the Plan shall terminate on May 20, 2007, which shall be within ten
(10) years from the date the Plan is adopted by the Board or approved by the
stockholders of the Company, whichever is earlier. No Options may be granted
under the Plan while the Plan is suspended or after it is terminated.
(b) Rights and obligations under any Option 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 Option was granted.
13. EFFECTIVE DATE OF PLAN.
The Plan shall become effective as determined by the Board, but no Options
granted under the Plan shall be exercised unless and until the Plan has been
approved by the stockholders of the Company, which approval shall be within
twelve (12) months before or after the date the Plan is adopted by the Board.
21
<PAGE> 22
INCENTIVE STOCK OPTION
_________________________, Optionee:
PARADISE ELECTRONICS, INC. (the "Company"), pursuant to its 1997 Stock
Option Plan (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Common Stock").
This option is intended to qualify as an "incentive stock option" within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors and consultants and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"). The grant of this
option and the issuance of shares upon the exercise of this option are also
intended to be exempt from the securities qualification requirements of the
California Corporations Code pursuant to Section 25102(o) of that code. Defined
terms not explicitly defined in this agreement but defined in the Plan shall
have the same definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is ____________________ (______).
2. VESTING. Subject to the limitations contained herein, twenty-five
percent (25%) of the shares will vest (become exercisable) on ____________, 19__
and two and one-twelfth percent (2 1/12%) of the shares will then vest at the
end of each month thereafter until either (i) you cease to provide services to
the Company for any reason, or (ii) this option becomes fully vested.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is ($________)
per share, being not less than the fair market value of the Common Stock on the
date of grant of this option.
(b) METHOD OF PAYMENT. Payment of the exercise price per share is due
in full upon exercise of all or any part of each installment which has accrued
to you. You may elect, to the extent permitted by applicable statutes and
regulations, to make payment of the exercise price under one of the following
alternatives:
(i) Payment of the exercise price per share in cash (including
check) at the time of exercise;
(ii) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which, 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;
(iii) Provided that at the time of exercise the Company's Common
Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of already-
<PAGE> 23
owned shares of Common Stock, held for the period required to avoid a charge to
the Company's reported earnings, and owned free and clear of any liens, claims,
encumbrances or security interests, which Common Stock shall be valued at its
fair market value on the date of exercise;
(iv) Payment by a combination of the methods of payment permitted
by subparagraph 3(b)(i) through 3(b)(iii) above.
4. WHOLE SHARES. This option may only be exercised for whole shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Act, or, if such
shares are not then so registered, the Company has determined that such exercise
and issuance would be exempt from the registration requirements of the Act.
6. TERM. The term of this option commences on __________, 19__, the date
of grant, and expires on ______________________ (the "Expiration Date," which
date shall be no more than ten (10) years from date this option is granted),
unless this option expires sooner as set forth below or in the Plan. In no event
may this option be exercised on or after the Expiration Date. This option shall
terminate prior to the Expiration Date as follows: three (3) months after the
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or an Affiliate of the Company unless one of the following
circumstances exists:
(a) Your termination of Continuous Status as an Employee, Director or
Consultant is due to your disability in which event this option will expire on
the earlier of the Expiration Date set forth above or twelve (12) months
following such termination of Continuous Status as an Employee, Director or
Consultant. You should be aware that if your disability is not considered a
permanent and total disability within the meaning of Section 422(c)(6) of the
Code, and you exercise this option more than three (3) months following the date
of your termination of employment, your exercise will be treated for tax
purposes as the exercise of a "nonstatutory stock option" instead of an
"incentive stock option."
(b) Your termination of Continuous Status as an Employee, Director or
Consultant is due to your death or your death occurs within three (3) months
following your termination of Continuous Status as an Employee, Director or
Consultant. This option will then expire on the earlier of the Expiration Date
set forth above or twelve (12) months after your death.
(c) If during any part of such three (3) month period you may not
exercise your option solely because of the condition set forth in paragraph 5
above, then your option will not expire until the earlier of the Expiration Date
set forth above or until this option shall have been exercisable for an
aggregate period of three (3) months after your termination of Continuous Status
as an Employee, Director or Consultant.
(d) If your exercise of the option within three (3) months after
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or with an Affiliate of the Company would result in liability
under section 16(b) of the Securities Exchange Act of 1934, then your option
will expire on the earlier of (i) the Expiration Date set forth above, (ii) the
tenth (10th) day after the last date upon which exercise would result in such
liability or (iii) six (6) months and ten (10) days after the termination of
your Continuous Status as an Employee, Director or Consultant with the Company
or an Affiliate of the Company.
2
<PAGE> 24
However, this option may be exercised following termination of Continuous
Status as an Employee, Director or Consultant only as to that number of shares
as to which it was exercisable on the date of termination of Continuous Status
as an Employee, Director or Consultant under the provisions of paragraph 2 of
this option.
In order to obtain the federal income tax advantages associated with an
"incentive stock option," the Code requires that at all times beginning on the
date of grant of the option and ending on the day three (3) months before the
date of the option's exercise, you must be an employee of the Company or an
Affiliate of the Company, except in the event of your death or permanent and
total disability. The Company has provided for continued vesting or extended
exercisability of your option under certain circumstances for your benefit, but
cannot guarantee that your option will necessarily be treated as an "incentive
stock option" if you provide services to the Company or an Affiliate of the
Company as a consultant or exercise your option more than three (3) months after
the date your employment with the Company and all Affiliates of the Company
terminates.
7. EXERCISE.
(a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise 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 pursuant to subsection 6(f)
of the Plan.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any exercise of this
option, the Company may require you to enter 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 this option; (2) the lapse of any
substantial risk of forfeiture to which the shares are subject at the time of
exercise; or (3) the disposition of shares acquired upon such exercise;
(ii) you will notify the Company in writing within fifteen (15)
days after the date of any disposition of any of the shares of the Common Stock
issued upon exercise of this option that occurs within two (2) years after the
date of this option grant or within one (1) year after such shares of Common
Stock are transferred upon exercise of this option; and
(iii) the Company (or a representative of the underwriters) may,
in connection with the first underwritten registration of the offering of any
securities of the Company under the Act, require that you not sell or otherwise
transfer or dispose of any shares of Common Stock or other securities of the
Company during such period (not to exceed one hundred eighty (180) days)
following the effective date (the "Effective Date") of the registration
statement of the Company filed under the Act as may be requested by the Company
or the representative of the underwriters. You further agree that the Company
may impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such period.
8. TRANSFERABILITY. This 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 this
option.
3
<PAGE> 25
9. OPTION NOT A SERVICE CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in this option shall obligate the Company or any Affiliate of the
Company, or their respective stockholders, Board of Directors, officers or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
10. NOTICES. Any notices provided for in this 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 the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the address
specified below or at such other address as you hereafter designate by written
notice to the Company.
11. GOVERNING PLAN DOCUMENT. This option is subject to all the provisions
of the Plan, a copy of which is attached hereto and its provisions are hereby
made a part of this option, including without limitation the provisions of
Section 6 of the Plan relating to option provisions, 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 this option and those of the Plan, the
provisions of the Plan shall control.
Dated the ____ day of __________________, 19__.
Very truly yours,
PARADISE ELECTRONICS, INC.
By:
-------------------------------
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
Paradise Electronics, Inc. 1997 Stock Option Plan
Notice of Exercise
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<PAGE> 26
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE
------------
(Initial)
OTHER
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OPTIONEE
Address:
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<PAGE> 27
NONSTATUTORY STOCK OPTION
_________________________, Optionee:
PARADISE ELECTRONICS, INC. (the "Company"), pursuant to its 1997 Stock
Option Plan (the "Plan"), has granted to you, the optionee named above, an
option to purchase shares of the common stock of the Company ("Common Stock").
This option is not intended to qualify as and will not be treated as an
"incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code").
The grant hereunder is in connection with and in furtherance of the
Company's compensatory benefit plan for participation of the Company's employees
(including officers), directors and consultants and is intended to comply with
the provisions of Rule 701 promulgated by the Securities and Exchange Commission
under the Securities Act of 1933, as amended (the "Act"). The grant of this
option and the issuance of shares upon the exercise of this option are also
intended to be exempt from the securities qualification requirements of the
California Corporations Code pursuant to Section 25102(o) of that code. Defined
terms not explicitly defined in this agreement but defined in the Plan shall
have the same definitions as in the Plan.
The details of your option are as follows:
1. TOTAL NUMBER OF SHARES SUBJECT TO THIS OPTION. The total number of
shares of Common Stock subject to this option is ____________________
(__________).
2. VESTING. Subject to the limitations contained herein, twenty-five
percent (25%) of the shares will vest (become exercisable) on ____________, 19__
and two and one-twelfth percent (2 1/2%) of the shares will then vest at the end
of each month thereafter until either (i) you cease to provide services to the
Company for any reason, or (ii) this option becomes fully vested.
3. EXERCISE PRICE AND METHOD OF PAYMENT.
(a) EXERCISE PRICE. The exercise price of this option is ($________)
per share, being not less than 85% of the fair market value of the Common Stock
on the date of grant of this option.
(b) METHOD OF PAYMENT. Payment of the exercise price per share is due
in full upon exercise of all or any part of each installment which has accrued
to you. You may elect, to the extent permitted by applicable statutes and
regulations, to make payment of the exercise price under one of the following
alternatives:
(i) Payment of the exercise price per share in cash (including
check) at the time of exercise;
(ii) Payment pursuant to a program developed under Regulation T
as promulgated by the Federal Reserve Board which, 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;
<PAGE> 28
(iii) Provided that at the time of exercise the Company's Common
Stock is publicly traded and quoted regularly in the Wall Street Journal,
payment by delivery of already-owned shares of Common Stock, held for the period
required to avoid a charge to the Company's reported earnings, and owned free
and clear of any liens, claims, encumbrances or security interests, which Common
Stock shall be valued at its fair market value on the date of exercise;
(iv) Payment by a combination of the methods of payment permitted
by subparagraph 3(b)(i) through 3(b)(iii) above.
4. WHOLE SHARES. This option may only be exercised for whole shares.
5. SECURITIES LAW COMPLIANCE. Notwithstanding anything to the contrary
contained herein, this option may not be exercised unless the shares issuable
upon exercise of this option are then registered under the Act or, if such
shares are not then so registered, the Company has determined that such exercise
and issuance would be exempt from the registration requirements of the Act.
6. TERM. The term of this option commences on __________, 19__, the date
of grant and expires on _______________________ (the "Expiration Date," which
date shall be no more than ten (10) years from the date this option is granted),
unless this option expires sooner as set forth below or in the Plan. In no event
may this option be exercised on or after the Expiration Date. This option shall
terminate prior to the Expiration Date as follows: three (3) months after the
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or an Affiliate of the Company for any reason or for no reason
unless:
(a) Your termination of Continuous Status as an Employee, Director or
Consultant is due to your disability in which event this option shall expire on
the earlier of the Expiration Date set forth above or twelve (12) months
following such termination of Continuous Status as an Employee, Director or
Consultant; or
(b) Your termination of Continuous Status as an Employee, Director or
Consultant is due to your death or your death occurs within three (3) months
following your termination for any other reason, in which event the option shall
expire on the earlier of the Expiration Date set forth above or twelve (12)
after your death; or
(c) If during any part of such three (3) month period you may not
exercise your option solely because of the condition set forth in paragraph 5
above, then your option will not expire until the earlier of the Expiration Date
set forth above or until this option shall have been exercisable for an
aggregate period of three (3) months after your termination of Continuous Status
as an Employee, Director or Consultant; or
(d) If your exercise of the option within three (3) months after
termination of your Continuous Status as an Employee, Director or Consultant
with the Company or with an Affiliate of the Company would result in liability
under section 16(b) of the Securities Exchange Act of 1934, then your option
will expire on the earlier of (i) the Expiration Date set forth above, (ii) the
tenth (10th) day after the last date upon which exercise would result in such
liability or (iii) six (6) months and ten (10) days after the termination of
your Continuous Status as an Employee, Director or Consultant with the Company
or an Affiliate of the Company.
However, this option may be exercised following termination of Continuous
Status as an Employee, Director or Consultant only as to that number of shares
as to which it was exercisable on the
2
<PAGE> 29
date of termination of Continuous Status as an Employee, Director or Consultant
under the provisions of paragraph 2 of this option.
7. EXERCISE.
(a) This option may be exercised, to the extent specified above, by
delivering a notice of exercise (in a form designated by the Company) together
with the exercise 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 pursuant to subsection 6(f)
of the Plan.
(b) By exercising this option you agree that:
(i) as a precondition to the completion of any exercise of this
option, the Company may require you to enter an arrangement providing for the
cash payment by you to the Company of any tax withholding obligation of the
Company arising by reason of: (1) the exercise of this option; (2) the lapse of
any substantial risk of forfeiture to which the shares are subject at the time
of exercise; or (3) the disposition of shares acquired upon such exercise. You
also agree that any exercise of this option has not been completed and that the
Company is under no obligation to issue any Common Stock to you until such an
arrangement is established or the Company's tax withholding obligations are
satisfied, as determined by the Company; and
(ii) the Company (or a representative of the underwriters) may,
in connection with the first underwritten registration of the offering of any
securities of the Company under the Act, require that you not sell or otherwise
transfer or dispose of any shares of Common Stock or other securities of the
Company during such period (not to exceed one hundred eighty (180) days)
following the effective date (the "Effective Date") of the registration
statement of the Company filed under the Act as may be requested by the Company
or the representative of the underwriters. You further agree that the Company
may impose stop-transfer instructions with respect to securities subject to the
foregoing restrictions until the end of such period.
8. TRANSFERABILITY. This 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 this
option.
9. OPTION NOT A SERVICE CONTRACT. This option is not an employment
contract and nothing in this option shall be deemed to create in any way
whatsoever any obligation on your part to continue in the employ of the Company,
or of the Company to continue your employment with the Company. In addition,
nothing in this option shall obligate the Company or any Affiliate of the
Company, or their respective stockholders, Board of Directors, officers, or
employees to continue any relationship which you might have as a Director or
Consultant for the Company or Affiliate of the Company.
10. NOTICES. Any notices provided for in this 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 the Company to you, five (5) days after deposit in
the United States mail, postage prepaid, addressed to you at the address
specified below or at such other address as you hereafter designate by written
notice to the Company.
11. GOVERNING PLAN DOCUMENT. This option is subject to all the provisions
of the Plan, a copy of which is attached hereto and its provisions are hereby
made a part of this option, including
3
<PAGE> 30
without limitation the provisions of Section 6 of the Plan relating to option
provisions, 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 this option and
those of the Plan, the provisions of the Plan shall control.
Dated the ____ day of __________________, 19__.
Very truly yours,
PARADISE ELECTRONICS, INC.
By:
--------------------------------------
Duly authorized on behalf
of the Board of Directors
ATTACHMENTS:
Paradise Electronics, Inc. 1997 Stock Option Plan
Notice of Exercise
4
<PAGE> 31
The undersigned:
(a) Acknowledges receipt of the foregoing option and the attachments
referenced therein and understands that all rights and liabilities with respect
to this option are set forth in the option and the Plan; and
(b) Acknowledges that as of the date of grant of this option, it sets
forth the entire understanding between the undersigned optionee and the Company
and its Affiliates regarding the acquisition of stock in the Company and
supersedes all prior oral and written agreements on that subject with the
exception of (i) the options previously granted and delivered to the undersigned
under stock option plans of the Company, and (ii) the following agreements only:
NONE
------------
(Initial)
OTHER
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OPTIONEE
Address:
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5
<PAGE> 1
EXHIBIT 5.1
MSB:NS26117-1
June 23, 1999
Genesis Microchip Incorporated
165 Commerce Valley Drive W.
Thornhill, Ontario, Canada L3T 7V8
Ladies and Gentlemen:
We act as Nova Scotia counsel to Genesis Microchip Incorporated, a body
corporate under the laws of the Province of Nova Scotia ("Genesis"), and have
reviewed the Registration Statement on Form S-8 (the "Registration Statement"),
to be filed by Genesis on or about June 23, 1999 with the Securities and
Exchange Commission pursuant to The Securities Act of 1993, as amended, for the
registration of 506,748 common shares without nominal or par value in the
capital stock of Genesis for issuance under the 1997 Employee Stock Option Plan,
and 533,315 common shares without nominal or par value in the capital stock of
Genesis for issuance under the Paradise Electronics, Inc. 1997 Stock Option
Plan, (collectively, the "Shares" and the "1997 Plans", as appropriate).
We have reviewed the Registration Statement and such agreements, records,
certificates and other documents and made such reviews, examinations and
inquiries and considered such matters of law as are, in our opinion, necessary
or appropriate for the purposes of rendering this opinion. In giving this
opinion, we have assumed the genuineness of all signatures (whether on originals
or copies of documents), the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as notarial, certified, conformed, photostatic or faxed copies thereof and the
authenticity of the originals of such documents.
On the basis of the foregoing and assuming the due execution and delivery
of certificates representing the Shares, we are of the opinion that the Shares,
when issued and delivered against payment of the agreed consideration therefor
in accordance with the terms of the 1997 Plans, will be validly issued, fully
paid and non-assessable.
We are qualified to practice law in the Province of Nova Scotia. The
opinion expressed in this letter relates only to the laws of Nova Scotia and the
federal laws of Canada applicable in the Province of Nova Scotia. No opinions
are expressed with respect to the laws of any other jurisdiction.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement and any amendments thereto.
/s/ Stewart McKelvey Stirling Scales
------------------------------------
STEWART MCKELVEY STIRLING SCALES
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Genesis Microchip Inc.
We consent to the incorporation by reference in this Registration Statement on
Form S-8 to be filed June 23, 1999 pertaining to the 1997 Employee Stock Option
Plan, as amended on October 27, 1998, of our report dated July 10, 1998 on the
consolidated financial statements of the Company as at May 31, 1998 and 1997 and
for three years ended May 31, 1998 included in the May 31, 1998 Form 20-F of the
Company.
/s/ KPMG LLP
Toronto, Canada
June 23, 1999
