<PAGE>
As filed with the Securities and Exchange Commission on March 22, 2000
Registration No. 333-_______
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
PRIMUS KNOWLEDGE SOLUTIONS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
Washington 91-1350484
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
Suite 1900
1601 Fifth Avenue
Seattle, Washington 98101
(Address of principal executive offices, including zip code)
PRIMUS KNOWLEDGE SOLUTIONS, INC. 1999 NONOFFICER EMPLOYEE STOCK
COMPENSATION PLAN
IMPARTO SOFTWARE CORPORATION 1996 STOCK OPTION PLAN
BUSINESS SYSTEMS DESIGN, INC. 1996 STOCK OPTION PLAN
(Full title of the plans)
MICHAEL A. BROCHU
President and Chief Executive Officer
Primus Knowledge Solutions, Inc.
1601 Fifth Avenue, Suite 1900
Seattle, WA 98101
(206) 292-1000
(Name, address and telephone number, including area code, of agent for service)
______________________
Copies to:
ANDREW BOR
ELIZABETH KORRELL
Perkins Coie LLP
1201 Third Avenue, Suite 4800
Seattle, Washington 98101-3099
______________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
============================================================================================================
Proposed
Proposed Maximum Maximum
Title of Securities Amount to Be Offering Price Aggregate Amount of
to Be Registered Registered(1) per share Offering Price Registration Fee
- ------------------------------------------------------------------------------------------------------------
Common Stock, $.025 par value
per share, under the:
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1999 Nonofficer Employee Stock 1,000,000 $ 98.50(2) $98,500,000
Compensation Plan
- ------------------------------------------------------------------------------------------------------------
Imparto Software Corporation 39,314(3) $ 7.66(4) $ 301,306
1996 Stock Option Plan
- ------------------------------------------------------------------------------------------------------------
Business Systems Design, Inc 131,594(5) $ 5.30(4) $ 697,302
1996 Stock Option Plan
- ------------------------------------------------------------------------------------------------------------
TOTAL 1,170,908 $99,498,608 $26,268
============================================================================================================
</TABLE>
(1) Together with an indeterminate number of additional shares which may be
necessary to adjust the number of shares reserved for issuance pursuant to
the plans as the result of any future stock split, stock dividend or
similar adjustment of the Registrant's outstanding Common Stock.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, based
on the average of high and low sales prices for the Common Stock on March
21, 2000, as reported for such date on the Nasdaq National Market.
(3) Pursuant to an Agreement and Plan of Merger dated as of December 12, 1999
(the "Imparto Merger Agreement"), by and among the Registrant, San Antonio
Acquisition, Inc., and Imparto Software Corporation ("Imparto"), the
Registrant assumed outstanding options to purchase common stock of Imparto
under the Imparto Software Corporation 1996 Stock Option Plan (the "Imparto
Assumed Options"), with appropriate adjustments to the number of shares and
the exercise price of each Imparto Assumed Option to reflect the ratio at
which Imparto common stock was converted into Common Stock of the
Registrant under the Imparto Merger Agreement.
(4) Shares are issuable upon exercise of outstanding options with fixed
exercise prices. Pursuant to Rule 457(h) under the Securities Act of 1933,
as amended, the proposed maximum aggregate offering price and the
registration fee have been computed based on the weighted average exercise
price of the assumed options.
(5) Pursuant to an Agreement and Plan of Merger dated as of January 8, 2000
(the "2order Merger Agreement"), by and among the Registrant, Austin
Acquisition, Inc., and 2order.com, Inc. ("2order"), the Registrant assumed
outstanding options to purchase common stock of 2order under the Business
Systems Design 1996 Stock Option Plan (the "2order Assumed Options"), with
appropriate adjustments to the number of shares and the exercise price of
each 2order Assumed Option to reflect the ratio at which 2order common
stock was converted into Common Stock of the Registrant under the 2order
Merger Agreement.
1
<PAGE>
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Securities and Exchange Commission
(the "Commission") are hereby incorporated by reference in this Registration
Statement:
(a) The description of the Registrant's Common Stock contained in the
Registration Statement on Form 8-A filed on June 4, 1999, under Section 12(g) of
the Securities and Exchange Act of 1934, as amended (the "Exchange Act"),
including any amendments or reports for the purpose of updating such
description;
(b) The Registrant's annual report on Form 10-K for the year ended
December 31, 1999 as filed with the SEC under the Exchange Act; and
(c) All other reports filed by the Registrant pursuant to Section
13(a) or 15(d) of the Exchange Act since the end of the fiscal year covered by
the annual report referred to in (b) above.
All documents filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date hereof and prior to the
filing of a post-effective amendment which indicates that the securities offered
hereby have been sold or which deregisters the securities covered hereby then
remaining unsold, shall also be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof commencing on the respective
dates on which such documents are filed.
Item 4. DESCRIPTION OF SECURITIES
Not applicable.
Item 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
None.
Item 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Sections 23B.08.500 through 23B.08.600 of the Washington Business
Corporation Act (the "WBCA") authorize a court to award, or a corporation's
board of directors to grant, indemnification to directors and officers on terms
sufficiently broad to permit indemnification under certain circumstances for
liabilities arising under the Securities Act of 1933, as amended (the
"Securities Act"). Section 10 of the Registrant's Second Amended and Restated
Bylaws provides for indemnification of the Registrant's directors, officers,
employees and agents to the maximum extent permitted by Washington law. The
directors and officers of the Registrant also may be indemnified against
liability they may incur for serving in that capacity pursuant to a liability
insurance policy maintained by the Registrant for such purpose.
Section 23B.08.320 of the WBCA authorizes a corporation to limit a
director's liability to the corporation or its shareholders for monetary damages
for acts or omissions as a director, except in certain circumstances involving
intentional misconduct, knowing violations of law or illegal corporate loans or
distributions, or any transaction from which the director personally receives a
benefit in money, property or services to which the director is not legally
entitled. Article 9 of the Registrant's Fourth Amended and Restated Articles of
Incorporation contains provisions implementing, to the fullest extent permitted
by Washington law, such limitations on a director's liability to the Registrant
and its shareholders.
II-1
<PAGE>
Item 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
Item 8. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------- -----------------------------------------------------------------------
<C> <S>
5.1 Opinion of Perkins Coie LLP regarding legality of the Common Stock
being registered
23.1 Consent of KPMG LLP, Independent Auditors
23.2 Consent of Perkins Coie LLP (included in opinion filed as Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 Primus Knowledge Solutions, Inc. 1999 Nonofficer Employee Stock
Compensation Plan
99.2 Imparto Software Corporation 1996 Stock Option Plan
99.3 Business Systems Design, Inc. 1996 Stock Option Plan
</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:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of this Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate, represent
a fundamental change in the information set forth in this Registration
Statement; and
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in this Registration Statement or any
material change to such information in this Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) above 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 Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
B. 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 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefits plan's annual
report pursuant to Section 15(d) of the
II-2
<PAGE>
Exchange Act) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
C. 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 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.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Seattle, State of Washington, on March 22, 2000.
PRIMUS KNOWLEDGE SOLUTIONS, INC.
/s/ MICHAEL A. BROCHU
--------------------------------------
By: Michael A. Brochu
President, Chief Executive Officer and
Chairman of the Board
POWER OF ATTORNEY
Each person whose individual signature appears below hereby authorizes
Michael A. Brochu and Elizabeth J. Huebner, or either of them, as attorneys-in-
fact with full power of substitution, to execute in the name and on the behalf
of each person, individually and in each capacity stated below, and to file, any
and all amendments to this Registration Statement, including any and all post-
effective amendments.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on March 22, 2000.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
/s/ MICHAEL A. BROCHU President, Chief Executive Officer and Chairman of the Board
- --------------------------------- (Principal Executive Officer)
Michael A. Brochu
/s/ ELIZABETH J. HUEBNER Vice President, Chief Financial Officer, Secretary and
- --------------------------------- Treasurer (Principal Financial and Accounting Officer)
Elizabeth J. Huebner
/s/ ANTONIO M. AUDINO Director
- ---------------------------------
Antonio M. Audino
/s/ PROMOD HAQUE Director
- ---------------------------------
Promod Haque
/s/ FREDRIC W. HARMAN Director
- ---------------------------------
Fredric W. Harman
/s/ YASUKI MATSUMOTO Director
- ---------------------------------
Yasuki Matsumoto
Director
- ---------------------------------
Janice C. Peters
</TABLE>
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- -------- ----------------------------------------------------------------------
<C> <S>
5.1 Opinion of Perkins Coie LLP regarding legality of the Common Stock
being registered
23.1 Consent of KPMG LLP, Independent Auditors
23.2 Consent of Perkins Coie LLP (included in opinion filed as Exhibit 5.1)
24.1 Power of Attorney (see signature page)
99.1 Primus Knowledge Solutions, Inc. 1999 Nonofficer Employee Stock
Compensation Plan
99.2 Imparto Software Corporation 1996 Stock Option Plan
99.3 Business Systems Design, Inc. 1996 Stock Option Plan
</TABLE>
<PAGE>
EXHIBIT 5.1
[Perkins Coie LLP Letterhead]
March 22, 2000
Primus Knowledge Solutions, Inc.
1601 Fifth Ave., Suite 1900
Seattle, WA 98101
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel to you in connection with the preparation of a
Registration Statement on Form S-8 (the "Registration Statement") under the
Securities Act of 1933, as amended (the "Act"), which you are filing with the
Securities and Exchange Commission with respect to up to 1,170,908 shares of
Common Stock, par value $.025 per share (the "Shares"), which may be issued as
follows: 1,000,000 Shares under the Primus Knowledge Solutions, Inc. 1999
Nonofficer Employee Stock Compensation Plan; 39,314 Shares under the Imparto
Software Corporation 1996 Stock Option Plan and 131,594 Shares under the
Business Systems Design, Inc. 1996 Stock Option Plan.
We have examined the Registration Statement and such documents and records
of the Company and other documents as we have deemed relevant and necessary for
the purpose of this opinion. In giving this opinion, we are assuming the
authenticity of all instruments presented to us as originals, the conformity
with originals of all instruments presented to us as copies and the genuineness
of all signatures.
Based upon and subject to the foregoing, we are of the opinion that any
original issuance of Shares that may be issued pursuant to the plans has been
duly authorized and that, upon the due execution by the Company and the
registration by its registrar of such Shares and the sale thereof by the Company
in accordance with the terms of the plans, and the receipt of consideration
therefor in accordance with the terms of the plans, such Shares will be validly
issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Perkins Coie LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Primus Knowledge Solutions, Inc.:
We consent to the use of our report incorporated herein by reference.
/s/ KPMG LLP
Seattle, Washington
March 22, 2000
<PAGE>
EXHIBIT 99.1
PRIMUS KNOWLEDGE SOLUTIONS, INC.
1999 NONOFFICER EMPLOYEE STOCK COMPENSATION PLAN
SECTION 1. PURPOSE
The purpose of the Primus Knowledge Solutions, Inc. 1999 Nonofficer
Employee Stock Compensation Plan (the "Plan") is to enhance the long-term
shareholder value of Primus Knowledge Solutions, Inc., a Washington corporation
(the "Company"), by offering opportunities to selected persons who are not
officers or directors of the Company to participate in the Company's growth and
success, and to encourage them to remain in the service of the Company and its
Related Corporations (as defined in Section 2) and to acquire and maintain stock
ownership in the Company.
SECTION 2. DEFINITIONS
For purposes of the Plan, the following terms shall be defined as set forth
below:
"Award" means an award or grant made pursuant to the Plan, including,
without limitation, awards or grants of Stock Awards and Options, or any
combination of the foregoing.
"Board" means the Board of Directors of the Company.
"Cause" means dishonesty, fraud, misconduct, unauthorized use or disclosure
of confidential information or trade secrets, or conviction or confession of a
crime punishable by law (except minor violations), in each case as determined by
the Plan Administrator, and its determination shall be conclusive and binding.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Common Stock" means the common stock, par value $.025 per share, of the
Company.
"Corporate Transaction" means any of the following events:
(a) Consummation of any merger or consolidation of the Company with or into
another corporation; or
(b) Consummation of any sale, lease, exchange or other transfer in one
transaction or a series of related transactions of all or substantially all of
the Company's assets other than a transfer of the Company's assets to a
majority-owned subsidiary corporation (as defined in Section 8.3) of the
Company.
"Disability," unless otherwise defined by the Plan Administrator, means a
mental or physical impairment of the Participant that is expected to result in
death or that has lasted or is expected to last for a continuous period of 12
months or more and that causes the Participant to
-1-
<PAGE>
be unable, in the opinion of the Company, to perform his or her duties for the
Company or a Related Corporation and to be engaged in any substantial gainful
activity.
"Effective Date" has the meaning set forth in Section 15.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" shall be as established in good faith by the Plan
Administrator or (a) if the Common Stock is listed on the Nasdaq National
Market, the average of the high and low per share sales prices for the Common
Stock as reported by the Nasdaq National Market for a single trading day or (b)
if the Common Stock is listed on the New York Stock Exchange or the American
Stock Exchange, the average of the high and low per share sales prices for the
Common Stock as such price is officially quoted in the composite tape of
transactions on such exchange for a single trading day. If there is no such
reported price for the Common Stock for the date in question, then such price on
the last preceding date for which such price exists shall be determinative of
Fair Market Value.
"Grant Date" means the date on which the Plan Administrator completes the
corporate action relating to the grant of an Award and all conditions precedent
to the grant have been satisfied, provided that conditions to the exercisability
or vesting of Awards shall not defer the Grant Date.
"Option" means an option to purchase Common Stock granted under Section 7
that is not intended to qualify as an incentive stock option as that term is
defined in Section 422 of the Code.
"Option Term" has the meaning set forth in Section 7.3.
"Parent" means any entity, whether now or hereafter existing, that directly
or indirectly controls the Company.
"Participant" means (a) the person to whom an Award is granted; (b) for a
Participant who has died, the personal representative of the Participant's
estate, the person(s) to whom the Participant's rights under the Award have
passed by will or by the applicable laws of descent and distribution, or the
beneficiary designated in accordance with Section 10; or (c) the person(s) to
whom an Award has been transferred in accordance with Section 10.
"Plan Administrator" means the Board or any committee or committees
designated by the Board or any person to whom the Board has delegated authority
to administer the Plan under Section 3.1.
"Related Corporation" means any Parent or Subsidiary of the Company.
"Securities Act" means the Securities Act of 1933, as amended.
-2-
<PAGE>
"Stock Award" means shares of Common Stock or units denominated in Common
Stock granted under Section 8, the rights of ownership of which may be subject
to restrictions prescribed by the Plan Administrator.
"Subsidiary" means any entity that is directly or indirectly controlled by
the Company.
"Successor Corporation" has the meaning set forth in Section 11.3.
"Termination Date" has the meaning set forth in Section 7.6.
SECTION 3. ADMINISTRATION
3.1 Plan Administrator
The Plan shall be administered by the Board and/or a committee or
committees (which term includes subcommittees) appointed by, and consisting of
two or more members of, the Board (a "Plan Administrator"). The Board may
delegate the responsibility for administering the Plan with respect to
designated classes of eligible persons to different committees consisting of two
or more members of the Board, subject to such limitations as the Board deems
appropriate. Committee members shall serve for such term as the Board may
determine, subject to removal by the Board at any time. To the extent
consistent with applicable law, the Board may authorize a senior executive
officer of the Company to grant Awards to specified eligible persons, within the
limits specifically prescribed by the Board.
3.2 Administration and Interpretation by Plan Administrator
Except for the terms and conditions explicitly set forth in the Plan, the
Plan Administrator shall have exclusive authority, in its discretion, to
determine all matters relating to Awards under the Plan, including the selection
of individuals to be granted Awards, the type of Awards, the number of shares of
Common Stock subject to an Award, all terms, conditions, restrictions and
limitations, if any, of an Award and the terms of any instrument that evidences
the Award. The Plan Administrator shall also have exclusive authority to
interpret the Plan and the terms of any instrument evidencing the Award and may
from time to time adopt, and change, rules and regulations of general
application for the Plan's administration. The Plan Administrator's
interpretation of the Plan and its rules and regulations, and all actions taken
and determinations made by the Plan Administrator pursuant to the Plan, shall be
conclusive and binding on all parties involved or affected. The Plan
Administrator may delegate administrative duties to such of the Company's
officers as it so determines.
SECTION 4. STOCK SUBJECT TO THE PLAN
4.1 Authorized Number of Shares
Subject to adjustment from time to time as provided in Section 11.1, the
number of shares of Common Stock that shall be available for issuance under the
Plan shall be 1,000,000 shares.
-3-
<PAGE>
Shares issued under the Plan shall be drawn from authorized and unissued
shares or shares now held or subsequently acquired by the Company.
4.2 Reuse of Shares
Any shares of Common Stock that have been made subject to an Award that
cease to be subject to the Award (other than by reason of exercise or payment of
the Award to the extent it is exercised for or settled in vested and
nonforfeitable shares) shall again be available for issuance in connection with
future grants of Awards under the Plan.
SECTION 5. ELIGIBILITY
Awards may be granted under the Plan to any individual who, at the time of
the grant is an employee, consultant, agent, advisor, or independent contractor
who provides services to the Company or its Related Corporations and is not an
officer or director of the Company; provided, however, that such Participants
render bona fide services that are not in connection with the offer and sale of
the Company's securities in a capital-raising transaction and do not directly or
indirectly promote or maintain a market for the Company's securities.
SECTION 6. AWARDS
6.1 Form and Grant of Awards
The Plan Administrator shall have the authority, in its sole discretion, to
determine the type or types of Awards to be made under the Plan. Such Awards
may include, but are not limited to Options and Stock Awards. Awards may be
granted singly or in combination.
6.2 Settlement of Awards
The Company may settle Awards through the delivery of shares of Common
Stock, cash payments, the granting of replacement Awards or any combination
thereof as the Plan Administrator shall determine. Any Award settlement,
including payment deferrals, may be subject to such conditions, restrictions and
contingencies as the Plan Administrator shall determine. The Plan Administrator
may permit or require the deferral of any Award payment, subject to such rules
and procedures as it may establish, which may include provisions for the payment
or crediting of interest, or dividend equivalents, including converting such
credits into deferred stock equivalents. The Plan Administrator may at any time
offer to buy out, for a payment in cash or Common Stock, an Award previously
granted based on such terms and conditions as the Plan Administrator shall
establish and communicate to the Participant at the time such offer is made.
6.3 Acquired Company Awards
Notwithstanding anything in the Plan to the contrary, the Plan
Administrator may grant Awards under the Plan in substitution for awards issued
under other plans, or assume under the Plan awards issued under other plans, if
the other plans are or were plans of other acquired entities ("Acquired
Entities") (or the parent of the Acquired Entity) and the new Award is
-4-
<PAGE>
substituted, or the old award is assumed, by reason of a merger, consolidation,
acquisition of property or of stock, reorganization or liquidation (the
"Acquisition Transaction"). In the event that a written agreement pursuant to
which the Acquisition Transaction is completed is approved by the Board and said
agreement sets forth the terms and conditions of the substitution for or
assumption of outstanding awards of the Acquired Entity, said terms and
conditions shall be deemed to be the action of the Plan Administrator without
any further action by the Plan Administrator, except as may be required for
compliance with Rule 16b-3 under the Exchange Act, and the persons holding such
awards shall be deemed to be Participants.
SECTION 7. AWARDS OF OPTIONS
7.1 Grant of Options
The Plan Administrator is authorized under the Plan, in its sole
discretion, to issue Options.
7.2 Option Exercise Price
The exercise price for shares purchased under an Option shall be as
determined by the Plan Administrator, but shall not be less than 85% of the Fair
Market Value of the Common Stock on the Grant Date.
7.3 Term of Options
The term of each Option (the "Option Term") shall be as established by the
Plan Administrator or, if not so established, shall be ten years from the Grant
Date.
7.4 Exercise of Options
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option the time at which, or the installments in which, the
Option shall vest and become exercisable, which provisions may be waived or
modified by the Plan Administrator at any time. If not so established in the
instrument evidencing the Option, the Option shall vest and become exercisable
according to the following schedule, which may be waived or modified by the Plan
Administrator at any time:
<TABLE>
<CAPTION>
Period of Participant's Continuous Employment
or Service With the Company or Its Related Percent of Total Option
Corporations From the Option Grant Date That Is Vested and Exercisable
--------------------------------------- ------------------------------
<S> <C>
After 1 year 25%
Each additional one-month period of
continuous service completed thereafter An additional 1/48
After 4 years 100%
</TABLE>
-5-
<PAGE>
The Plan Administrator may adjust the vesting schedule of an Option held by
a Participant who works less than "full-time" as that term is defined by the
Plan Administrator.
To the extent that an Option has vested and become exercisable, the Option
may be exercised from time to time by delivery to the Company of a written stock
option exercise agreement or notice, in a form and in accordance with procedures
established by the Plan Administrator, setting forth the number of shares with
respect to which the Option is being exercised, the restrictions imposed on the
shares purchased under such exercise agreement, if any, and such representations
and agreements as may be required by the Plan Administrator, accompanied by
payment in full as described in Section 7.5. An Option may not be exercised as
to less than a reasonable number of shares at any one time, as determined by the
Plan Administrator.
7.5 Payment of Exercise Price
The exercise price for shares purchased under an Option shall be paid in
full to the Company by delivery of consideration equal to the product of the
Option exercise price and the number of shares purchased. Such consideration
must be paid in cash or by check or, unless the Plan Administrator in its sole
discretion determines otherwise, either at the time the Option is granted or at
any time before it is exercised, in any combination of
(a) cash or check;
(b) tendering (either actually or, if and so long as the Common Stock is
registered under Section 12(b) or 12(g) of the Exchange Act, by attestation)
shares of Common Stock already owned by the Participant for at least six months
(or any shorter period necessary to avoid a charge to the Company's earnings for
financial reporting purposes) having a Fair Market Value on the day prior to the
exercise date equal to the aggregate Option exercise price;
(c) if and so long as the Common Stock is registered under Section 12(b) or
12(g) of the Exchange Act, delivery of a properly executed exercise notice,
together with irrevocable instructions, to (i) a brokerage firm designated by
the Company to deliver promptly to the Company the aggregate amount of sale or
loan proceeds to pay the Option exercise price and any withholding tax
obligations that may arise in connection with the exercise and (ii) the Company
to deliver the certificates for such purchased shares directly to such brokerage
firm, all in accordance with the regulations of the Federal Reserve Board; or
(d) such other consideration as the Plan Administrator may permit.
In addition, to assist a Participant (including a Participant who is an
officer or a director of the Company) in acquiring shares of Common Stock
pursuant to an Award granted under the Plan, the Plan Administrator, in its sole
discretion, may authorize, either at the Grant Date or at any time before the
acquisition of Common Stock pursuant to the Award, (i) the payment by a
Participant of a full-recourse promissory note, (ii) the payment by the
Participant of the purchase price, if any, of the Common Stock in installments,
or (iii) the guarantee by the Company of a loan obtained by the Participant from
a third party. Subject to the foregoing, the Plan
-6-
<PAGE>
Administrator shall in its sole discretion specify the terms of any loans,
installment payments or loan guarantees, including the interest rate and terms
of and security for repayment.
7.6 Post-Termination Exercises
The Plan Administrator shall establish and set forth in each instrument
that evidences an Option whether the Option shall continue to be exercisable,
and the terms and conditions of such exercise, if a Participant ceases to be
employed by, or to provide services to, the Company or its Related Corporations,
which provisions may be waived or modified by the Plan Administrator at any
time. If not so established in the instrument evidencing the Option, the Option
shall be exercisable according to the following terms and conditions, which may
be waived or modified by the Plan Administrator at any time:
(a) Any portion of an Option that is not vested and exercisable on the date
of termination of the Participant's employment or service relationship (the
"Termination Date") shall expire on such date.
(b) Any portion of an Option that is vested and exercisable on the
Termination Date shall expire upon the earliest to occur of
(i) the last day of the Option Term;
(ii) if the Participant's Termination Date occurs for reasons other
than Cause, death or Disability, the three-month anniversary of such Termination
Date; and
(iii) if the Participant's Termination Date occurs by reason of
Disability or death, the one-year anniversary of such Termination Date.
Notwithstanding the foregoing, if the Participant dies after the Termination
Date while the Option is otherwise exercisable, the portion of the Option that
is vested and exercisable on such Termination Date shall expire upon the earlier
to occur of (y) the last day of the Option Term and (z) the first anniversary of
the date of death, unless the Plan Administrator determines otherwise.
Also notwithstanding the foregoing, in case of termination of the
Participant's employment or service relationship for Cause, the Option shall
automatically expire upon first notification to the Participant of such
termination, unless the Plan Administrator determines otherwise. If a
Participant's employment or service relationship with the Company is suspended
pending an investigation of whether the Participant shall be terminated for
Cause, all the Participant's rights under any Option likewise shall be suspended
during the period of investigation.
A Participant's transfer of employment or service relationship between or
among the Company and its Related Corporations, or a change in status from an
employee to a consultant, agent, advisor or independent contractor, shall not be
considered a termination of employment or service relationship for purposes of
this Section 7. Employment or service relationship shall be deemed to continue
while the Participant is on a bona fide leave of absence, if such leave was
approved by the Company or a Related Corporation in writing and if continued
crediting of
-7-
<PAGE>
service for purposes of this Section 7 is expressly required by the terms of
such leave or by applicable law (as determined by the Company). The effect of a
Company-approved leave of absence on the terms and conditions of an Option shall
be determined by the Plan Administrator, in its sole discretion.
SECTION 8. STOCK AWARDS
8.1 Grant of Stock Awards
The Plan Administrator is authorized to make Awards of Common Stock or
Awards denominated in units of Common Stock on such terms and conditions and
subject to such restrictions, if any (which may be based on continuous service
with the Company or the achievement of performance goals), as the Plan
Administrator shall determine, in its sole discretion, which terms, conditions
and restrictions shall be set forth in the instrument evidencing the Award. The
terms, conditions and restrictions that the Plan Administrator shall have the
power to determine shall include, without limitation, the manner in which shares
subject to Stock Awards are held during the periods they are subject to
restrictions and the circumstances under which forfeiture of the Stock Award
shall occur by reason of termination of the Participant's employment or service
relationship.
8.2 Issuance of Shares
Upon the satisfaction of any terms, conditions and restrictions prescribed
with respect to a Stock Award, or upon the Participant's release from any terms,
conditions and restrictions of a Stock Award, as determined by the Plan
Administrator, the Company shall release, as soon as practicable, to the
Participant or, in the case of the Participant's death, to the personal
representative of the Participant's estate or as the appropriate court directs,
the appropriate number of shares of Common Stock.
8.3 Waiver of Restrictions
Notwithstanding any other provisions of the Plan, the Plan Administrator
may, in its sole discretion, waive the forfeiture period and any other terms,
conditions or restrictions on any Stock Award under such circumstances and
subject to such terms and conditions as the Plan Administrator shall deem
appropriate.
SECTION 9. WITHHOLDING
The Company may require the Participant to pay to the Company the amount of
any withholding taxes that the Company is required to withhold with respect to
the grant, vesting or exercise of any Award. Subject to the Plan and applicable
law, the Plan Administrator may, in its sole discretion, permit the Participant
to satisfy withholding obligations (up to the minimum rate), in whole or in
part, by paying cash, by electing to have the Company withhold shares of Common
Stock or by transferring shares of Common Stock to the Company, in such amounts
as are equivalent to the Fair Market Value of the withholding obligation. The
Company shall have the right to withhold from any Award or any shares of Common
Stock issuable pursuant to an Award or from any cash amounts otherwise due or to
become due from the Company to the
-8-
<PAGE>
Participant an amount equal to such taxes. The Company may also deduct from any
Award any other amounts due from the Participant to the Company or a Related
Corporation.
SECTION 10. ASSIGNABILITY
Awards granted under the Plan and any interest therein may not be assigned,
pledged or transferred by the Participant and may not be made subject to
attachment or similar proceedings otherwise than by will or by the applicable
laws of descent and distribution, and, during the Participant's lifetime, such
Awards may be exercised only by the Participant. Notwithstanding the foregoing,
the Plan Administrator, in its sole discretion, may permit such assignment,
transfer and exercisability and may permit a Participant to designate a
beneficiary who may exercise the Award or receive compensation under the Award
after the Participant's death; provided, however, that any Award so assigned or
transferred shall be subject to all the same terms and conditions contained in
the instrument evidencing the Award.
SECTION 11. ADJUSTMENTS
11.1 Adjustment of Shares
In the event that, at any time or from time to time, a stock dividend,
stock split, spin-off, combination or exchange of shares, recapitalization,
merger, consolidation, distribution to shareholders other than a normal cash
dividend, or other change in the Company's corporate or capital structure
results in (a) the outstanding shares, or any securities exchanged therefor or
received in their place, being exchanged for a different number or class of
securities of the Company or of any other corporation or (b) new, different or
additional securities of the Company or of any other corporation being received
by the holders of shares of Common Stock of the Company, then the Plan
Administrator shall make proportional adjustments in (i) the maximum number and
kind of securities subject to the Plan as set forth in Section 4.1 and (ii) the
number and kind of securities that are subject to any outstanding Award and the
per share price of such securities, without any change in the aggregate price to
be paid therefor. The determination by the Plan Administrator as to the terms
of any of the foregoing adjustments shall be conclusive and binding.
Notwithstanding the foregoing, a dissolution or liquidation of the Company or a
Corporate Transaction shall not be governed by this Section 11.1 but shall be
governed by Sections 11.2 and 11.3, respectively.
11.2 Dissolution or Liquidation
In the event of the proposed dissolution or liquidation of the Company, the
Plan Administrator shall notify each Participant as soon as practicable prior to
the effective date of such proposed transaction. The Plan Administrator in its
discretion may permit a Participant to exercise an Option until ten days prior
to such transaction with respect to all vested and exercisable shares of Common
Stock covered thereby and with respect to such number of unvested shares as the
Plan Administrator shall determine. In addition, the Plan Administrator may
provide that any forfeiture provision or Company repurchase option applicable to
any Award shall lapse as to such number of shares as the Plan Administrator
shall determine, contingent upon the occurrence of the proposed dissolution or
liquidation at the time and in the manner
-9-
<PAGE>
contemplated. To the extent an Option has not been previously exercised, the
Option shall terminate automatically immediately prior to the consummation of
the proposed action. To the extent a forfeiture provision applicable to a Stock
Award has not been waived by the Plan Administrator, the Stock Award shall be
forfeited automatically immediately prior to the consummation of the proposed
action.
11.3 Corporate Transaction
In the event of a Corporate Transaction, except as otherwise provided in
the instrument evidencing the Award, each outstanding Option shall be continued,
assumed or an equivalent option or right substituted by the surviving
corporation, the successor corporation or its parent corporation, as applicable
(the "Successor Corporation"). In the event that the Successor Corporation
refuses to continue, assume or substitute for the Option, the Participant shall
fully vest in and have the right to exercise the Option as to all of the shares
of Common Stock subject thereto, including shares as to which the Option would
not otherwise be vested or exercisable. If an Option becomes fully vested and
exercisable in lieu of assumption or substitution in the event of a Corporate
Transaction, the Plan Administrator shall notify the Participant in writing or
electronically that the Option shall be fully vested and exercisable for a
specified time period after the date of such notice, and the Option shall
terminate upon the expiration of such period, in each case conditioned on the
consummation of the Corporate Transaction. For the purposes of this Section
11.3, the Option shall be considered assumed if, following the Corporate
Transaction, the option or right confers the right to purchase or receive, for
each share of Common Stock subject to the Option, immediately prior to the
Corporate Transaction, the consideration (whether stock, cash, or other
securities or property) received in the merger or sale of assets by holders of
Common Stock for each share held on the effective date of the transaction (and
if holders were offered a choice of consideration, the type of consideration
chosen by the holders of a majority of the outstanding shares); provided,
however, that if such consideration received in the Corporate Transaction is not
solely common stock of the Successor Corporation, the Plan Administrator may,
with the consent of the Successor Corporation, provide for the consideration to
be received upon the exercise of the Option, for each share of Common Stock
subject thereto, to be solely common stock of the Successor Corporation equal in
fair market value to the per share consideration received by holders of Common
Stock in the Corporate Transaction. All Options shall terminate and cease to
remain outstanding immediately following the consummation of the Corporate
Transaction, except to the extent assumed by the Successor Corporation.
In the event of a Corporate Transaction, except as otherwise provided in
the instrument evidencing the Award, the vesting of Shares subject to Stock
Awards shall accelerate, and the forfeiture provisions to which such Shares are
subject shall lapse, if and to the same extent that the vesting of outstanding
Options accelerates in connection with the Corporate Transaction. If unvested
Options are to be assumed, continued or substituted by a Successor Corporation
without acceleration upon the occurrence of a Corporate Transaction, the
forfeiture provisions to which such shares are subject will continue with
respect to shares of the Successor Corporation that may be issued in exchange
for such Shares.
-10-
<PAGE>
11.4 Further Adjustment of Awards
Subject to Sections 11.2 and 11.3, the Plan Administrator shall have the
discretion, exercisable at any time before a sale, merger, consolidation,
reorganization, liquidation or change in control of the Company, as defined by
the Plan Administrator, to take such further action as it determines to be
necessary or advisable, and fair and equitable to the Participants, with respect
to Awards. Such authorized action may include (but shall not be limited to)
establishing, amending or waiving the type, terms, conditions or duration of, or
restrictions on, Awards so as to provide for earlier, later, extended or
additional time for exercise, lifting restrictions and other modifications, and
the Plan Administrator may take such actions with respect to all Participants,
to certain categories of Participants or only to individual Participants. The
Plan Administrator may take such action before or after granting Awards to which
the action relates and before or after any public announcement with respect to
such sale, merger, consolidation, reorganization, liquidation or change in
control that is the reason for such action.
11.5 Limitations
The grant of Awards shall in no way affect the Company's right to adjust,
reclassify, reorganize or otherwise change its capital or business structure or
to merge, consolidate, dissolve, liquidate or sell or transfer all or any part
of its business or assets.
SECTION 12. MARKET STANDOFF
In connection with any underwritten public offering by the Company of its
equity securities pursuant to an effective registration statement filed under
the Securities Act, including the Company's initial public offering, a person
shall not sell, make any short sale of, loan, hypothecate, pledge, grant any
option for the purchase of, or otherwise dispose of or transfer for value or
otherwise agree to engage in any of the foregoing transactions with respect to
any shares issued pursuant to an Award granted under the Plan without the prior
written consent of the Company or its underwriters. Such limitations shall be
in effect for such period of time as may be requested by the Company or such
underwriters and agreed to by the Company's officers and directors with respect
to their shares; provided, however, that in no event shall such period exceed
180 days. The limitations of this paragraph shall in all events terminate two
years after the effective date of the Company's initial public offering.
Holders of shares issued pursuant to an Award granted under the Plan shall be
subject to the market standoff provisions of this paragraph only if the officers
and directors of the Company are also subject to similar arrangements.
In the event of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
Company's outstanding Common Stock effected as a class without the Company's
receipt of consideration, any new, substituted or additional securities
distributed with respect to the purchased shares shall be immediately subject to
the provisions of this Section 12, to the same extent the purchased shares are
at such time covered by such provisions.
-11-
<PAGE>
In order to enforce the limitations of this Section 12, the Company may
impose stop-transfer instructions with respect to the purchased shares until the
end of the applicable standoff period.
SECTION 13. AMENDMENT AND TERMINATION OF PLAN
13.1 Amendment of Plan
The Plan may be amended only by the Board in such respects as it shall deem
advisable.
13.2 Termination of Plan
The Board may suspend or terminate the Plan at any time. The Plan shall
have no fixed expiration date.
13.3 Consent of Participant
The amendment or termination of the Plan or the amendment of an outstanding
Award shall not, without the Participant's consent, impair or diminish any
rights or obligations under any Award theretofore granted to the Participant
under the Plan. Notwithstanding the foregoing, any adjustments made pursuant to
Section 11 shall not be subject to these restrictions.
SECTION 14. GENERAL
14.1 Evidence of Awards
Awards granted under the Plan shall be evidenced by a written instrument
that shall contain such terms, conditions, limitations and restrictions as the
Plan Administrator shall deem advisable and that are not inconsistent with the
Plan.
14.2 No Individual Rights
Nothing in the Plan or any Award granted under the Plan shall be deemed to
constitute an employment contract or confer or be deemed to confer on any
Participant any right to continue in the employ of, or to continue any other
relationship with, the Company or any Related Corporation or limit in any way
the right of the Company or any Related Corporation to terminate a Participant's
employment or other relationship at any time, with or without Cause.
14.3 Registration
Notwithstanding any other provision of the Plan, the Company shall have no
obligation to issue or deliver any shares of Common Stock under the Plan or make
any other distribution of benefits under the Plan unless such issuance, delivery
or distribution would comply with all applicable laws (including, without
limitation, the requirements of the Securities Act), and the applicable
requirements of any securities exchange or similar entity.
The Company shall be under no obligation to any Participant to register for
offering or resale or to qualify for exemption under the Securities Act, or to
register or qualify under state
-12-
<PAGE>
securities laws, any shares of Common Stock, security or interest in a security
paid or issued under, or created by, the Plan, or to continue in effect any such
registrations or qualifications if made. The Company may issue certificates for
shares with such legends and subject to such restrictions on transfer and stop-
transfer instructions as counsel for the Company deems necessary or desirable
for compliance by the Company with federal and state securities laws.
To the extent that the Plan or any instrument evidencing an Award provides
for issuance of stock certificates to reflect the issuance of shares of Common
Stock, the issuance may be effected on a noncertificated basis, to the extent
not prohibited by applicable law or the applicable rules of any stock exchange.
14.4 No Rights as a Shareholder
No Option or Stock Award denominated in units shall entitle the Participant
to any cash dividend, voting or other right of a shareholder unless and until
the date of issuance under the Plan of the shares that are the subject of such
Award.
14.5 Participants in Foreign Countries
The Plan Administrator shall have the authority to adopt such
modifications, procedures and subplans as may be necessary or desirable to
comply with provisions of the laws of foreign countries in which the Company or
its Related Corporations may operate to assure the viability of the benefits
from Awards granted to Participants employed in such countries and to meet the
objectives of the Plan.
14.6 No Trust or Fund
The Plan is intended to constitute an "unfunded" plan. Nothing contained
herein shall require the Company to segregate any monies or other property, or
shares of Common Stock, or to create any trusts, or to make any special deposits
for any immediate or deferred amounts payable to any Participant, and no
Participant shall have any rights that are greater than those of a general
unsecured creditor of the Company.
14.7 Severability
If any provision of the Plan or any Award is determined to be invalid,
illegal or unenforceable in any jurisdiction, or as to any person, or would
disqualify the Plan or any Award under any law deemed applicable by the Plan
Administrator, such provision shall be construed or deemed amended to conform to
applicable laws, or, if it cannot be so construed or deemed amended without, in
the Plan Administrator's determination, materially altering the intent of the
Plan or the Award, such provision shall be stricken as to such jurisdiction,
person or Award, and the remainder of the Plan and any such Award shall remain
in full force and effect.
-13-
<PAGE>
14.8 Choice of Law
The Plan and all determinations made and actions taken pursuant hereto, to
the extent not otherwise governed by the laws of the United States, shall be
governed by the laws of the State of Washington without giving effect to
principles of conflicts of laws.
SECTION 15. EFFECTIVE DATE
The Effective Date is the date on which the Plan is adopted by the Board.
-14-
<PAGE>
PLAN ADOPTION AND AMENDMENTS/ADJUSTMENTS
SUMMARY PAGE
<TABLE>
<CAPTION>
Section/Effect of
Date of Board Action Action Amendment
<S> <C> <C>
December 3, 1999 Initial Plan Adoption Plan to be effective
as of December 3, 1999
</TABLE>
-15-
<PAGE>
EXHIBIT 99.2
IMPARTO SOFTWARE CORPORATION
1996 STOCK OPTION PLAN
1. Purposes of the Plan
The purposes of this Stock Option Plan are to attract and (retain)the best
available personnel for positions of substantial responsibility, to provide
additional incentive to Employees, Directors and Consultants of the Company and
--------- --------- -----------
its Subsidiaries and to promote the success of the Company's business. Options
granted under the Plan may be Incentive Stock Options or Non-Qualified Stock
Options, as determined by the Administrator at the time of grant.
2. Definitions
As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any of the Committees appointed
-------------
to administer the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
---------------
administration of stock option plans, if any, under applicable provisions of
federal securities laws, California corporate and securities laws, the Code, the
rules of any applicable stock exchange or national market system, and the rules
of any foreign jurisdiction applicable to Options granted to residents therein.
(c) "Board" means the Board of Directors of the Company.
-----
(d) "Code" means the Internal Revenue Code of 1986, as amended.
----
(e) "Committee" means any Committee appointed by the Board to
---------
administer the Plan.
(f) "Common Stock" means the common stock of the Company.
------------
(g) "Company" means Imparto Software Corporation.
-------
(h) "Consultant" means any person who is engaged by the Company or any
----------
Parent or Subsidiary to render consulting or advisory services as an independent
contractor and is compensated for such services.
<PAGE>
(i) "Continuous Status as an Employee, Director or Consultant" means
--------------------------------------------------------
that the employment, director or consulting relationship with the Company, any
Parent, or Subsidiary, is not interrupted or terminated. Continuous Status as
an Employee, Director or Consultant shall not be considered interrupted in the
case of (i) any leave of absence approved by the Company or (ii) transfers
between locations of the Company or between the Company, its Parent, any
Subsidiary, or any successor. A leave of absence approved by the Company shall
include sick leave, military leave, or any other personal leave approved by an
authorized representative of the Company. For purposes of Incentive Stock
Options, no such leave may exceed ninety (90) days, unless reemployment upon
expiration of such leave is guaranteed by statute or contract.
(j) "Corporate Transaction" means any of the following shareholder-
---------------------
approved transactions to which the Company is a party:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which is to
change the state in which the Company is incorporated;
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company (including the capital stock of
the Company's subsidiary corporations) in connection with the complete
liquidation or dissolution of the Company; or
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) or more
of the total combined voting power of the Company's outstanding securities are
transferred to a person or persons different from those who held such securities
immediately prior to such merger.
(k) "Director" means a member of the Board.
--------
(1) "Employee" means any person, including an Officer or Director, who is
--------
an employee of the Company or any Parent or Subsidiary of the Company for
purposes of Section 422 of the Code. The payment of a director's fee by the
Company shall not be sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
------------
(n) "Fair Market Value" means, as of any date, the value of Common Stock
-----------------
determined as follows:
-2-
<PAGE>
(i) Where there exists a public market for the Common Stock, the Fair
Market Value shall be (A) the closing sales price for a Share for the last
market trading day prior to the time of the determination (or, if no sales were
reported on that date, on the last trading date on which sales were reported) on
the stock exchange determined by the Administrator to be the primary market for
the Common Stock or the Nasdaq National Market, whichever is applicable or (B)
if the Common Stock is not traded on any such exchange or national market
system, the average of the closing bid and asked prices of a Share on the Nasdaq
Small Cap Market, in each case, as reported in The Wall Street Journal or such
other source as the Administrator deems reliable; or
(ii) In the absence of an established market of the type described in
(i), above, for the Common Stock, the Fair Market Value thereof shall be
determined by the I Administrator in good faith and in a manner consistent with
Section 260.140.50 of Title 10 of the | California Code of Regulations.
(o) "Incentive Stock Option" means an Option intended to qualify as an
----------------------
incentive stock option within the meaning of Section 422 of the Code
(p) "Non-Qualified 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 the written agreement evidencing the grant of
----------------
an Option executed by the Company and the Optionee, including any amendments
thereto.
(t) "Optioned Stock" means the Common Stock subject to an Option.
--------------
(u) "Optionee" means an Employee, Director or Consultant who receives an
--------
Option under the Plan.
(v) "Parent" means a "parent corporation," whether now or hereafter
------
existing, as defined in Section 424(e) of the Code.
(w) "Plan" means this 1996 Stock Option Plan.
----
-3-
<PAGE>
(x) "Registration Date" means the closing of the first sale of Common Stock
-----------------
to the general public pursuant to a registration statement filed with and
declared effective by the Securities and Exchange Commission under the
Securities Act of 1933, as amended.
(y) "Share" means a share of the Common Stock.
(z) "Subsidiary" means a "subsidiary corporation", whether now or hereafter
----------
existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan
(a) Subject to the provisions of Section 11(a), below, the maximum
aggregate number of Shares which may be optioned and sold under the Plan is
1,490,000 Shares. The Shares may be authorized, but unissued, or reacquired
Common Stock. Notwithstanding the foregoing, the total number of Shares
issuable upon exercise of all outstanding Options shall not exceed a number of
Shares which is equal to 30% of the then outstanding shares of the Company, as I
calculated in accordance with the conditions and exclusions of California
Corporate Securities Rule 260.140.45.
(b) If an Option expires or becomes unexercisable without having been
exercised in full, or is surrendered pursuant to an Option exchange program, or
if any unissued Shares are retained by the Company upon exercise of an Option in
order to satisfy the exercise price for such Option or any withholding taxes due
with respect to such Option, such unissued or retained Shares shall become
available for future grant under the Plan (unless the Plan has terminated).
Shares that actually have been issued under the Plan shall not be returned to
the Plan and shall not become available for future distribution under the Plan,
except that if unvested Shares are forfeited, or repurchased by the Company at
their original purchase price, such Shares shall become available for future
grant under the Plan.
4. Administration of the Plan
(a) Plan Administrator. With respect to grants of Options to Employees,
------------------
Directors, Officers or Consultants, the Plan shall be administered by (A) the
Board or (B) a Committee (or a subcommittee of the Committee) designated by the
Board, which Committee shall be constituted in such a manner as to satisfy
Applicable Laws. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time
the Board may increase the size of the Committee and appoint additional members
thereof, remove members (with or without cause) and appoint new members in
substitution therefor, fill
-4-
<PAGE>
vacancies, however caused, and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
Applicable Laws.
(b) Multiple Administrative Bodies. The Plan may be administered by
------------------------------
different bodies with respect to Directors, Officers, Consultants and Employees
who are neither Directors nor Officers.
(c) Powers of the Administrator. Subject to Applicable Laws and the
---------------------------
provisions of the Plan (including any other powers given to the Administrator
hereunder), and except as otherwise provided by the Board, the Administrator
shall have the authority, in its discretion:
(i) to select the Employees, Directors and Consultants to whom
Options may be granted from time to time hereunder;
(ii) to determine whether and to what extent Options are granted
hereunder;
(iii) to determine the number of Shares to be covered by each Option
granted hereunder;
(iv) to approve forms of Option Agreement for use under the Plan;
(v) to determine the terms and conditions of any Option granted
hereunder;
(vi) to establish additional terms, conditions, rules or procedures
to accommodate the rules or laws of applicable foreign jurisdictions and to
afford Optionees favorable treatment under such laws; provided, however, that no
Option shall be granted under any such additional terms, conditions, rules or
procedures with terms or conditions which are inconsistent with the provisions
of the Plan;
(vii) to amend the terms of any outstanding Option granted under the
Plan, including a reduction in the exercise price of any Option to reflect a
reduction in the Fair Market Value of the Common Stock since the grant date of
the Option, provided that any amendment that would adversely affect the
Optionee's rights under an outstanding Option shall not be made without the
Optionee's written consent;
-5-
<PAGE>
(viii) to construe and interpret the terms of the Plan and Options
granted pursuant to the Plan; and
(ix) to take such other action, not inconsistent with the terms of
the Plan, as the Administrator deems appropriate.
(d) Effect of Administrator's Decision. All decisions, determinations and
----------------------------------
interpretations of the Administrator shall be conclusive and binding on all
persons.
5. Eligibility
Non-Qualified Stock Options may be granted to Employees, Directors and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee, Director or Consultant who has been granted an Option may, if
otherwise eligible, be granted additional Options. Options may be granted to
such Employees of the Company and its Subsidiaries who are residing in foreign
jurisdictions as the Administrator in its sole discretion may determine from
time to time.
6. Terms and Conditions of Options
(a) Designation of Options. Each Option shall be designated as either an
----------------------
Incentive Stock Option or a Non-Qualified Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of Shares subject to Options designated as Incentive Stock Options which
become exercisable for the first time by an Optionee during any calendar year
(under all plans of the Company or any Parent or Subsidiary) exceeds $100,000,
such excess Options, to the extent of the Shares covered thereby in excess of
the foregoing limitation, shall be treated as Non-Qualified Stock Options. For
this purpose, Incentive Stock Options shall be taken into account in the order
in which they were granted, and the Fair Market Value of the Shares shall be
determined as of the date the Option with respect to such Shares is granted.
(b) Conditions of Option. Subject to the terms of the Plan, the
--------------------
Administrator .shall determine the provisions, terms, and conditions of each
Option including, but not limited to, the Option vesting schedule, repurchase
provisions, rights of first refusal, forfeiture provisions, and satisfaction of
any performance criteria. The performance criteria established by the
Administrator may be based on any one of or combination of, increase in share
price, earnings per share, total shareholder return, return on equity, return on
assets, return on investment, net operating income, cash flow, revenue, economic
value added, personal management objectives, or other measure of performance
selected by the Administrator. Partial
-6-
<PAGE>
achievement of the specified criteria may result in vesting corresponding to the
degree of achievement as specified in the Option Agreement.
(c) Term of Option. The term of each Option shall be the term stated in
--------------
the Option Agreement, provided, however, that the term shall be no more than ten
(10) years from the date hereof. However, in the case of an Incentive Stock
Option granted to an Optionee who, at the time the Option is granted, owns stock
representing more than ten percent ( 10%) of the voting power of all classes of
stock of the Company or any Parent or Subsidiary, the term of the Option shall
be five (5) years from the date of grant thereof or such shorter term as may be
provided in the Option Agreement.
(d) Non-Transferability of Options. Options may not be sold, pledged,
------------------------------
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
(e) Time of Granting Options. The date of grant of an Option shall for all
------------------------
purposes, be the date on which the Administrator makes the determination to
grant such Option, or such other date as is determined by the Administrator.
Notice of the grant determination shall be given to each Employee, Director or
Consultant to whom an Option is so granted within a I reasonable time after the
date of such grant.
7. Option Exercise Price, Consideration, Taxes and Reload Options
(a) Exercise Price. The exercise price for an Option shall be as follows:
--------------
(i) In the case of an Incentive Stock Option:
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option owns stock representing more than ten percent (10%) of
the voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be not less than one hundred ten
percent ( 110%) of the Fair Market Value per Share on the date of grant.
(B) granted to any Employee other than an Employee described in the
preceding paragraph, the per Share exercise price shall be not less than one
hundred percent (100%) of the Fair Market Value per Share on the date of grant.
(ii) In the case of a Non-Qualified Stock Option:
-7-
<PAGE>
(A) granted to a person who, at the time of the grant of such Option,
owns stock representing more than ten percent (10%) of the voting power of all
classes of stock of the Company or any Parent or Subsidiary, the per Share
exercise price shall be not less than one hundred ten percent (110%) of the Fair
Market Value per Share on the date of grant.
(B) granted to any person other than a person described in the
preceding paragraph, the per Share exercise price shall be not less than eighty-
five percent (85%) of the Fair Market Value per Share on the date of grant.
(b) Consideration. Subject to Applicable Laws, the consideration to be
-------------
paid for the Shares to be issued upon exercise of an Option including the method
of payment, shall be determined by the Administrator (and, in the case of an
Incentive Stock Option, shall be determined at the time of grant). In addition
to any other types of consideration the Administrator may determine, the
Administrator is authorized to accept as consideration for Shares issued under
the Plan the following:
(i) cash;
(ii) check;
(iii) delivery of Optionee's promissory note with such recourse,
interest, security, and redemption provisions as the Administrator determines as
appropriate;
(iv) if the exercise occurs on or after the Registration Date,
surrender of Shares (including withholding of Shares otherwise deliverable upon
exercise of the Option) which have a Fair Market Value on the date of surrender
equal to the aggregate exercise price of the Shares as to which said Option
shall be exercised (but only to the extent that such exercise of the Option
would not result in an accounting compensation charge with respect to the Shares
used to pay the exercise price unless otherwise determined by the
Administrator);
(v) if the exercise occurs on or after the Registration Date, delivery
of a properly executed exercise notice together with such other documentation as
the Administrator and the broker, if applicable, shall require to effect an
exercise of the Option and delivery to the Company of the sale or loan proceeds
required to pay the exercise price; or
(vi) any combination of the foregoing methods of payment.
-8-
<PAGE>
(c) Taxes. No Shares shall be delivered under the Plan to any Optionee or
-----
other person until such Optionee or other person has made arrangements
acceptable to the Administrator for the satisfaction of any foreign, federal,
state, or local income and employment tax withholding obligations, including,
without limitation, obligations incident to the receipt of Shares or the
disqualifying disposition of Shares received on exercise of an Incentive Stock
Option. Upon exercise of an Option the Company shall withhold or collect from
Optionee an amount sufficient to satisfy such tax obligations.
(d) Reload Options. In the event the exercise price or tax withholding of
--------------
an Option is satisfied by the Company or the Optionee's employer withholding
Shares otherwise deliverable to the Optionee, the Administrator may issue the
Optionee an additional Option, with terms identical to the Option Agreement
under which the Option was exercised, but at an exercise price as determined by
the Administrator in accordance with the Plan.
8. Exercise of Option
(a) Procedure for Exercise: Rights as a Shareholder.
-----------------------------------------------
(i) Any Option granted hereunder shall be exercisable at such times
and under such conditions as determined by the Administrator, including
performance criteria with respect to the Company and/or the Optionee, and as
shall be permissible under the terms of the Plan but in the case of an Option,
in no case at a rate of less than 20% per year over five (5) years from the date
the Option is granted.
(ii) An Option may not be exercised for a fraction of a Share.
(iii) An Option shall be deemed to be exercised when written notice
of such exercise has been given to the Company in accordance with the terms of
the Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received by
the Company. Full payment may, as authorized by the Administrator, consist of
any consideration and method of payment allowable under "Option Exercise Price,
----------------------
Consideration, Taxes and Reload Options," above. Until the issuance (as
- ---------------------------------------
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate evidencing
such Shares, no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to Optioned Stock, notwithstanding the
exercise of an Option. The Company shall issue (or cause to be issued) such
stock certificate promptly upon exercise of the Option. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in "Adjustments Upon
----------------
Changes in Capitalization or Corporate Transaction," below.
- --------------------------------------------------
-9-
<PAGE>
(b) Termination of Employment, Director or Consulting Relationship. In the
--------------------------------------------------------------
event of termination of an Optionee's Continuous Status as an Employee, Director
or Consultant with the Company for any reason other than disability or death
(but not in the event of an Optionee's change of status from Employee to
Consultant or from Consultant to Employee), such Optionee may, but only within
three (3) months after the date of such termination (but in no event later than
the expiration date of the term of such Option as set forth in the Option
Agreement), exercise his or her Option to the extent that the Optionee was
entitled to exercise it at the date of such termination or to such other extent
as may be determined by the Administrator. If the Optionee should die within
three (3) months after the date of such termination, the Optionee's estate or
the person who acquired the right to exercise the Option by bequest or
inheritance may exercise the Option to the extent that the Optionee was entitled
to exercise it at the date of such termination within twelve (12) months of the
Optionee's date of death, but in no event later than the expiration date of the
term of such Option as set forth in the Option Agreement. In the event of an
Optionee's change of status from Employee to Consultant, an Employee's Incentive
Stock Option shall convert automatically to a Non-Qualified Stock Option on the
ninety-first (91) day following such change of status. If the Optionee does not
exercise such Option to the extent so entitled within the time specified herein,
the Option shall terminate.
(c) Disability of Optionee. In the event of termination of an Optionee's
----------------------
Continuous Status as an Employee, Director or Consultant as a result of his or
her disability, Optionee may, but only within twelve (12) months from the date
of such termination (and in no event later than the expiration date of the term
of such Option as set forth in the Option Agreement), exercise the Option to the
extent otherwise entitled to exercise it at the date of such termination;
provided, however, that if such disability is not a "disability" as such term is
defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock
Option such Incentive Stock Option shall automatically convert to a Nonqualified
Stock Option on the day three (3) months and one day following such termination.
To the extent that Optionee is not entitled to exercise the Option at the date
of termination, or if Optionee does not exercise such Option to the extent so
entitled within the time specified herein, the Option shall terminate, and the
Shares covered by such Option shall revert to the Plan.
(d) Death of Optionee. In the event of the death of an Optionee, the
-----------------
Option may be exercised at any time within twelve (12) months following the date
of death (but in no event later than the expiration of the term of such Option
as set forth in the Option Agreement), by the Optionee's estate or by a person
who acquired the right to exercise the Option by bequest or inheritance, but
only to the extent that the Optionee was entitled to exercise the Option at the
date of death. If, at the time of death, the Optionee was not entitled to
exercise his or her entire Option, the Shares covered by
-10-
<PAGE>
the unexercisable portion of the Option shall immediately revert to the Plan.
If, after death, the Optionee's estate or a person who acquired the right to
exercise the Option by bequest or inheritance does not exercise the Option
within the time specified herein, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.
(e) Buyout Provisions. The Administrator may at any time offer to buy out
-----------------
for a payment in cash or Shares, an Option previously granted, based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.
9. Conditions Upon Issuance of Shares
(a) Shares shall not be issued pursuant to the exercise of an Option unless
the exercise of such Option and the issuance and delivery of such Shares
pursuant thereto shall comply with all Applicable Laws, and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.
(b) As a condition to the exercise of an Option, the Company may require
the person exercising such Option to represent and warrant at the time of any
such exercise that the Shares are being purchased only for investment and
without any present intention to sell or distribute such Shares if, in the
opinion of counsel for the Company, such a representation is required by any
Applicable Laws.
10. Repurchase Rights
If the provisions of an Option Agreement grant to the Company the right to
repurchase Shares upon termination of the Optionee's Continuing Status as an
Employee, Director or Consultant, the Option Agreement shall provide that the
repurchase price will be either:
(a) The higher of the original purchase price or Fair Market Value on the
date of termination of the Optionee's Continuous Status as an Employee, Director
or Consultant, if the right to repurchase must be exercised for cash or
cancellation of purchase money indebtedness for the Shares within ninety (90)
days of the termination of the Optionee's Continuous Status as an Employee,
Director or Consultant, and the right terminates when the Company's securities
become publicly traded; or
(b) The original purchase price, provided (i) the right to repurchase at
the original purchase price lapses at the rate of at least twenty percent (20%)
per year over five (5) years from the date the Option is granted (without
respect to the date the Option was exercised or became exercisable), which
right must be exercised for
-11-
<PAGE>
cash or cancellation of purchase money indebtedness for the Shares within ninety
(90) days of termination of the Optionee's Continuous Status as an Employee,
Director or Consultant, and (ii) if the repurchase right is assignable, the
assignee must pay the Company upon assignment of the right, (unless the assignee
is a one hundred percent (100%) owned subsidiary of the Company or is the parent
of the Company owning one hundred percent (100%) of the stock of the Company)
cash equal to the difference between the original purchase price and Fair Market
Value if the original purchase price is less than Fair Market Value.
11. Adjustments Upon Changes in Capitalization or Corporate Transaction
(a) Adjustments Upon Changes in Capitalization. Subject to any required
------------------------------------------
action by the shareholders of the Company, the number of Shares covered by each
outstanding Option, and the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan, as well as the price per share of Common
Stock covered by each such outstanding Option, shall be proportionately adjusted
for any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other similar event resulting in
an increase or decrease in the number of issued shares of Common Stock. Except
as expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason hereof shall be made with respect to, the
number or price of Shares subject to an Option.
(b) Corporate Transaction. In the event of a proposed Corporate
---------------------
Transaction, the Administrator shall notify the Optionee at least fifteen (15)
days prior to such proposed Corporate Transaction. Except as provided otherwise
in individual Option Agreements, to the extent it has not been previously
exercised, the Option will terminate immediately prior to the consummation of
such proposed Corporate Transaction, unless the Option is assumed or an
equivalent Option is substituted by the successor corporation or a Parent or
Subsidiary of such successor corporation. For the purposes of this subsection,
the Option shall be considered assumed if, following the Corporate Transaction,
the Option confers the right to purchase, for each Share subject to the Option
immediately prior to the Corporate Transaction, the consideration (whether
stock, cash, or other securities or property) received in the Corporate
Transaction by holders of Common Stock for each Share subject to the Option held
on the effective date of the Corporate Transaction (and if holders were offered
a choice of consideration, the type of consideration chosen by the holders of a
majority of the outstanding Shares); provided, however, that if such
consideration
-12-
<PAGE>
received in the Corporate Transaction was not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received upon the
exercise of the Option for each Share subject to the Option to be solely common
stock of the successor corporation or its Parent equal in fair market value to
the per share consideration received by holders of Common Stock in the Corporate
Transaction.
12. Term of Plan
The Plan shall become effective upon the earlier to occur of its adoption
by the Board or its approval by the shareholders of the Company. It shall
continue in effect for a term of ten ( 10) years unless sooner terminated.
13. Amendment, Suspension or Termination of the Plan
(a) The Board may at any time amend, suspend or terminate the Plan. To the
extent necessary to comply with Applicable Laws, the Company shall obtain
shareholder approval of any Plan amendment in such a manner and to such a degree
as required.
(b) No Option may be granted during any suspension of the Plan or after
termination of the Plan.
(c) Any amendment, suspension or termination of the Plan shall not affect
Options already granted, and such Options shall remain in full force and effect
as if the Plan had not been amended, suspended or terminated, unless mutually
agreed otherwise between the Optionee and the Administrator, which agreement
must be in writing and signed by the Optionee and the Company.
14. Reservation of Shares
(a) The Company, during the term of the Plan, will at all times reserve and
keep available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.
(b) The inability of the Company to obtain authority from any regulatory
body having jurisdiction, which authority is deemed by the Company's counsel to
be necessary to the lawful issuance and sale of any Shares hereunder, shall
relieve the Company of any liability in respect of the failure to issue or sell
such Shares as to which such requisite authority shall not have been obtained.
-13-
<PAGE>
15. No Effect on Terms of Employment
The Plan shall not confer upon any Optionee any right with respect to
continuation of employment or consulting relationship with the Company, nor
shall it interfere in any way with his or her right or the Company's right to
terminate his or her employment or consulting relationship at any time, with or
without cause.
16. Shareholder Approval
Continuance of the Plan shall be subject to approval by the shareholders of
the Company within twelve (12) months before or after the date the Plan is
adopted. Such shareholder approval shall be obtained in the degree and manner
required under Applicable Laws. Any Option exercised before shareholder
approval is obtained shall be rescinded if shareholder approval is not obtained
within the time prescribed, and Shares issued on the exercise of any such Option
shall not be counted in determining whether shareholder approval is obtained.
17. Information to Optionees
The Company shall provide to each Optionee, during the period for which
such Optionee has one or more Options outstanding copies of financial statements
at least annually and all annual reports and other information which is provided
to all shareholders of the Company.
-14-
<PAGE>
EXHIBIT 99.3
BUSINESS SYSTEMS DESIGN, INC.
1996 STOCK OPTION PLAN
----------------------
Section 1.
PURPOSE
The Plan is intended to provide an opportunity for directors, officers,
key employees, and consultants of the Company to acquire shares of Stock, or to
receive compensation which is based upon appreciation in the value of Shares.
The Plan provides for the grant of Non-Qualified Stock Options and Incentive
Stock Options to aid the Company in retaining and obtaining key personnel of
outstanding ability.
Section 2.
DEFINITIONS
Each term set forth in this Section 2 shall have the meaning set forth
opposite such term for purposes of this Plan and, for purposes of such
definitions, the singular shall include the plural and the plural shall include
the singular.
2.1 Board means the Board of Directors of the Company.
-----
2.2 Code means the Internal Revenue Code of 1986, as amended.
----
2.3 Common Stock means the $.01 par value per share of common stock of the
------------
Company, as defined in the Certificate of Incorporation, as amended, of the
Company.
2.4 Company means Business Systems Design, Inc., a Georgia corporation, and
-------
any successor to such organization.
2.5 Disability means (a) the inability of Employee to perform the duties of
----------
Employee's employment due to physical or emotional incapacity or illness, where
such inability is expected to be of long-continued and indefinite duration or
(b) Employee shall be entitled to (i) disability retirement benefits under the
federal Social Security Act or (ii) recover benefits under any long-term
disability plan or policy maintained by the Company. In the event of a dispute,
the determination of Disability shall be made by the Board and shall be
supported by advice of a physician competent in the area to which such
Disability relates.
2.6 Employee means an employee of the Company, a Subsidiary or a Parent.
--------
2.7 Exchange Act means the Securities Exchange Act of 1934, as amended.
------------
2.8 Fair Market Value means the price at which the Board acting in good
-----------------
faith determines through any reasonable valuation method that a Share might
change hands between a
<PAGE>
willing buyer and a willing seller, neither being under any compulsion to buy or
to sell and both having reasonable knowledge of the relevant facts.
2.9 ISO means an option granted under this Plan to purchase Shares which is
---
intended by the Company to satisfy the requirements of Code Section 422 as an
incentive stock option.
2.10 Key Person means (i) a member of the Board who is not an Employee, (ii)
----------
a consultant, distributor or other person who has rendered valuable services to
the Company, a Subsidiary or a Parent, (iii) a person who has incurred, or is
willing to incur, financial risk in the form of guaranteeing or acting as co-
obligor with respect to debts or other obligations of the Company, or (iv) a
person who has extended credit to the Company. Key Persons are not limited to
individuals and, subject to the preceding definition, may include corporations,
partnerships, associations and other entities.
2.11 Non-ISO means an option granted under this Plan to purchase Shares which
-------
is not intended by the Company to satisfy the requirements of Code Section 422.
2.12 Option means an ISO or a Non-ISO.
------
2.13 Option Price means the price which shall be paid to purchase one (1)
------------
Share upon the exercise of an Option granted under this Plan.
2.14 Optionee means grantee of an Option.
--------
2.15 Parent means any corporation which is a parent of the Company (within
------
the meaning of Code Section 424).
2.16 Plan means the 1996 Stock Option Plan, as amended from time to time.
----
2.17 Share means a share of the Common Stock of the Company.
-----
2.18 Shareholders Agreement means the agreement among shareholders entered
----------------------
into between the company's shareholders and the company, as amended from time to
time, or any subsequent agreement which may supersede or replace such agreement
among shareholders, or any other agreement to which the Company and one or more
of its shareholders may become a party within the meaning of O.C.G.A. (S) 14-2-
120 at the time of delivery of shares to an employee pursuant to the exercise of
an Option granted under this Plan.
2.19 Stock Option Grant Certificate means the written agreement or instrument
------------------------------
which sets forth the terms of an Option granted to an Employee or Key Person
under this Plan.
2.20 Subsidiary means any corporation which is a subsidiary of the Company
----------
(within the meaning of Code Section 424(f)).
2
<PAGE>
2.21 Surrendered Shares means the Shares described in Section 11.2 which (in
------------------
lieu of being purchased) are surrendered for cash or Shares, or for a
combination of cash and Shares, in accordance with Section 11.
2.22 Ten Percent Shareholder means a person who owns (after taking into
-----------------------
account the attribution rules of Code Section 424(d)) more than ten percent
(10%) of the total combined voting power of all classes of shares of either the
Company, a Subsidiary or a Parent.
2.23 Termination of Employment means the termination of the employer-employee
-------------------------
relationship between an Employee and the Company (and its Parents and
Subsidiaries), regardless of the fact that severance or similar payments are
made to the Employee, for any reason, including, but not by way of limitation, a
termination by resignation, discharge, death, Disability or retirement. The
Board shall, in its absolute discretion, determine the effect of all matters and
questions relating to Termination of Employment, including, but not by way of
limitation, the question of whether a leave of absence or conversion from full-
time to part-time employment constitutes a Termination of Employment, or whether
a Termination of Employment is for cause.
Section 3.
SHARES SUBJECT TO OPTIONS
Twenty Thousand (20,000) Shares of Common Stock shall be reserved for
use under this Plan. Such Shares shall be reserved, to the extent that the
Company deems appropriate, from authorized but unissued Shares, and from Shares
which have been reacquired by the Company. Furthermore, any Shares subject to
an Option which remain after the cancellation, expiration or exchange of such
Option thereafter shall again become available for use under this Plan, but any
Surrendered Shares which remain after the surrender of an Option under Section
11 shall not again become available for use under this Plan.
Section 4.
EFFECTIVE DATE
The effective date of this Plan shall be the date it is adopted by the
Board, provided the shareholders of the Company approve this Plan within twelve
(12) months after such effective date. If such effective date comes before such
shareholder approval, any Options granted under this Plan before the date of
such approval automatically shall be granted subject to such approval.
Section 5.
ADMINISTRATION
This Plan shall be administered by the Board. The Board, acting in its
absolute discretion, shall exercise such powers and take such action as
expressly called for under this Plan. The Board shall have the power to
interpret this Plan and, subject to Section 16, to take such other action in the
administration and operation of the Plan as it deems equitable under the
3
<PAGE>
circumstances. The Board's actions shall be binding on the Company, on each
affected Employee or Key Person, and on each other person directly or indirectly
affected by such actions.
The Board may delegate its authority under the Plan, in whole or in
part, to a Committee appointed by the Board consisting of not less than two (2)
members. The Committee (if appointed) shall act according to the policies and
procedures set forth in the Plan and to those policies and procedures
established by the Board, and the Committee shall have such powers and
responsibilities as are set forth by the Board. Reference to the Board in this
Plan shall specifically include reference to the Committee where the Board has
delegated it authority to the Committee, and any action by the Committee
pursuant to a delegation of authority by the Board shall be deemed an action by
the Board under the Plan. Notwithstanding the above, the Board may assume the
powers and responsibilities granted to the Committee at any time, in whole or in
part.
Section 6.
ELIGIBILITY
Options may be granted only to Employees or Key Persons of the Company
or a Parent or Subsidiary the Company; provided, however, that an ISO may only
be granted to an employee of any such entity. In the case of ISO's, the
aggregate Fair Market Value (determined as of the date an ISO is granted) of
stock with respect to which stock options intended to meet the requirements of
Code Section 422 become exercisable for the first time by an individual during
any calendar year under all plans of the Company and its Parents and
Subsidiaries shall not exceed $100,000.
Section 7.
GRANT OF OPTIONS
The Board, in its absolute discretion, shall grant Options under this
Plan from time to time to purchase Shares and shall have the right to grant new
Options in exchange for outstanding Options. The Board may either grant Options
under this Plan or recommend to the Board that Options be granted under the
Plan. Options shall be granted to Employees or Key Persons selected by the
Board, and neither the Board nor the Committee (if appointed) shall be under any
obligation whatsoever to grant Options to all Employees or Key Persons, or to
grant all Options subject to the same terms and conditions (except as may be
expressly required by this Plan).
Every Option granted under the Plan shall conform to the following
provisions, and may contain such other terms and conditions not inconsistent
with the Plan as the Board determines are advisable and in the interest of the
Company:
(a) Each grant of an Option shall be evidenced by an Stock Option Grant
Certificate, executed by the Company and the Optionee and each such
Certificate:
4
<PAGE>
1. shall specify whether the Option is an ISO or Non-ISO;
2. may provide that any unexpired Option may be exercised upon a Change
in Control (as defined in Section 17), as to the full number of
Shares covered by the Option (without regard to the date of grant of
the Option) which has not been previously forfeited and which would
have become vested within twelve (12) months after the date of
occurrence of a Change of Control shall be fully vested upon a
Change in Control;
3. may provide for a cashless exercise through a brokerage transaction
following registration of the Company's equity securities under
Section 12 of the Exchange Act. Except as provided in Subsection
(c) below, payment shall be made at the time that the Option or any
part thereof is exercised, and no Shares shall be issued or
delivered upon exercise of an option until full payment has been
made by the Optionee;
4. shall state the time or times, or upon the occurrence of such event
or events, and in such amounts, that the Options shall become
exercisable; provided, however, that subsequent to the grant of an
Option, the Board, at any time before complete termination of such
Option, may accelerate the time or times at which such Option may be
exercised in whole or in part; and
5. shall incorporate such other terms and conditions as the Board,
acting in its absolute discretion, deems consistent with the terms
of this Plan, including (without limitation) a restriction on the
number of Shares subject to the Option which first become
exercisable or subject to surrender during any calendar year.
(b) Except as provided in subsection (c) below, an Option shall not be
transferable or assignable except by will or by the laws of descent and
distribution, if authorized by the Board with respect to Non-ISO's, and shall
be exercisable, during the Optionee's lifetime, only by the Optionee's, or in
the event of the death or Disability of the Optionee, by the legal
representative of the Optionee.
(c) With respect solely to an ISO, in the event of Termination of Employment
of a Optionee, the Option or portion thereof held by the Optionee which is
unexercised shall expire, terminate, and become unexerciseable no later than
the expiration of three (3) months after the date of Termination of
Employment; provided, however, that in the case of an Optionee whose
Termination of Employment is due to death or Disability, one year shall be
substituted for such three (3) month period. For purposes of this subsection
(c), Termination of Employment of the Optionee shall be deemed not to have
occurred if the Optionee is employed by another corporation (or a parent or
subsidiary corporation of such other corporation) which has assumed the ISO
of the Optionee in a transaction to which Code Section 424(a) is applicable.
With respect to Non-ISO's, in the event of Termination of Employment of the
Optionee, the Options granted to such Optionee shall immediately terminate,
provided, however, that in the case of an Optionee whose Termination of
5
<PAGE>
Employment is due to death or Disability, such Options shall be exercisable
(if vested on the date of death or Disability) for ninety (90) days after the
date of death or Disability.
In determining Employee(s) or Key Person(s) to whom an Option shall be
granted and the number of Shares to be covered by such Option, the Board may
take into account the recommendations of the President of the Company and its
other officers, the duties of the Employee or Key Person, the present and
potential contributions of the Employee or Key Person to the success of the
Company, the anticipated number of years of service remaining before the
attainment by the Employee of retirement age, and other factors deemed relevant
by the Board, in its sole discretion, in connection with accomplishing the
purpose of this Plan. An Employee or Key Person who has been granted an Option
to purchase Shares of the Company, whether under this Plan or otherwise, may be
granted one or more additional Options.
If the Board grants an ISO and a Non-ISO to an Employee on the same
date, the right of the Employee to exercise or surrender one such Option shall
not be conditioned on his or her failure to exercise or surrender the other such
Option.
Section 8.
OPTION PRICE
If an Option is an ISO, the Option Price for each Share subject to such
Option shall be no less than the Fair Market Value of a Share on the date such
Option is granted or, if such Option is granted to a Ten Percent Shareholder,
the Option Price for each Share subject to such Option shall be no less than
110% of the Fair Market Value of a Share on the date such Option is granted. If
an Option is a Non-ISO, the Option Price for each Share shall be no less than
the minimum price required by applicable state law, or by the Company's
governing instrument, or $0.01, whichever price is greater. The Option Price
shall be payable in full upon the exercise of any Option, and a Stock Option
Grant Certificate, Exercise Agreement or related document, at the discretion of
the Board, can provide for the payment of the Option Price either in cash, or in
Shares acceptable to the Board, or in any combination of cash and Shares
acceptable to the Board. Any payment made in Shares shall be treated as equal
to the Fair Market Value of such Shares on the date the properly endorsed
certificate for such Shares is delivered to the Board for ISO's and for Non-
ISO's shall be treated as the then current book value of the Shares.
Notwithstanding the above, and in the sole discretion of the Board, an
Option may be exercised as to a portion or all (as determined by the Board) of
the number of Shares specified in the Stock Option Grant Certificate by delivery
to the Company of a promissory note, such promissory note to be executed by the
Optionee and which shall include, with such other terms and conditions as the
Board shall determine, provisions in a form approved by the Board under which
(i) the balance of the aggregate purchase price shall be payable in equal
installments over such period and shall bear interest at such rate (which shall
not be less than the prime bank loan rate as determined by the Board) as the
Board shall approve and (ii) the Optionee shall be personally liable for payment
of the unpaid principal balance and all accrued but unpaid interest.
6
<PAGE>
Section 9.
EXERCISE PERIOD
Each Option granted under this Plan shall be exercisable in whole or in
part at such time or times as set forth in the related Stock Option Grant
Certificate, but no Stock Option Grant Certificate shall:
1. make an Option exercisable before the date such Option is granted; or
2. make an Option exercisable after the earlier of the:
(a) the date such Option is exercised in full, or
(b) the date which is the tenth (10th) anniversary of the date such
Option is granted, if such Option is a Non-ISO or an ISO granted to
a non-Ten Percent Shareholder, or the date which is the fifth (5th)
anniversary of the date such Option is granted, if such Option is an
ISO granted to a Ten Percent Shareholder.
A Stock Option Grant Certificate may provide for the exercise of an
Option after the employment of an Employee has terminated for any reason
whatsoever, including death or disability.
Section 10.
NONTRANSFERABILITY AND OTHER RESTRICTIONS
No Option granted under this Plan shall be transferable by an Employee
or Key Person other than by will or by the laws of descent and distribution as
provided in Section 7(c) above, and Options shall be exercisable during an
Employee's or Key Person's lifetime only by the Employee or Key Person, as the
case may be. The person or persons to whom an Option is transferred by will or
by the laws of descent and distribution thereafter shall be treated as the
Employee or Key Person.
Shares which may be obtained by the exercise of an Option granted under
the Plan shall be made subject to, and the issuance of such Shares shall be
conditioned upon, the terms and conditions of a Shareholders Agreement (as such
term is defined in O.C.G.A. (S) 14-2-120) in effect at the time of the delivery
of such Shares, or any other agreement entered into by the Company and one (1)
or more of its Shareholders governing the transfer, disposition or ownership or
such Shares. With respect to ISO's, any such restrictions shall be contained in
the Stock Option Grant Certificate granted to the Employee or Key Person.
7
<PAGE>
Section 11.
SURRENDER OF OPTIONS
11.1 General Rule. The Board, acting in its absolute discretion may
------------
incorporate a provision in a Stock Option Grant Certificate to allow an Employee
or Key Person to surrender his or her Option in whole or in part in lieu of the
exercise in whole or in part of that Option on any date that:
1. the Fair Market Value of the Shares subject to such Option exceeds
the Option Price for such Shares, and
2. the Option to purchase such Shares is otherwise exercisable.
11.2 Procedure. The surrender of an Option in whole or in part shall be
---------
effected by the delivery of the Stock Option Grant Certificate to the Board,
together with a statement signed by the Employee or Key Person which specifies
the number of Shares ("Surrendered Shares") as to which the Employee or Key
Person surrenders his or her Option and how he or she desires payment be made
for such Surrendered Shares.
11.3 Payment. An Employee or Key Person in exchange for his or her
-------
Surrendered Shares shall receive a payment in cash or in Shares, or in a
combination of cash and Shares, equal in amount on the date such surrender is
effected to the excess of the Fair Market Value of the Surrendered Shares (or
then current book value, if Non-ISO's) on such date over the Option Price for
the Surrendered Shares. The Board, acting in its absolute discretion, can
approve or disapprove an Employee's or Key Person's request for payment in whole
or in part in cash and can make that payment in cash or in such combination of
cash and Shares as the Board deems appropriate. A request for payment only in
Shares shall be approved and made in Shares to the extent payment can be made in
whole shares of Shares and (at the Board's discretion) in cash in lieu of any
fractional Shares.
11.4 Restrictions. Any Stock Option Grant Certificate which incorporates a
------------
provision to allow an Employee or Key Person to surrender his or her Option in
whole or in part also shall incorporate such additional restrictions on the
exercise or surrender of such Option as the Board deems necessary to satisfy the
conditions to the exemption under Rule 16b-3 (or any successor exemption) to
Section 16(b) of the Exchange Act.
Section 12.
SECURITIES REGISTRATION
Each Stock Option Grant Certificate may provide that, upon the receipt
of Shares as a result of the surrender or exercise of an Option, the Employee or
Key Person shall, if so requested by the Company, hold such Shares for
investment and not with a view of resale or distribution to the public and, if
so requested by the Company, shall deliver to the Company a written statement
satisfactory to the Company to that effect. Each Stock Option Grant Certificate
may also provide that, if so requested by the Company, the Employee or Key
Person shall make a
8
<PAGE>
written representation to the Company that he or she will not sell or offer to
sell any of such Shares unless a registration statement shall be in effect with
respect to such Shares under the Securities Act of 1933, as amended ("1933
Act"), and any applicable state securities law or, unless he or she shall have
furnished to the Company an opinion, in form and substance satisfactory to the
Company, of legal counsel acceptable to the Company, that such registration is
not required. Certificates representing the Shares transferred upon the exercise
or surrender of an Option granted under this Plan may at the discretion of the
Company bear a legend to the effect that such Shares have not been registered
under the 1933 Act or any applicable state securities law and that such Shares
may not be sold or offered for sale in the absence of an effective registration
statement as to such Shares under the 1933 Act and any applicable state
securities law or an opinion, in form and substance satisfactory to the Company,
of legal counsel acceptable to the Company, that such registration is not
required.
Section 13.
LIFE OF PLAN
No Option shall be granted under this Plan on or after the earlier of:
1. the tenth (10th) anniversary of the effective date of this Plan (as
determined under Section 4 of this Plan), in which event this Plan otherwise
thereafter shall continue in effect until all outstanding Options have been
surrendered or exercised in full or no longer are exercisable, or
2. the date on which all of the Shares reserved under Section 3 of this
Plan have (as a result of the surrender or exercise of Options granted under
this Plan) been issued or no longer are available for use under this Plan, in
which event this Plan also shall terminate on such date.
Section 14.
ADJUSTMENT
The number of Shares reserved under Section 3 of this Plan, and the
number of Shares subject to Options granted under this Plan, and the Option
Price of such Options shall be adjusted by the Board in an equitable manner to
reflect any change in the capitalization of the Company, including, but not
limited to, such changes as stock dividends or stock splits. Furthermore, the
Board shall have the right to adjust (in a manner which satisfies the
requirements of Code Section 424(a)) the number of Shares reserved under Section
3 of this Plan, and the number of Shares subject to Options granted under this
Plan, and the Option Price of such Options in the event of any corporate
transaction described in Code Section 424(a) which provides for the substitution
or assumption of such Options. If any adjustment under this Section 14 creates
a fractional Share or a right to acquire a fractional Share, such fractional
Share shall be disregarded, and the number of Shares reserved under this Plan
and the number subject to any Options granted under this Plan shall be the next
lower number of Shares, rounding all fractions downward. An adjustment made
under this Section 14 by the Board shall be conclusive and binding on all
affected persons and, further, shall not constitute an increase in the number of
Shares reserved under Section 3 of this Plan.
9
<PAGE>
Section 15.
SALE OR MERGER OF THE COMPANY
If the Company agrees to sell substantially all of its assets for cash
or property, or for a combination of cash and property, or agrees to any merger,
consolidation, reorganization, division or other transaction in which Shares are
converted into another security or into the right to receive securities or
property and such agreement does not provide for the assumption or substitution
of the Options granted under this Plan, each Option at the direction and
discretion of the Board, or as is otherwise provided in the Stock Option Grant
Certificates, may be canceled unilaterally by the Company in exchange for the
whole Shares (or, subject to satisfying the conditions to the exemption under
Rule 16b-3 or any successor exemption to Section 16(b) of the Exchange Act, for
the whole Shares and the cash in lieu of a fractional Share) which each Employee
or Key Person otherwise would receive if he or she had the right to surrender
his or her outstanding Option in full under Section 11 of this Plan and he or
she exercised that right exclusively for Shares on a date fixed by the Board
which comes before such sale or other corporate transaction.
Section 16.
AMENDMENT OR TERMINATION
This Plan may be amended by the Board from time to time to the extent
that the Board deems necessary or appropriate; provided, however, no such
amendment shall be made absent the approval of the shareholders of the Company
(1) to increase the number of Shares reserved under Section 3 except as set
forth in Section 14, (2) to extend the maximum life of the Plan under Section 13
or the maximum exercise period under Section 9, (3) to decrease the minimum
Option Price under Section 8, or (4) to change the designation of Employees or
Key Persons eligible for Options under Section 6. The Board also may suspend
the granting of Options under this Plan at any time and may terminate this Plan
at any time; provided, however, the Company shall not have the right to modify,
amend or cancel any Option granted before such suspension or termination unless
(1) the Employee or Key Person consents in writing to such modification,
amendment or cancellation or (2) there is a dissolution or liquidation of the
Company or a transaction described in Section 14 or Section 15 of this Plan.
Section 17.
CHANGE OF CONTROL
In the event of a Change of Control, provision may be made to (i) cause each
outstanding Option to become exercisable prior to a Change of Control, and (ii)
to terminate upon the consummation of any Change of Control. A "Change of
Control" of the Company shall be deemed to have occurred if one of the following
events takes place:
1. Any person other than an Existing Person (as defined below) becomes a
holder of record, as reflected on the stock transfer ledger of the
Company, of securities of the Company representing a right of the
person, acting individually and not in concert with any other party
(and not acting through a contract, arrangement,
10
<PAGE>
understanding, relationship, proxy, voting trust, voting agreement, or
other device), to vote more than fifty percent (50%) of the combined
voting power of the Company's then outstanding securities;
2. A person other than an Existing Person obtains the right to elect a
majority of the members of the Board of Directors of the Company;
3. The Company or any of its subsidiaries shall sell, assign or otherwise
transfer, directly or indirectly, assets (including stock or other
securities of subsidiaries, but other than the grant of licenses to
intangible assets in the ordinary course of business) having a fair
market value of fifty percent (50%) or more of all the assets of the
Company and its subsidiaries to any third party, other than to an
Existing Person, a Parent or a Subsidiary;
4. Any person becomes a beneficial owner (as such term is used in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) of securities of the Company representing a right to
vote more than fifty percent (50%) of the Company's then outstanding
securities, other than an Existing Person;
5. Any transaction or series of related transactions occurring within a
period of ninety (90) days, pursuant to, following or as a result of,
which the beneficial ownership of fifty percent (50%) or more of the
common stock of the Company (or other securities having generally the
right to vote for election of the Board of Directors) shall be sold,
assigned or otherwise transferred, directly or indirectly, to any
person or persons other than an Existing Person, whether by sale or
issuance of common stock or other securities or otherwise; or
6. The issuance of new securities pursuant to a public offering of the
common stock of the Company under the Securities Act of 1933, as
amended, and the issuance of new securities in connection with the
exercise of warrants and options granted and outstanding as of the
effective date of the Plan or which are granted pursuant to a public
offering.
A Change of Control shall not be deemed to occur as a result of any conveyance,
transfer or grant to a bank or other financial institution of a collateral
assignment of, securities title to or security interest in any goods, accounts,
inventory, general intangibles or other assets of the Company or any of its
subsidiaries to secure the obligations of the Company or any of its subsidiaries
to such bank or other financial institution, or the exercise of any rights or
remedies by such bank or other financial institution relation thereto. An
"Existing Person" means a shareholder or holder of any option or warrant of the
Company as of the effective date of the Plan or any lineal descendant or
antecedent, farther, mother, spouse, brother, or sister of such shareholder or
option holder or a trustee for the benefit of any of the foregoing, who is the
holder of at least ten percent (10%) or more of the Company's Common Stock or
who, upon exercise of Options for Common Stock would be the holder of at least
10% of the Common Stock of the Company.
11
<PAGE>
Section 18.
Subchapter S Corporation Status
18.1. Purpose. It is intended that the Company remain an S Corporation,
--------
within the meaning of Section 1361 of the Internal Revenue Code of 1986 (the
"Code"). It is acknowledged that the Shareholders desire that the S Corporation
status not be terminated except by the written consent of a majority-in-interest
of all Shareholders of the Company as provided in Section 1362 of the Code and
that this Plan promote the operation of the Company as an S Corporation. Until
the Shareholders holding a majority-in-interest of all stock of the Company
elect to terminate the S Corporation status of the Company, all terms and
conditions of the Plan, any Option and any Exercise Agreement shall be subject
to the terms and conditions of this Section 18.
Section 19.
MISCELLANEOUS
19.1 Shareholder Rights. No Employee or Key Person shall have any rights as
------------------
a shareholder of the Company as a result of the grant of an Option to him or to
her under this Plan or his or her exercise or surrender of such Option pending
the actual delivery of Shares subject to such Option to such Employee or Key
Person.
19.2 No Contract of Employment. The grant of an Option to an Employee or Key
-------------------------
Person under this Plan shall not constitute a contract of employment and shall
not confer on an Employee any rights upon his or her termination of employment
in addition to those rights, if any, expressly set forth in the Stock Option
Grant Certificate which evidences his or her Option.
19.3 Withholding. The exercise or surrender of any Option granted under this
-----------
Plan shall constitute an Employee's or Key Person's full and complete consent to
whatever action the Board directs to satisfy the federal and state tax
withholding requirements, if any, which the Board in its discretion deems
applicable to such exercise or surrender.
19.4 Transfer. The transfer of an Employee between or among the Company, a
--------
Subsidiary or a Parent shall not be treated as a termination of his or her
employment under this Plan.
19.5 Cash Awards. The Board may, at any time and in its discretion, grant to
-----------
any Optionee the right to receive, at such times and in such amounts as
determined by the Board in its discretion, a cash amount which is intended to
reimburse such person for all or a portion of the federal, state and local
income taxes imposed upon such person as a consequence of the receipt of the
Option or the exercise of rights thereunder.
19.6 Compliance with Code. All ISO's to be granted hereunder are intended to
---------------------
comply with Code Section 422, and all provisions of the Plan and all ISO's
granted hereunder shall be construed in such manner as to effectuate that
intent.
12
<PAGE>
19.7 Construction. This Plan shall be construed under the laws of the State
------------
of Georgia.
IN WITNESS WHEREOF, the Company has caused its duly authorized officer
to execute this Plan effective as of the ____________ day of December, 1995, to
evidence its adoption of this Plan.
BUSINESS SYSTEMS DESIGN, INC.
By: __________________________________
Name (Print):___________________________
Title: _________________________________
13
