<PAGE>
As filed with the Securities and Exchange Commission on May 23, 2000
Registration No. 333-_____
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
FORM S-8
REGISTRATION STATEMENT
Under The Securities Act of 1933
------------------------
VIRATA CORPORATION
(Exact name of Registrant as Specified in its Charter)
Delaware 77-0521696
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
2933 Bunker Hill Lane, Suite 201
Santa Clara, California 95054
(Address of Principal Executive Offices) (Zip Code)
D2 TECHNOLOGIES, INC. TANDEM STOCK OPTION PLAN
INVERNESS SYSTEMS LTD. EMPLOYEE SHARE OPTION PLAN (1997)
INVERNESS SYSTEMS LTD. SUPPLEMENTAL STOCK OPTION PLAN
as assumed by Virata Corporation
(Full title of the Plans)
------------------------
Andrew Vought
Chief Financial Officer
2933 Bunker Hill Lane, Suite 201
Santa Clara, California 95054
(Name and Address of Agent for Service)
(408) 566-1000
(Telephone number, including area code, of agent for service)
------------------------
Copies to:
Douglas D. Smith
Gibson, Dunn & Crutcher LLP
One Montgomery Street, Telesis Tower
San Francisco, California 94104
(415) 393-8200
------------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
Proposed Proposed
Maximum Maximum Amount of
Title of Securities Amount to be Offering Price Aggregate Registration Fee
to be Registered Registered (1) per Share Offering Price (2)
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $0.001 per share (3)....... 466,165 $ 12.71 $ 5,924,957.15 $ 1565
Common Stock, par value $0.001 per share (4)....... 231,203 $ 0.06 $ 13,872.18 4
Common Stock, par value $0.001 per share (5)....... 27,745 $ 0.003 $ 83.24 1
- -----------------------------------------------------------------------------------------------------------------------------------
Total 725,113 $ 5,938,912.57 $ 1570
===================================================================================================================================
</TABLE>
(1) Pursuant to Rule 416(a), also covers additional securities that may be
offered as a result of stock splits, stock dividends or similar
transactions.
(2) 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 prices and the
registration fees have been computed based on the weighted average exercise
prices for shares subject to each of the D2 Technologies, Inc. Tandem Stock
Option Plan and the Inverness Systems Employee Share Option Plan (1997).
(3) In connection with its acquisition of D2 Technologies, Inc., Registrant
assumed all of the outstanding options under the D2 Technologies Tandem
Stock Option Plan (the "Tandem Option Plan"). Registrant is registering
466,165 shares of its common stock, par value $0.001 per share issuable to
eligible employees under the Tandem Option Plan, at a weighted average
price of $12.71.
(4) In connection with its acquisition of Inverness Systems Ltd. ("Inverness"),
Registrant assumed all of the outstanding options under the Inverness
Employee Share Option Plan (1997) (the "Share Option Plan"). Registrant is
registering 231, 203 shares of its common stock, par value $0.001 per share
issuable to eligible employees under the Share Option Plan, at a weighted
average exercise price of $0.06.
(5) In connection with its acquisition of Inverness, Registrant assumed all of
the outstanding options under the Inverness Systems Ltd. Supplemental Stock
Option Plan. Registrant is registering 27,745 shares of its common stock,
par value $0.001 per share issuable to an eligible employee, at a weighted
average exercise price of $0.003.
================================================================================
<PAGE>
INTRODUCTION
This Registration Statement on Form S-8 is filed by Virata Corporation,
a Delaware corporation (the "Registrant") relating to 466,165 shares of its
common stock, par value $0.001 per share (the "Common Stock") issuable to
eligible employees of the Registrant under the D2 Technologies Tandem Stock
Option Plan, 231,203 shares of Common Stock issuable to eligible employees of
the Registrant under the Inverness Employee Share Option Plan (1997) and 27,745
shares of Common Stock issuable under the Inverness Supplemental Stock Option
Plan, as assumed by the Registrant (collectively, the "Plans").
PART I
Item 1. Plan Information.
----------------
Not filed as part of this Registration Statement pursuant to Note to
Part I of Form S-8.
Item 2. Registration Information And Employee Plan Annual Information.
-------------------------------------------------------------
Not filed as part of this Registration Statement pursuant to Note to
Part I of Form S-8.
PART II
Information Required In The Registration Statement
Item 3. Incorporation Of Documents By Reference.
---------------------------------------
The following documents of the Registrant heretofore filed with the
Securities and Exchange Commission (the "Commission") are hereby incorporated in
this Registration Statement by reference:
(1) the Registrant's Registration Statement No. 333-86591 on Form S-1
filed on September 3, 1999, and all amendments thereto;
(2) the Registrant's Registration Statement No. 333-34742 on Form S-8
filed on April 13, 2000, and all amendments thereto;
(3) the Registrant's reports on Form 8-K filed on April 3, 2000, and
all amendments thereto;
(4) the Registrant's report on Form 8-K/A filed on April 21, 2000;
and
(5) the Registrant's report on Form 8-K filed on May 5, 2000, and all
amendments thereto.
All reports and other documents subsequently filed by the Registrant
pursuant to Sections 13(a) and (c), 14 and 15(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), prior to the filing of a post-
effective amendment which indicates that all securities offered hereunder have
been sold or which deregisters all such securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and to
be a part hereof from the date of filing of such reports and documents.
Any document, and any statement contained in a document, incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Registration Statement to the extent that a
statement contained herein, or in any other subsequently filed document that
also is incorporated or deemed to be incorporated by reference herein, modifies
or supersedes such document or statement. Any such document or statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Registration Statement. Subject to the foregoing,
all information appearing in this Registration Statement is qualified in its
entirety by the information appearing in the documents incorporated by
reference.
<PAGE>
Item 8. Exhibits.
--------
5 Opinion of Gibson, Dunn & Crutcher LLP.
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit
5).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Arthur Andersen LLP.
24 Power of Attorney. Reference is made to the signature page
hereto.
99.1 D2 Technologies, Inc. Tandem Stock Option Plan
99.2 Inverness Systems Ltd. Employee Share Option Plan (1997)
99.3 Inverness Systems Ltd. Supplemental Stock Option Plan
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8, and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Santa Clara, California, on this 23rd day of May, 2000
VIRATA CORPORATION
By: /s/ Andrew M. Vought
------------------------
Andrew M. Vought,
Chief Financial Officer
Pursuant to the requirements of the Securities Act, the person who
administers the D2 Technologies, Inc. Tandem Stock Option Plan, the Inverness
Systems Ltd. Employee Share Option Plan(1997) and the Inverness Systems Ltd.
Supplemental Stock Option Plan has duly executed this Registration Statement on
Form S-8 in the city of Santa Clara, State of California, on this 23rd day of
May, 2000.
VIRATA CORPORATION
/s/ Andrew M. Vought
By: ________________________
Andrew M. Vought,
Chief Financial Officer
<PAGE>
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS
Each person whose signature appears below constitutes and appoints Charles
Cotton and Andrew M. Vought as his or her true and lawful attorney-in-fact and
agent, with full power of substitution and resubstitution, for him or her and in
his or her name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement,
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and
agent, or his or her substitute or substitutes, may lawfully do or cause to be
done by virtue hereof. This power of attorney may be signed in several
counterparts.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities indicated
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ CHARLES COTTON Chief Executive Officer and Director May 23, 2000
- ------------------------------------ (Principal Executive Officer)
Charles Cotton
/s/ ANDREW VOUGHT Senior Vice President, Chief Financial May 23, 2000
- ------------------------------------ Officer and Secretary (Principal
Andrew Vought Financial Officer and Principal
Accounting Officer)
Chairman of the Board
- ------------------------------------
Hermann Hauser
/s/ MARCO DE BENEDETTI Director May 23, 2000
- ------------------------------------
Marco De Benedetti
Director
- ------------------------------------
Gary Bloom
/s/ BANDEL CARANO Director May 23, 2000
- ------------------------------------
Bandel Carano
Director
- ------------------------------------
Andrew Hopper
/s/ MARTIN JACKSON Director May 23, 2000
- ------------------------------------
Martin Jackson
/s/ PETER MORRIS Director May 23, 2000
- ------------------------------------
Peter Morris
/s/ PATRICK SAYER Director May 23, 2000
- ------------------------------------
Patrick Sayer
/s/ GIUSEPPE ZOCCO Director May 23, 2000
- ------------------------------------
Giuseppe Zocco
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit Description
- ------- -----------
5 Opinion of Gibson, Dunn & Crutcher LLP.
23.1 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Arthur Andersen LLP.
24 Power of Attorney (included on the signature page hereof).
99.1 D2 Technologies, Inc. Tandem Stock Option Plan
99.2 Inverness Systems Ltd. Employee Share Option Plan (1997)
99.3 Inverness Systems Ltd. Supplemental Stock Option Plan
<PAGE>
EXHIBIT 5
OPINION OF GIBSON DUNN AND CRUTCHER
[LETTERHEAD OF GIBSON, DUNN & CRUTCHER LLP APPEARS HERE]
May 22, 2000
(415) 393-8200 C 03778-00010
Virata Corporation
2933 Bunker Hill Lane, Suite 201
Santa Clara, California 95054
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel for Virata Corporation, a Delaware corporation
(the "Company"), in connection with the registration of 466,165 shares of Common
Stock, par value $0.001 per share of the Company (the "Common Stock") issuable
under the D2 Technologies, Inc. Tandem Stock Option Plan, 231,203 shares of
Common Stock issuable under the Inverness Systems Ltd. Employee Share Option
Plan (1997) and 27,745 shares of Common Stock issuable under the Inverness
Systems Ltd. Supplemental Stock Option Plan (collectively, the "Plans"). In
connection therewith, we have examined, among other things, the Registration
Statement on Form S-8 (the "Registration Statement") proposed to be filed by the
Company with the Securities and Exchange Commission on or about May 22, 2000.
We have also examined the proceedings and other actions taken by the Company in
connection with the authorization of the shares of Common Stock issuable under
the Plans and such other matters as we deemed necessary for purposes of
rendering this opinion.
Based upon the foregoing, and in reliance thereon, we are of the opinion
that the shares of Common Stock issuable under the Plans, when issued, delivered
and paid for in accordance with the Plans and in the manner described in the
Registration Statement, will be validly issued, fully paid and nonassessable.
The Company is a Delaware corporation. We are not admitted to practice in
Delaware. However, we are familiar with the Delaware General Corporation Law
and have made such review thereof as we consider necessary for the purpose of
this opinion. Subject to the foregoing, this opinion is limited to the present
laws of the State of Delaware and the State of California, and to the present
federal laws of the United States of America.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving this consent, we do not admit that we are
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933, as amended, or the General Rules and Regulations of the
Securities and Exchange Commission.
Very truly yours,
/s/ GIBSON, DUNN & CRUTCHER LLP
GIBSON, DUNN & CRUTCHER LLP
DDS/MLR/NTM
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our reports dated August 20, 1999, except as to Note 13
which is as of October 12, 1999, relating to the financial statements and
financial statement schedule of Virata Corporation, which appear in Virata
Corporation's Registration Statement on Form S-1 (No. 333-86591).
/s/ PricewaterhouseCoopers LLP
------------------------------
PricewaterhouseCoopers LLP
San Jose, California
May 23, 2000
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement on Form S-8 of our report dated January
26, 2000 on the financial statements of D2 Technologies, Inc as of December 31,
1999 and 1998 and for each of the three years in the period ended December 31,
1999 included in Virata Corporation's Form 8-K/A filed on April 21, 2000, and to
all references to our Firm included in this registration statement.
By: /s/ Arthur Andersen LLP
-----------------------
ARTHUR ANDERSEN LLP
Los Angeles, California
May 19, 2000
<PAGE>
Exhibit 99.1
D2 TECHNOLOGIES, INC.
---------------------
TANDEM STOCK OPTION PLAN
------------------------
THIS TANDEM STOCK OPTION PLAN (the "Plan") is adopted by D2 TECHNOLOGIES,
INC., a California corporation (the "Company"), with reference to the following
facts:
RECITALS:
--------
A. The Company desire to issue shares of its common stock to certain
employees, consultants and independent contractors (the "Recipients") in order
to reward those Recipients for their contributions to the growth and profits of
the Company.
B. To accomplish that goal, the Company is adopting this Plan to establish
the terms and conditions on which the Company shall issue to such Recipients
options to acquire the Company's common stock.
PLAN:
----
NOW, THEREFORE, the Company hereby adopts the following Plan:
1. DEFINITIONS
-----------
The following terms shall have the meanings indicated below:
1.1 "Board" means the Board of Directors of the Company.
-----
1.2 "Code" means the Internal Revenue Code of 1986, as amended.
---- -----------------------------
1.3 "Employment Termination Date" means the date on which a Recipient
---------------------------
ceases to be employed by the Company for any reason.
1.4 "Exercise Date" means the date on which the Recipient delivers to the
-------------
Company a written notice that such Recipient elects to exercise an Option with
respect to some or all of the Shares of Stock subject to that Option.
1.5 "Expiration Date" means, with respect to each Option, the date
---------------
specified by the Board as the last date on which the Option may be exercised.
1.6 "Grant Date" means the date on which the Board grants an Option to a
----------
Recipient pursuant to this Plan.
1.7 "Incentive Option" means an Option which satisfies the requirements of
----------------
Code Section 422, and each successor provision of the Code.
1.8 "Nonqualified Option" means an Option which is no an Incentive Option.
-------------------
-1-
<PAGE>
1.9 "Option" means an option granted under this Plan to a Recipient which
------
entitles the Recipient to purchase Shares.
1.10 "Option Term" means the period of time during which the Recipient may
-----------
exercise an Option granted to the Recipient pursuant to this Plan, which period
shall (a) commence on the Grant Date, and (b) end on the earlier (i) of the
Expiration date, or (ii) the date which is six (6) months after the Recipient's
Employment Termination Date, if termination is caused by Recipient's death or
disability, or thirty (30) days after the Recipient's Employment Termination
Date if such termination occurs as a result of any cause other than Recipient 's
death or disability.
1.11 "Recipient" means an employee, consultant or independent contractor
---------
of the Company to whom an Option is granted pursuant to this Plan.
1.12 "Shares" means the shares of common capital stock of the Company.
------
1.13 "Vested Percentage" means, with respect to each Option, the portion
-----------------
of the Option in which the Recipient has become vested, as determined under
Section 4.3.2, below.
1.14 "Vested Shares" means, with respect to each Option the number of
-------------
Shares determined by multiplying (a) the total number of Shares subject to the
Option, times (b) the Recipient's Vested Percentage.
2. COVERED OPTIONS
---------------
2.1 Types of Options. The Company may grant to Recipients either
----------------
Incentive Options or Nonqualified Options. Unless the Board of Directors
designates an Option as an Incentive Option at the time the Option is granted to
the Recipient, the Option shall be a Nonqualified Option.
2.2 Application of Plan. Except as otherwise expressly provided in this
-------------------
Plan, all the provisions of this Plan relate equally to both Incentive Options
and Nonqualified Options.
3. RESERVATION OF SHARES
---------------------
3.1 Number of Shares Reserved. The Company shall establish a Stock Option
-------------------------
Reserve ("Stock Option Reserve") to which it shall credit One Hundred Thousand
(100,000) Shares of its authorized and unissued stock.
3.2 Issuance of Options. The Company may not grant an Option to acquire
-------------------
Shares unless there are credited to the Stock Option Reserve, immediately prior
to the grant of the Option, the number of Shares to which the Option is to
apply. If an Option is granted for a number of Shares which exceeds the number
of Shares then credited to the Stock Option Reserve, then the Option shall be
effective only with respect to the number of Shares then credited to the Stock
Option Reserve.
3.3 Adjustment to Reserve. So long as this Plan is in effect, the Company
---------------------
shall not issue any of the Shares credited to the Stock Option Reserve, except
pursuant to the exercise of Options granted under this Plan.
3.3.1 Stock Split, Etc. If the Company effects a subdivision or
----------------
consolidation of Shares or any other capital readjustment, the payment of a
stock dividend, a stock split or reverse stock split, or any other increase or
decrease in the number of the outstanding Shares without receiving compensation
therefor
-2-
<PAGE>
in money, services, or property (other than pursuant to the exercise of Options
granted under this Plan), then the number of Shares then credited to the Stock
Option Reserve shall:
A. In the event of an increase in the number of outstanding
Shares, be proportionately increased;
B. In the event of an increase in the number of outstanding
Shares, be proportionately decreased.
Any fractional Shares resulting from any such adjustment shall be disregarded.
3.3.2 Grant and Exercise of Options. The number of Shares credited
-----------------------------
to the Stock Option Reserve shall be (a) reduced by the number of Shares for
which Options are granted under this Plan, and (b) subject to that Option but
for which the Option was not exercised.
4. GRANT OF OPTIONS
----------------
4.1 Eligible Individuals. The Company may grant:
--------------------
4.1.1 Incentive Options. Incentive Options only to employees of the
-----------------
Company. A person who is a member of the Board of Directors of the Company
shall be eligible to receive an Incentive Option only if that person also is an
employee of the Company.
4.1.2 Nonqualified Options. Nonqualified Options to any employee,
--------------------
Director, independent contractor or consultant of the Company.
4.2 Discretionary Terms. Subject to Section 4.3, below, the Board in its
-------------------
discretion shall determine with respect to each Option granted under this Plan:
4.2.1 Recipients. Those Recipients, if any, to whom Options shall be
----------
granted under this Plan.
4.2.2 Number of Shares. The number of Shares subject to the Option;
----------------
4.2.3 Price. The purchase price per Share subject to each Option;
-----
provided,
- --------
A. If the Option is an Incentive Option, then the purchase
price per Share shall be equal to the fair market value of each such Share as of
the Grant Date, as determined by the Board in good faith (taking into account,
among other factors, the price at which Shares recently have been purchased and
sold; the price at which shares of the Common Stock of reasonably comparable
corporations are being traded; and the earnings history, book value, and
prospects of the Company in light of marketing conditions generally); and
B. If the Option is a Non-qualified Option, then the purchase
price per Share shall be not less than eighty-five percent (85%) of the fair
market value of each such Share as of the Grant Date, determined by the Board in
good faith (taking into account, among other factors, the price at which Shares
recently have been purchased and sold; the price at which Shares of the common
stock of reasonably
-3-
<PAGE>
comparable corporations are being traded; and the earnings history, book value,
and prospects of the Company, in light of marketing conditions generally); and
C. Notwithstanding Paragraphs A and B, above, if the Recipient
directly or indirectly own stock of the Company possessing more than ten percent
(10%) of the total voting power of all classes of stock of the Company or any
parent corporation or subsidiary of the Company, then (1) the purchase price for
the Shares subject to the Option shall be equal to or greater than one hundred
ten percent (110%) of the fair market value of such Shares as of the Grant Date,
and (2) the Option Term for such Option may not exceed five (5) years.
4.2.4 Other Matters. Whether:
-------------
A. To impose on each Option terms and conditions which are in
addition to, or different from, those imposed on other Options; and
B. To require as a condition to the grant of an Option that
the Recipient surrender any Options then held by the Recipient to purchase
Shares, whether pursuant to options previously granted to the Recipient under an
employee stock option plan or pursuant to any other option, warrant or other
right then held by the Recipient.
4.3 Mandatory Terms. Each Option granted pursuant to this Plan shall be
---------------
subject to the following terms and conditions:
4.3.1 Vested Shares. A Recipient may exercise an Option at any time
-------------
only with respect to the number of Vested Shares under the Options.
4.3.2 Vesting. Unless a different schedule has been prescribed b the
-------
Board at the time an Option is granted, a Recipient shall become vested in (a)
twenty-five percent (25%) of the Shares subject to an Option if the Recipient
remains employed by the Company during the one-year period following the Grant
Date, and (b) one-thirty-sixth (1/36th) of the remaining Shares subject to the
Option for each subsequent full calendar month that the Recipient remains
employed with the Company; provided, each Recipient shall become vested in
--------
Shares at a rate not less favorable to the Recipient than twenty percent (20%)
per year over a period of five years.
4.3.3 Assignments. No option granted under this Plan may be assigned
-----------
or transferred (except, to the extent permitted by Code Section 424, between
spouses or former spouse incident to a divorce or to the Recipient's estate or
other successor following the death of the Recipient) and during the life of the
Recipient no Option shall be exercisable by any person other than the Recipient.
4.3.4 Limits on Incentive Options. With respect to Incentive Options
---------------------------
only:
A. No Incentive Option granted under this Plan may be
exercised unless the Recipient to whom such Option was granted was an employee
of the Company (or a successor thereto pursuant to a transaction described in
Section 424 of the Code) at all times during the period beginning on the Grant
Date and ending no more than three (3) months prior to the date on which the
option is exercised (subject to the 30-day period set forth in Section 4.37,
below).
B. At no time shall the aggregate fair market value (determined
at the time the option is granted) of all Shares with respect to which Incentive
Options (whether they are Options granted
-4-
<PAGE>
under this Plan or are incentive stock options granted under any other plan
sponsored by the Company) are exercisable for the first time by any employee
during any calendar year, exceed $100,000.
C. Each Incentive Option shall expire to the extent it is not
exercised within ten (10) years after the Grant Date.
4.3.5 Time of Exercise. Options may be exercised at any time during
----------------
the Option Term, provided that an Option may be exercised only (a) once during
--------
any calendar quarter, and (b) not more than twice in any calendar year.
4.3.6 Partial Exercise. If a Recipient exercises an Option as to
----------------
some but not all the Shares which are subject to the Option then the remaining
Shares subject to the Option shall continue to be subject to the Option and may
be purchased upon any subsequent exercise of the Option prior to the end of the
Option Term.
4.3.7 Termination of Option. If a Recipient of an Option who is an
---------------------
employee terminates employment with the Company, then the Option shall terminate
on the earlier of (a) the Expiration Date, or (b) the date which is six (6)
months after the Recipient's Employment Termination Date, if termination is
caused by Recipient's death or disability, or thirty (30) days after the
Recipient's termination date, if such termination occurs as a result of any
cause other than Recipient's death or disability. Prior to termination, the
Recipient shall be entitled to exercise the Option with respect to Vested Shares
by delivering the Exercise Notice (as defined in Section 5.1) to the Company
prior to termination of the Option.
4.3.8 Adjustment to Shares and Price. If the Shares of the Company
------------------------------
are increased, decreased or changed into or exchanged for a different number or
kind of shares of stock or securities of the Company or of another corporation
as the result of a stock split or stock dividend or combination of shares or any
other change, or are exchanged for other securities by reclassification,
reorganization, merger, consolidation, recapitalization or otherwise, then the
Board shall adjust accordingly (in such manner so as to cause such adjustment
not to be a "modification" of such Option as defined in Code Section 424), the
number and kind of shares as to which outstanding Options, or portions thereof
then unexercised, shall be exercisable, so that the Recipient's proportionate
interest shall be maintained as before the occurrence of such event. To the
extent permitted by Code Section 424, such adjustment in outstanding Options
shall be made without change in the aggregate price applicable to the
unexercised portion of the Option and with a corresponding adjustment in the
purchase price per share. Any such adjustment made by the Board shall be
conclusive.
4.3.9 Rights as Shareholder. No Recipient shall have any rights as a
---------------------
shareholder of the Company with respect to any Share subject to an Option until
after (a) the Recipient has exercised the Option, and (b) there is issued to the
Recipient a stock certificate evidencing ownership of such share. No adjustments
shall be made for dividends or other rights for which the record date is prior
to the date such stock certificate is issued.
4.3.10 Financial Statements. Within one hundred twenty (120) days
--------------------
after the end of each of the Company's fiscal years, the Company shall provide
to each Recipient holding unexercised Options a statement of revenue and
expenses for the Company for the most recently completed fiscal year, and a
balance sheet for the Company dated as of the last day of such fiscal year.
4.3.11 Listing and Registration. If at any time the Board
------------------------
determines, in its discretion, that the listing, registration or qualification
of Options granted pursuant to the Plan, or the Shares
-5-
<PAGE>
to be sold and issued upon exercise of such Options, upon any securities
exchange or under any state or federal law, or the consent or approval of any
governmental regulatory body, is necessary or desirable as a condition to or in
connection with the granting of Options pursuant to the Plan, or the sale of
Shares upon the exercise of such Options, then no further Options may be granted
or Shares should unless such listing, registration, qualification, consent or
approval shall have been obtained free of any conditions not acceptable to the
Board. The Board may cause the Company, at its expense, to take any action
related to the Plan which may be required in connection with such listing,
registration, qualification, consent or approval.
4.3.12 Stock Option Agreement. Options granted under this Plan shall
----------------------
be evidenced by a written Stock Option Agreement, substantially in the form
attached as Exhibit A to this Plan (in the case of Incentive Options), or by a
written Nonqualified Stock Option Agreement substantially in the form attached
as Exhibit B to this Plan (in the case of Nonqualified Options), and in each
case containing such additional terms and conditions consistent with the
provisions of the Plan as are imposed by the Board and which, in the opinion of
the Board, are necessary or desirable for the protection of the Company.
4.4 Notice. The Board shall give written notice of any Option granted
------
under this Plan to the Recipient and to the Company within ten (10) days after
the Grant Date. Each such notice shall specify (a) the number of shares subject
to the Option, (b) the type of Option (Incentive or Nonqualified), (c) the
purchase price for Shares under the Option, (d) the Option Term and (e) the
times at which the Option may be exercised.
5. ISSUANCE OF SHARES
------------------
5.1 Notice of Exercise. To the extent that an Option may be exercised
------------------
with respect to Vested Shares under Section 4, above, such Option shall be
exercised only by the Recipient delivering to the Company a written notice (the
"Exercise Notice") stating the number of Shares with respect to which the Option
is being exercised.
5.2 Closing. The closing of the purchase and sale of Shares pursuant to
-------
the exercise of an Option shall occur at the offices of the Company on a
mutually agreeable date not more than thirty (30) days after the date on which
the Exercise Notice is delivered to the Company pursuant to Section 5.1, above
(or, if later, the third business day after the date on which the condition
specified in Section 5.2.1, below, is satisfied).
5.2.1 Condition Precedent. The obligations of the parties at the
-------------------
closing shall be subject to the Company's obtaining any permits, qualifications
or other consents that may be required under state or federal securities laws in
connection with the issuance of the Shares.
5.2.2 Deliveries of Closing. At the closing:
---------------------
A. The Recipient shall deliver:
(1) The purchase price for the Shares being purchased,
either in cash or by certified or cashier's check or money order or, in such
amount as is determined under the terms of the Option being exercised by the
Recipient;
(2) An executed Stock Transfer Agreement pursuant to
Section 6, below;
-6-
<PAGE>
(3) An executed Investment Letter, in substantially the
form set forth as Exhibit C to this Plan (if requested by the Company); and
(4) Such other documents and instruments as the Company
reasonably may request to effect the closing in compliance with this Plan and
applicable law.
B. The Company shall deliver:
(1) One or more stock certificates evidencing the Shares
being purchased by the Recipient; and
(2) As executed Stock Transfer Agreement pursuant to
Section 6, below.
5.3 Legend. All certificates evidencing Shares purchased pursuant to
------
exercise of an Option shall be imprinted with such legends, if any, as may be
necessary to comply with applicable federal and State securities laws, and also
bear a legend in substantially the following form:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
OF THAT CERTAIN STOCK TRANSFER AGREEMENT BETWEEN THE COMPANY AND
[RECIPIENT] DATED ________, 19___, A COPY OF WHICH IS AVAILABLE FOR
INSPECTION AT THE OFFICES OF THE COMPANY.
5.4 Failure to Complete Purchase. If, upon tender and delivery by the
----------------------------
Company at the closing of the stock certificates required pursuant to Section
5.2, above, the Recipient fails to accept delivery of and to pay for all or any
part of the number of Shares specified in the Exercise Notice, then the Board,
in its discretion, may terminate the Recipient's right to exercise the Option
with respect to such undelivered shares and any other Shares subject to the
Option.
5.5 Fully Paid Shares. All Shares issued upon the exercise of Options
-----------------
granted under this Plan shall be fully paid and nonassessable shares.
6. RESTRICTIONS ON SHARE TRANSFER
------------------------------
6.1 Grant of Rights. With respect to all Shares purchased pursuant to the
---------------
exercise of an Option (the "Option Shares"), the Company shall have:
6.1.1 First Refusal. A right of first refusal to purchase the Option
-------------
Shares prior to any sale, encumbrance, or other transfer, whether voluntarily or
by operation of law, other than a transfer to a revocable inter vivos trust of
----- -----
which the Recipient is the trustor, trustee, and beneficiary, as further
described in Section 6.2, below; and
6.1.2 Repurchase Option. The right and option (the "Repurchase
-----------------
Option"), but not the obligation, to purchase such Option Shares upon (a) the
termination of the Recipient's employment or other service engagement with the
Company for any reason, and (b) the death of the Recipient, as further described
in Section 6.3., below.
6.2 First Refusal Rights. Prior to any transfer of any Option Shares, the
--------------------
Recipient shall deliver to the Company a written notice (the "Transfer Notice")
describing (a) the name and address of the
-7-
<PAGE>
proposed transferee; (b) the proposed purchase price; (c) the number of Option
Shares to be sold or transferred; and (d) the other terms and conditions of the
transfer. Such Transfer Notice shall be treated as an offer by the Recipient to
sell the Option Shares to the Company at the same price, and on the same other
terms, as in the proposed transfer described in the Transfer Notice.
6.2.1 Exercise. If the Company wishes to purchase the Option Shares,
--------
then the Company shall deliver to the Recipient, within thirty (30) days after
receiving the Transfer Notice, a written acceptance of the offer. The closing
of the sale of the Option Shares to be Company thereafter shall occur, at the
offices of the Company, within thirty (30) days after the Company accepts the
Recipient's offer.
6.2.3 Failure to Exercise. If the Company fails to deliver to the
-------------------
Recipient within such 30-day period a written acceptance of the Recipient's
offer, then the Recipient may proceed with the proposed transfer to the proposed
transferee, and on the same terms and conditions, described in the Transfer
Notice. If such transfer fails to close within 60 days after the end of such
30-day period, then the Recipient shall be obligated to offer the Option Shares
to the Company pursuant to this Section 6.2 prior to transferring those Shares
to the proposed transferee or any other person.
6.3 Repurchase Option. If a Recipient dies or the Recipient's employment
-----------------
or other service engagement with the Company is terminated for any other reason,
then the Company thereafter shall have the option (the "Repurchase Option") to
purchase the Recipient's Option Shares by delivering to the Recipient or the
Recipient's successor or legal representative), within ninety (90) days after
Recipient's death or termination of employment, a written notice of its election
to exercise of that option (the "Exercise Notice").
6.3.1 Closing. If the Company delivers that Exercise Notice within
-------
such 90-day period, then the closing of the sale of the Option Shares to the
Company pursuant to the exercise of the Repurchase Option shall occur at the
offices of the Company on a mutually acceptable date within thirty (30) days
after delivery of the Exercise Notice.
6.3.2 Price. The purchase price for each of the Option Shares shall
-----
be the greater of (a) the price paid by the Recipient for such shares upon the
exercise of the Option, or (b) the fair market value of such Option Shares as of
the date of termination of Recipient's employment, determined in good faith by
the Company's Board of Directors based upon the same factors taken into account
by the Board in establishing the Exercise Price for an Option pursuant to
Section 4.2.3, above. The Company shall pay such amount to the Recipient, in
cash, at the closing; provided, if the Options Shares were purchased with any
--------
purchase-money indebtedness from the Recipient, then the Purchase Price payable
by the Company at the closing shall be reduced to the extent of the amount then
due to the Company under such purchase-money indebtedness.
6.4 Stock Transfer Agreement. Concurrently with a Recipient's purchase of
------------------------
Shares pursuant to the exercise of an Option, the Recipient and the Company
shall execute a Stock Transfer Agreement in substantially the form set forth in
Exhibit D, evidencing the right of first refusal and Repurchase Option described
in this Section 6.
7. TERM AND AMENDMENT OF PLAN
--------------------------
7.1 Term. Unless sooner terminated pursuant to Section 7.2, below, this
----
Plan shall have a term of ten (10) years and shall expire on the tenth (10th)
anniversary of (a) the date of its adoption by the Board, or (b) the date of its
approval by the shareholders of the Company, whichever first occurs.
-8-
<PAGE>
7.2 Amendment and Termination. The Board in its sole and absolute
-------------------------
discretion may amend, suspend or terminate the Plan in whole or in part at any
time, but no such amendment, suspension or termination shall adversely affect
the rights or obligations of Recipients with respect to Options granted prior to
the date of any such amendment, suspension or termination; provided,
notwithstanding the foregoing, the shareholders shall be required to approve any
amendment which has the effect of (a) increasing the number of shares subject to
the Plan or (b) changing the designation of the class of employees eligible to
receive options under the Plan.
8. MISCELLANEOUS
-------------
8.1 Approval of Shareholders. This Plan shall be effective only if it is
------------------------
approved by the shareholders of the Company within the period beginning twelve
(12) months before and ending within twelve (12) months after the date of its
adoption by the Board. Options may be granted under this Plan prior to the date
of its approval by the Company's shareholders, but no such Option may be
exercised until this Plan has been so approved by the shareholders. Upon such
approval, Options previously granted under this Plan shall be given effect
retroactive to their Grant Date.
8.2 Use of Proceeds. The proceeds from the sale of Shares pursuant to
---------------
Options granted under this Plan shall constitute general funds of the Company.
8.3 No Right to Allocation. No person shall be entitled to receive an
----------------------
Option under this Plan and no person shall have authority to enter into an
agreement for the granting of an Option or to make any representation or
warranty with respect thereto. No Options shall be earmarked for the account of
a Recipient nor shall a Recipient have any rights with respect to such Options
until such Options have been issued in accordance with the provisions of this
Plan.
8.4 No Employment Rights. Neither the adoption of this Plan, nor any
--------------------
action taken by the Board under the Plan, or any provision of the Plan, shall be
construed as giving to any person the right to be retained in the employ of the
Company.
8.5 Notices. All notices permitted or required by this Plan shall be in
-------
writing and shall be deemed to be delivered and received (a) when personally
delivered, or (b) on the day on which telecopied, or (c) on the third (3rd)
business day after the day on which deposited in the United States mail, first-
class-certified mail, postage prepaid, transmitted or addressed to the person
for whom intended, at the telecopy number or address appearing on the records of
the Company, or such other telecopy number or address, notice of which is given
in the manner contemplated by this Section 8.5.
8.6 Governing Law. The Plan shall be governed by the Internal Revenue
------------- ----------------
Code of 1986, as amended, and by the laws of the State of California.
- ------------
8.7 Effective Date. The effective date of this Plan shall be October 21,
--------------
1996.
D2 TECHNOLOGIES, INC., a California
corporation
______________________________ By _________________________________
Date David Y. Wong, Ph.D.
President
-9-
<PAGE>
STOCK OPTION AGREEMENT
----------------------
(Incentive Stock Option)
THIS STOCK OPTION AGREEMENT (the "Agreement") is made and entered into,
effective on the date set forth below, by and between D2 TECHNOLOGIES, INC., a
California corporation (the "Company"), and ___________ (the "Recipient"), with
reference to the following facts:
RECITALS:
--------
A. The Company has adopted a Tandem Stock Option Plan (the "Option Plan")
which provides for the issuance of Incentive Stock Options meeting the
requirements of Internal Revenue Code (the "Code") Section 422 ("Incentive
Option"); and
B. The Recipient is eligible to participate in the Option Plan and has
been selected by the Board of Directors of the Company, which administers the
Plan, to receive an Incentive Option under the Plan.
AGREEMENT:
---------
NOW, THEREFORE, the parties hereto, intending to be legally bound, do
hereby agree as follows:
1. GRANT OF OPTION
---------------
1.1 Number of Shares. Subject to the terms and conditions of this
----------------
Agreement, the Company hereby grants to Recipient an option (the "Option") to
purchase _______ (_____________________________)shares of the Company's Common
Stock (the "Option Shares") at a price of __________ ($__) per share, which
the Board of Directors of the Company has determined to be the fair market value
of the Option Shares as of the "Grant Date" (as defined in Section 1.2, below).
The parties intend that the Option shall be treated as an Incentive Option, and
the Option therefore is subject to all restrictions imposed on "incentive stock
options" under the Code and all restrictions imposed on "Incentive Options"
under the Option Plan.
1.2 Date of Grant. The Option is granted as of the ____ day of ______,
-------------
____ (the "Grant Date").
1.3 Employment Date. The Recipient's "Employment Date" is _________, __
---------------
which is the date on which the Recipient commenced employment with the
Company.
1.4 Option Nontransferable. The Option shall not be assignable or
----------------------
transferable (except either a transfer between spouses or former spouses
incident to a divorce or to the Recipient's estate or other successor upon the
Recipient's death, such that the representative, heirs,
<PAGE>
or other successors of Recipient may exercise the Option within the six-month
period described in Section 1.6, below), and any attempted assignment or other
transfer shall cause the Option (and all of Recipient's Rights hereunder) to
expire as of the date of such attempted transfer.
1.5 Term. Subject to earlier termination pursuant to Section 1.6, below,
----
the term of the Option shall (a) commence on the Grant Date, and (b) continue
until the ___ day of ________, ____; provided, in all events this Option shall
expire and no longer be exercisable ten (10) years after the Grant Date. To the
extent the Option is not exercised within such period of time (as the same may
be terminated pursuant to Section 1.6, below), the Option and all of Recipient's
rights under this Agreement (including all such rights with respect to "Vested
Shares" as defined in Section 3, below, and otherwise) shall expire at the end
of that period of time.
1.6 Termination of Option. Notwithstanding any other provision of this
---------------------
Agreement to the contrary, the Option shall terminate as to all Option Shares,
including both "Vested Shares" (as defined in Section 3, below) and other Option
Shares, and all of Recipient's rights under this Agreement shall expire, (a) six
(6) months following termination of employment, where termination occurs by
reason of Recipient's death or disability, or (b) thirty (30) days following the
date on which Recipient's employment or other service engagement with the
Company terminates for any other reason. (NOTE TO RECIPIENT: EVEN THOUGH
CALIFORNIA CORPORATE LAW ENABLES A RECIPIENT'S HEIRS OR ESTATE TO EXERCISE THE
OPTION UP TO SIX (6) MONTHS FOLLOWING TERMINATION OF RECIPIENT'S EMPLOYMENT BY
REASON OF DEATH OR DISABILITY, THE OPTION MUST BE EXERCISED WITHIN NINETY (90)
DAYS FOLLOWING TERMINATION OF EMPLOYMENT IN ORDER FOR THE OPTION TO BE TREATED
AS A TAX-FAVORED "INCENTIVE STOCK OPTION.)
2. RIGHTS PRIOR TO EXERCISE OF OPTION
----------------------------------
Prior to the time that the Recipient exercises the Option in the manner
required by this Agreement and receives a share certificate evidencing the
Option Shares, the Recipient shall have no rights as a stockholder with respect
to any Option Shares.
3. VESTING AND EXERCISE
--------------------
3.1 Vesting of Option. The Recipient may exercise the Option only with
-----------------
respect to Vested Shares.
3.1.1 Vested Shares. The number of Vested Shares (the "Vested
-------------
Shares") at any time shall be determined by multiplying (a) the total number of
Option Shares set forth in Section 1.1, above, times (b) the Recipient's Vested
-----
Percentage (as determined in Section 3.1.2., below).
3.1.2 Vested Percentage. Subject to Section 3.1.3 and 4.3, below,
-----------------
the Recipient's Vested Percentage (the "Vested Percentage") [BOTH PARTIES
INITIAL APPROPRIATE SECTION]:
<PAGE>
[__/__] A. Initially shall be zero, and shall be increased by _____
percent (__%) as of each ___________________ during the term of the Option;
provided, in no event shall Recipient become vested in the Shares at a rate less
- --------
favorable to Recipient than twenty percent (20%) per year for a period of five
(5) years.
[__/__] B. Initially shall be zero. If the Recipient remains
employed with the Company during the one-year period following the Grant Date,
then upon completion of such one-year period, Recipient shall become vested in
twenty-five percent (25%) of the total number of Shares subject to this Option.
For each subsequent full calendar month that Recipient remains employed with the
Company, Recipient shall become vested in one-thirty-sixth (1/36th) of the
remaining number of Shares subject to this Option.
3.1.3 Application of $100,000 Limit. In order for the Option to be
-----------------------------
eligible for treatment as an "Incentive Option," the fair market value of stock
with respect to which any portion of the Option first becomes exercisable in any
calendar year cannot exceed $100,000. If, without regard to this Section 3.1.3,
such $100,000 limit would be violated with respect to any portion of the Option
in any calendar year, then (a) the vesting schedule otherwise applicable under
Section 3.1.2, above, shall not apply during such year, (b) Recipient shall be
deemed to vest in such calendar year only in such portion of the Option as would
cause the Option to remain an "Incentive Option," and (c) the portion of the
Option that would have vested in such calendar year without regard to this
Section 3.1.3 shall vest instead in the next succeeding calendar year (subject
to the application of this Section 3.1.3 in such succeeding year).
3.1.4 Acceleration of Vesting. The Company at any time, in its sole
-----------------------
and absolute discretion, may (but is not obligated to) increase the Recipient's
Vested Percentage.
3.2 Notice. If the Recipient desires to exercise the Option with respect
------
to some or all of the Vested Shares, then the Recipient shall deliver to the
Company a written notice (the "Exercise Notice") describing the number of Vested
Shares which the Recipient then desires to purchase.
3.3 Timing of Exercise. Notwithstanding any other provision of this
------------------
Agreement to the contrary, the Option may be exercised (a) only as to Vested
Shares, (b) only once in each calendar quarter during the term of the Option,
and (c) no more than twice during each calendar year. If the Recipient
exercises the Option with respect to only some of the Vested Shares, then the
Recipient may purchase the remaining Vested Shares upon any subsequent exercise
of the Option.
4. PURCHASE OF SHARES
------------------
4.1 Closing. The closing of the purchase and sale of Vested Shares
-------
pursuant to the exercise of the Option shall occur at the offices of the Company
on a mutually agreeable date not more than thirty (30) days after the date on
which the Exercise Notice is delivered to the Company pursuant to Section 3.2,
above (or, if later, the third business day after the date on which the
condition specified in Section 4.1.1, below, is satisfied).
<PAGE>
4.1.1 Condition Precedent. The obligations of the parties at the
-------------------
closing shall be subject to the Company's obtaining any permits, qualifications
or other consents that may be required under state or federal securities laws in
connection with the issuance of the Vested Shares to be purchased by the
Recipient pursuant to exercise of the Option.
4.1.2 Deliveries at Closing. At the closing:
---------------------
A. The Recipient shall deliver:
(1) The purchase price (as determined under Section 1.1),
above) for the Vested Shares being purchased, either (a) in cash or by certified
or cashier's check or money order, or (b) in the discretion of the Company, a
number of shares of the Company's outstanding capital stock having a fair market
value as of the date of the closing (as determined by the Company's Board of
Directors in good faith) equal to the purchase price due to the Company.
(2) An executed Stock Transfer Agreement pursuant to
Section 5.2, below;
(3) An executed Investment Letter, in substantially the
form set forth as an exhibit to the Option Plan (if requested by the Company);
and
(4) Such other documents and instruments as the Company
reasonably may request to effect the closing in compliance with the Option Plan
and applicable law.
B. The Company shall deliver:
(1) One or more stock certificates evidencing the Vested
Shares being purchase by the Recipient; and
(2) An executed Stock Transfer Agreement pursuant to
Section 5.2, below.
4.2 Legend. All certificates evidencing Shares purchased pursuant to
------
exercise of the Option shall be imprinted with such legends, if any, as may be
necessary to comply with applicable federal and state securities laws, and also
shall bear a legend in substantially the following form:
THE SHARES OF STOCK EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS
OF THAT CERTAIN STOCK TRANSFER AGREEMENT BETWEEN THE COMPANY AND
[RECIPIENT] DATED ______, 19__, A COPY OF WHICH IS AVAILABLE FOR INSPECTION
AT THE OFFICES OF THE COMPANY.
<PAGE>
4.3 Failure to Complete Purchase. If, upon tender and delivery by the
----------------------------
Company at the closing of the stock certificates required pursuant to Section
4.1.2, above, the Recipient fails to accept delivery of and to pay for all or
any part of the number of Vested Shares specified in the Exercise Notice, then
the Board, in its discretion, may terminate the Recipient's right to exercise
the Option with respect to such undelivered shares and any other Option Shares
not previously purchased by the Recipient.
4.4 Fully Paid Shares. All Option Shares issued upon the exercise of the
-----------------
Option shall be fully paid and nonassessable shares.
4.5 Investment Representation. RECIPIENT HEREBY REPRESENTS AND WARRANTS
-------------------------
TO THE COMPANY THAT RECIPIENT IS ACQUIRING TO THE OPTION, AND SHALL PURCHASE ALL
SHARES ACQUIRED PURSUANT TO EXERCISE OF THE OPTION, SOLELY AS AN INVESTMENT FOR
RECIPIENT'S OWN ACCOUNT, AND NOT WITH A VIEW TOWARDS OR IN CONNECTION WITH OR
WITH ANY INTENTION OF ANY SUBSEQUENT SALE, TRANSFER OR OTHER DISTRIBUTION OF THE
SHARES.
5. ADDITIONAL CONDITIONS OF OPTION
-------------------------------
In addition to the other terms and conditions set forth in this Agreement:
5.1 Adjustments to Shares and Price. If the common stock of the Company
-------------------------------
is increased, decreased or changed into or exchanged for a different number or
kind of shares of stock or securities of the Company or of another corporation
as the result of a stock split or stock dividend or combination of shares or any
other change, or is exchanged for other securities by reclassification,
reorganization, merger, consolidation, recapitalization or otherwise, then the
Board of Directors of the Company shall adjust accordingly, pursuant to Code
Section 424, the number and kind of Option Shares as to which the Option, or any
portion thereof then unexercised, shall be exercisable, so that the Recipient
shall maintain the same proportionate interest as before the occurrence of such
event. To the extent permitted by Code Section 424, such adjustment in the
Option shall be made without change in the aggregate price applicable to the
unexercised portion of the Option and with a corresponding adjustment in the
purchase price for each of the Option Shares not yet purchased by the Recipient
pursuant to the Option. Any such adjustment made by the Board shall be
conclusive.
5.2 Restrictions on Transfer. Recipient acknowledges and agrees that all
------------------------
Option Shares purchased pursuant to exercise of the Option shall be subject to
the restrictions on transfer described in the Option Plan, and as a condition of
purchasing any such Option Shares, the Recipient shall execute a Stock Transfer
Agreement, in the form described in the Option Plan, evidencing those
restrictions.
5.3 Listing and Registration. If at any time the Board of Directors of
------------------------
the Company shall determine, it its discretion, that it is necessary or
desirable either (a) to list, register, or qualify
<PAGE>
options granted pursuant to the Plan, or the shares to be sold and issued upon
exercise of such options, upon any securities exchange or under any state or
federal law, or (b) to obtain the consent or approval of any governmental
regulatory body, to the issuance of such options or sale of such shares, then no
further Option Shares shall be sold unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board of Directors. The Board of Directors
shall have the authority to cause the Company, at its expense, to take any
action related to the Plan which may be required in connection with such
listing, registration, qualification, consent or approval.
5.4 Terms of Option Plan. This Agreement is entered into pursuant to the
--------------------
terms and conditions of the Company's Option Plan and is subject to all of the
terms and conditions of such Plan. Any conflict between this Agreement and the
terms and conditions of the Option Plan shall be resolved in favor of the
provisions of the Option Plan.
5.5 Acknowledgment Re Tax Matters. Recipient acknowledges and agrees
-----------------------------
that:
5.5.1 Advisors. In order to obtain favorable tax treatment, the
--------
Recipient must observe certain rules governing "Incentive Stock Option" under
the Internal Revenue Code, and consequently, the Company has urged Recipient to
seek advice from a tax advisor regarding the income tax consequences of the
granting of the Option and the issuance of Options Shares pursuant to the
exercise of the Options;
5.5.2 No Reliance. The Recipient shall not rely upon Company, or any
-----------
of its agents, regarding the income tax consequences of such matters; and
5.5.3 Company Not Responsible. The Company shall not be responsible
-----------------------
for ensuring that the granting of the Option, or the exercise of the Option, or
the holding or sale of Option Shares by Recipient, or any other matter or aspect
of such transactions, enable Recipient to achieve any particular income tax
result, including but not limited to treatment of the Option as an "Incentive
Stock Option" under Code Section 422.
6. MISCELLANEOUS
-------------
6.1 Binding Effect. This Agreement shall be binding upon, and inure to
--------------
the benefit of, the Company and the Recipient, respectively, and their
respective executors, administrators, successors and assigns.
6.2 Compliance with Laws. The Company may file such forms, reports, and
--------------------
other information (including information pertaining to Recipient) as may be
necessary or appropriate for ensuring that the granting of the Option, the
exercise of the Option, and the sale of Option Shares to Recipient pursuant to
exercise of the Option comply fully with cognizant provisions of federal and
California laws regulating the sale, issuance, or other transfer of securities.
<PAGE>
6.3 Effective Date. The effective date of this Agreement shall be the
--------------
Grant Date set forth in Section 1.2, above.
IN WITNESS WHEREOF, the parties have executed this Stock Option Agreement
on the date set forth opposite their respective names.
"COMPANY": "RECIPIENT":
------- ---------
D2 TECHNOLOGIES, INC., a California
corporation
By
------------------------ -------------------------------
Name: Signature of Recipient
Title:
Date Recipient's Social Security No.:
------------------------
Address and Facsimile No.
for Notices: -------------------------------
-----------
D2 Technologies, Inc. Date
104 W. Anapanu Street -------------------------
Santa Barbara, California 93101 Address for Notices:
-------------------
Facsimile No.: (805) 966-2144
<PAGE>
EXHIBIT 99.2
INVERNESS SYSTEMS LTD
SHARE OPTION PLAN (1997)
------------------------
A. NAME AND PURPOSE
1. Name: This plan, as amended from time to time, shall be known as the
----
Inverness Systems Ltd. Employee Share Option Plan (1997) (the "Plan").
2. Purpose: The purpose and intent of the Plan is to provide incentives to
-------
employees of Inverness Systems Ltd. (the "Company"), by providing them with
opportunities to purchase shares in the Company, pursuant to the Plan that
was approved by the Board of Directors of the Company.
B. GENERAL TERMS AND CONDITIONS OF THE PLAN
3. Administration:
--------------
3.1 The Plan will be administered by a Share Option Committee (the
"Committee"), which will consist of such number of Directors of the Company
(not less than two in number), as may be fixed from time to time by the
Board of Directors of the Company. The Board of Directors shall appoint
the members of the Committee, may from time to time remove members from, or
add members to, the Committee and shall fill vacancies in the Committee
however caused.
3.2 The Committee shall select one of its members as its Chairman and shall
hold its meetings as such times and places as it shall determine. Actions
at a meeting of the Committee at which a majority of its members are
present or acts reduced to or approved in writing by all members of the
Committee, shall be the valid acts of the Committee. The Committee may
appoint a Secretary, who shall keep records of its meetings and shall make
such rules and regulations for the conduct of its business as it shall deem
advisable.
3.3 Subject to the general terms and conditions of this Plan, the Committee,
shall have full authority in its discretion, from time to time and at any
time, to determine (i) the persons to whom Option Awards (as hereinafter
defined) shall be granted ("Grantees"), (ii) the number of shares to be
covered by each Option Award, (iii) the time or times at which the same
shall be granted, (iv) the schedule and conditions on which such Option
Awards may be exercised and on which such shares shall be paid for, and/or
(v) any other matter which is necessary or desirable for, or incidental to,
the administration of the Plan. In determining the number of shares
covered by the Option Awards to be granted to each Grantee, the Committee
shall consider, among other things, the Grantee's salary and the duration
of the Grantee's employment by the Company.
1
<PAGE>
3.4 The Committee may from time to time adopt such rules and regulations for
carrying out the Plan as it may deem best. No member of the Board of
Directors or of the Committee shall be liable for any action or
determination made in good faith with respect to the Plan or any Option
Award granted thereunder.
3.5 The interpretation and construction by the Committee of any provision of
the Plan or of any Option Award thereunder shall be final and conclusive
unless otherwise determined by the Board of Directors.
4. Eligible Grantees:
-----------------
4.1 No Option Award may be granted pursuant to this Plan to any person serving
as a member of the Committee at the time of the grant.
4.2 Subject to this limitation and any restriction imposed by applicable law,
Option Awards may be granted to any officer, key employee or other employee
of the Company, whether or not a Director of the Company. The grant of an
Option Award to a Grantee hereunder, shall neither entitle such Grantee to
participate, nor disqualify him from participating, in any other grant of
options pursuant to this Plan or any other share incentive or share option
plan of the Company or any of its related companies.
5. Trustee: The Option Awards and/or shares in the Company which will be
-------
issued upon the exercise of the Option Awards may be held in trust, by
Advocate Doron Latzer, of A. Tally Eitan Zeev Pearl, D. Latzer & Co as
trustee (the "Trustee"). The Trustee shall hold the same pursuant to the
Company's instructions from time to time. The Trustee shall not exercise
any votes or voting rights at any meeting of the members of the Company in
respect of the options. Upon the submission by the beneficial holder of
shares into which Options were exercised of written instructions to the
Trustee not more than 7 days in advance of any meeting of the members of
the Company, the Trustee shall vote such shares at such meeting of the
members of the Company in accordance with the instructions so submitted.
The beneficial holder of the Shares who submitted the instruction to the
Trustee shall full indemnify the Trustee for any and all costs and expenses
entailed in the voting of such shares and in all acts taken by the Trustee
in connection with such instructions.
6. Reserved Shares: The Company has reserved 219,000 authorized but unissued
---------------
ordinary shares (nominal value NJS 0.01 per share) of the Company for
purposes of the Plan, subject to adjustment as provided in paragraph 11
hereof. Any shares under the Plan, in respect of which the right hereunder
of a Grantee to purchase the same shall for any reason terminate, expire or
otherwise cease to exist, shall again be available for grant through Option
Awards under the Plan.
2
<PAGE>
7. Option Awards:
-------------
7.1 The Committee in its discretion may award to Grantees options to purchase
shares in the Company available under the Plan ("Option Awards"). The Plan
is intended to be a Section 102 Employee Option Plan within the meaning of
the Israel Income Tax Ordinance (New Version). Option Awards may be
granted at any time after this Plan has been approved by the Board of
Directors of the Company (or prior to this Plan being so approved, provided
that the grant of such Option Awards is made subject to such approval) and
the shares reserved for the Plan have been effectively created. The date
of grant of each Option Award shall be the date specified by the Committee
at the time such award is made.
7.2 The instrument granting an Option Award shall state, inter alia, the number
of shares covered thereby, the dates when it may be exercised (subject to
paragraph 9.1), the exercise price, the schedule on which such shares may
be paid for and such other terms and conditions as the Committee in its
discretion may prescribe, provided that they are consistent with this Plan.
8. Option Prices: The price per share covered by each Option Award shall be
-------------
equal to its par vale, unless otherwise determined by the Committee.
9. Exercise of Option Award:
------------------------
9.1 Option Awards shall be exercisable pursuant to the terms and Company's 1997
Share Option Plan Agreement (under which they were awarded) and subject to
the terms and conditions of this Plan; provided, however, that in no event
-------- -------
shall an Option Award be exercisable after the expiration of ten (10) years
from the date such Option Award is granted.
9.2 An Option Award, or any part thereof, shall be exercisable by the Grantee's
signing and returning to the Company at its principal office (and to the
Trustee, where applicable), a "Notice of Exercise" in such form and
substance as may be prescribed by the Committee from time to time.
9.3 Notwithstanding, anything herein to the contrary but without derogating
from the provisions of paragraph 10 hereof, if any Option Award, or any
part, thereof, has not been exercised and the shares covered thereby not
paid for within ten (10) years after the date of grant (or any other period
set forth in the instrument granting such Option Award pursuant to
paragraph 7), such Option Award, or such part thereof, and the right to
acquire such shares shall terminate, all interests and rights of the
Grantee in and to the same shall expire, and, in the event that in
connection therewith any shares are held in trust as aforesaid, such trust
shall expire and the Trustee shall thereafter hold such shares in an
unallocated pool until instructed by the Company that some or all of such
shares are again to be held in trust for one or more Grantees.
3
<PAGE>
9.4 Each payment for shares under an Option Award shall be in respect of a
whole number of shares, shall be effected in cash or by a cashier's or
certified check payable to the order of the Company, or such other method
of payment acceptable to the Company as determined by the Committee, and
shall be accompanied by a notice stating the number of shares being paid
for thereby.
10. Termination of Employment:
-------------------------
10.1 In General: If the Grantee should die or become totally disabled while in
----------
the employ of the Company or of a subsidiary thereof, or if the Grantee
should be discharged or resign from the employ of the Company or of a
subsidiary thereof, the estate or personal representative of the Grantee as
the case may be, shall have the right, for a period of three (3) months
from the date of discharge or resignation, to exercise any unexpired
Options to the extend not theretofore exercised, but only with respect to
the number of shares purchasable at the time of such termination, (i.e. the
number of Options vested at such time), and to pay for any or all Option
Shares covered thereby, and to the extent that such rights are exercised as
provided herein, to receive a certificate therefor.
(b) In the event of the resignation or discharge of the Grantee from the
employ of the Company or a subsidiary, such employment shall, for the
purpose of this Section, be deemed to have ceased upon the date of delivery
of notice of discharge or resignation, as the case may be.
(c) Transfer of the Grantee from the employ of the Company to a subsidiary
(and vice versa) or from the employ of a subsidiary of the Company to
another subsidiary thereof, shall not be deemed a termination of employment
for purposes hereof.
10.2 Discharge for Cause: Notwithstanding, anything herein to the contrary, if
-------------------
the Grantee should be discharged from the employ of the Company or a
subsidiary for reasons of negligence in the discharge of his duties, breach
of fiduciary duty, willful cause of damage or loss to the Company in any
fashion or similar cause, or any other breach of employment agreement with
the Company or a subsidiary, all Options granted to the Grantee under the
Plan and all Options to which the Grantee may be entitled after the
effective date of discharge shall ipso facto expire and terminate.
11. Adjustments: Upon the happening of any of the following described events,
-----------
a Grantee's rights to purchase shares under the Plan shall be adjusted as
hereinafter provided.
11.1 In the event that the ordinary shares of the Company are subdivided or
combined into a greater or smaller number of shares or if, upon a merger,
consolidation, reorganization, recapitalization or the like, the ordinary
shares of the Company are exchanged for other securities of the Company or
of another
4
<PAGE>
corporation, each Grantee shall be entitled, subject to the conditions
herein stated, to purchase such number of ordinary shares or amount of
other securities of the Company or such other corporation as were
exchangeable for the number of ordinary shares of the Company which such
Grantee would have been entitled to purchase except for such action, and
appropriate adjustments shall be made in the purchase price per share to
reflect such subdivision, combination or exchange.
11.2 In the event that the Company issues any of its ordinary shares or other
securities as bonus shares upon or with respect to any shares which are at
the time subject to a right of purchase by a Grantee hereunder each
Grantee upon exercising such right shall be entitled to receive (if he so
elects), in addition to the shares as to which he is exercising such
right, the appropriate number of bonus shares, on the same terms and
conditions as offered to the other shareholders, which he would have
received had he been the holder of the shares as to which he is exercising
his right at all times between the date of the granting of such right and
the date of its exercise.
11.3 Upon the happening of any of the foregoing events, the class and aggregate
number of ordinary shares issuable pursuant to the Plan (as set forth in
paragraph 6 hereof), in respect of which Option Awards have not yet been
granted, shall also be appropriately adjusted to reflect the events
specified in paragraphs 11.1 and 11.2 above.
11.4 The Committee shall determine the specific adjustments to be made under
this paragraph 11, and its determination shall be conclusive.
12. Assignability and Sale of Shares:
--------------------------------
12.1 No shares purchasable hereunder which were not fully paid for, shall be
assignable or transferable by the Grantee. For avoidance of doubt, the
foregoing shall not be deemed to restrict the transfer of a Grantee's
rights in respect of Option Awards or shares purchasable pursuant to the
exercise thereof upon the death of such Grantee to his estate or other
successors by operation of law or will, whose rights therein shall be
governed by paragraph 10.2 hereof.
12.2 No Option Award my be transferred other than by will or by the laws of
descent and distribution, and during the Grantee's lifetime an Option
Award may be exercised only by him.
13. Securities Act of 1933; Israel Securities Law, 1967: By his exercise of an
---------------------------------------------------
Option Award hereunder, the Grantee agrees not to sell, transfer or
otherwise dispose of any of the shares so purchased by him except in
compliance with the United States Securities Act of 1933, and the Israel
Securities Law, 1967, as amended, and the rules and regulations thereunder
and the Grantee further agrees that all certificates evidencing any of
such shares shall be appropriately
5
<PAGE>
legended to reflect such restriction. The Company does not obligate itself
to register any shares under the United States Securities Act of 1933, as
amended. However, the securities being offered and/or issued hereby have
been issued in compliance with the Israel Securities Law, 1967.
14. Term and Amendment of the Plan:
------------------------------
14.1 The Plan shall become effective upon the adoption thereof by the Board of
Directors of the Company shall expire when terminated by the Board of
Directors (except as to Option Awards outstanding on that date).
14.2 The Board of Directors may, at any time and from time to time, terminate
or amend the Plan in any respect except that in no even may any action of
the Company alter or impair the rights of a grantee, without his consent,
under any Option Award previously granted to him.
15. Continuance of Employment: Neither the Plan nor the Agreement shall impose
-------------------------
any obligation on the company or a related company thereof, to continue
any Grantee in its employ, and nothing in the Plan or in any Option Award
granted pursuant thereto shall confer upon any Grantee any right to
continue in the employ of the Company or a related company thereof or
restrict the right of the Company or a related company thereof to
terminate such employment at any time.
16. Governing Law: The Plan and all instruments issued thereunder or in
-------------
connection therewith, shall be governed by, and interpreted in accordance
with, the laws of the State of Israel.
17. Application of Funds: The proceeds received by the Company from the sale
--------------------
of shares pursuant to Option Awards granted under the Plan will be used
for general corporate purposes of the Company or any related company
thereof.
18. Tax Consequences: Any tax consequences arising from the grant or exercise
----------------
of any Option Award, from the payment for shares covered thereby or from
any other event or act (of the Grantee or the corporation that employs the
Grantee) hereunder, shall be borne solely by the Grantee. Furthermore, the
Grantee shall agree to indemnify the corporation that employs the Grantee
and the Trustee and hold them harmless against and from any and all
liability for any such tax or interest or penalty thereon, including
without limitation, liabilities relating to the necessity to withhold, or
to have withheld, any such tax from any payment made to the Grantee.
6
<PAGE>
EXHIBIT 99.3
INVERNESS SYSTEMS LTD. SUPPLEMENTAL STOCK OPTION PLAN
INVERNESS SYSTEMS LTD.
1997 SHARE OPTION PLAN AGREEMENT
--------------------------------
We are pleased to notify you that INVERNESS SYSTEMS LTD. (the "Company") has, on
September 22, 1997 (being hereinafter called the "Granting Date"), granted to
you Options (the "Options") to purchase Thirty Five Thousand (35,000) Ordinary
Shares, nominal value NTS 0.01 per share (the "Exercise Price"), under the
Company's 1997 Share Option Plan (hereinafter referred to as the "Plan"). These
options will not be subject to the restrictions of Section 102 of the Israel
Income Tax Ordinance. The Options are subject to the terms and conditions set
forth below.
1. EXECUTION OF OPTION AGREEMENT
-----------------------------
The Options are granted to you upon execution hereof, which execution does
not oblige you to purchase any of the Option Shares.
2. TERM OF OPTIONS AND EXERCISE OF OPTIONS
---------------------------------------
2.1 The option will be exercisable (i.e., vest) subject to the provisions
hereof, over a period of three (3) years, as provided herein below:
(a) 33% of the Options upon the 12th month anniversary date of the
Granting Date provided that you are still an employee of the
Company on such date.
(b) additional 33% (totaling 66% of the Options) upon the 24th month
anniversary date of the Granting Date provided that you are still
an employee of the Company on such date.
(c) additional 34% (totaling 100% of the Options) upon the 36th month
anniversary date of the Granting Date provided that you are still
an employee of the Company on such date.
2.2 Subject to the provisions hereof, the Options shall be exercisable by
signing and returning to the Secretary of the Company a Notice of
Exercise in the form attached hereto as Exhibit A.
2.3 Upon exercise of the Options, in whole or in pat, each payment of the
Exercise Price shall be in respect of a whole number of Option Shares
only and shall be effected by cash payment or by a cashier's or
certified check payable to the order of the Company.
<PAGE>
2.4 Until your exercise of the Options into the Option Shares you will not
be entitled to any rights as a shareholder of the Company in respect
of any Option shares, including any right to vote such shares.
2.5 If the Company is liquidated or dissolved while unexercised Options
remain outstanding pursuant to this Agreement, then all such
outstanding Options may be exercised in full as of the effective date
of any such liquidation or dissolution of the Company without regard
to the exercise provisions of this Section 2, upon your written notice
to the Company.
2.6 The Company may place a legend on each share certificate delivered
hereunder representing an Option Share, to the effect that such shares
were acquired pursuant to an investment representation and are subject
to limitations on offers, transfers and sales as provided hereunder
and under applicable laws.
3. TERMINATION OF EMPLOYMENT
-------------------------
3.1 Subject to the provisions of Section 4 hereof, if you should die or
become totally disabled while in the employ of the Company or of a
subsidiary thereof, or if you should be discharged or resign from the
employ of the Company or of a subsidiary thereof, you, your estate or
your personal representative as the case may be, shall have the right,
for a period of three (3) months from the date of discharge or
resignation, to exercise any unexpired Options to the extent not
theretofore exercised, but only with respect to the number of shares
purchasable at the time of such termination (i.e., the number of
Options vested at such time), and to pay for any or all Option Shares
covered thereby, and to the extent that such rights are exercised as
provided herein, to receive a certificate therefor as provided in
Section 2 hereof.
3.2 In the event of your resignation or discharge from the employ of the
Company or a subsidiary, your employment shall, for the purpose of
Section 3(a) and 4, be deemed to have ceased upon the date of delivery
by your or to you of a written notice of resignation or discharge, as
the case may be.
3.3 Your transfer from the employ of the Company to a subsidiary (and vice
versa) or from the employ of a subsidiary of the Company to another
subsidiary thereof, shall not be deemed a termination of employment
for purposes thereof.
4. DISCHARGE FOR CAUSE
-------------------
Notwithstanding anything in Section 2 and 3 hereof the contrary if you
should be discharged from the employ of the Company or a subsidiary for
reasons of negligence in the discharge of your duties, breach of fiduciary
duty, willful cause of damage or loss to the Company in any fashion or
similar
<PAGE>
or a subsidiary, all Options granted to you under the Plan and all Options
to which you may be entitled after the effective date of discharge shall
ipso facto expire and terminate.
5. ASSIGNABILITY
-------------
Neither the Options nor the right to pay for the Option Shares and to
acquire certificates therefor, shall be assignable or transferable, except
by and to the extent permitted by testamentary disposition or pursuant to
the applicable laws of descent, and during your lifetime such rights shall
be exercised only by yourself.
6. DISPUTES
--------
Any dispute or disagreement which may arise under or as a result of or
pursuant to this Agreement shall be determined by the Company's Board of
Directors in its sole discretion and any interpretation by the Board of
Directors of the terms of this Agreement shall be final, binding and
conclusive.
7. ADJUSTMENTS
-----------
7.1 If the Company is separated or reorganized, or merged, consolidated or
amalgamated with or into another corporation while unexercised or
unvested Options remain outstanding, there shall be substituted for
the shares subject to the unexercised or unvested portions of such
outstanding Options an appropriate number of shares of each class or
other securities of the separated or reorganized, or merged,
consolidated or amalgamated corporation which were distributed to the
shareholders of the Company in respect of such shares. All options
that are unvested at the time of such separation, reorganization,
merger, consolidation or amalgamation shall vest immediately thereon
and may be immediately exercised if you choose to do so, provide that
you supply the successor in interest of the Company (the "Successor")
with suitable commitments as to your continued employment with the
Successor if so requested by the Successor.
7.2 If the Company is liquidated or dissolved while unexercised Options
remain outstanding pursuant to this Agreement, then all such
outstanding Options may be exercised in full by you as of the
effective date of any such liquidation or dissolution of the Company
without regard to the exercise provisions of Paragraph 2, by you
giving notice in writing to the Company of your intention to so
exercise.
7.3 If the outstanding shares of the Company shall at any time be changed
or exchanged by declaration of bonus shares, stock split, combination
or exchange of shares, recapitalization, extraordinary dividend
payable in stock of a corporation other than the Company, or otherwise
in cash, or any other like event by or of the Company, and as often as
the same shall occur, then the number, class and kind of shares
subject to the Plan or subject to any Options granted, and the
Exercise Price shall be
<PAGE>
shall occur, then the number, class and kind of shares subject to the
Plan or subject to any Options granted, and the Exercise Price shall
be appropriately and equitably adjusted so as to maintain the
proportionate number of Option Shares without changing the aggregate
Exercise Price; provided, however, that no adjustment shall be made by
reason of the distribution or subscription rights on outstanding
shares.
7.4 Except as provided in this Section 7, no adjustments shall be made for
dividends or other rights for which the record date shall be prior to
the issuance of a share certificate in respect of an Option Share.
8. CONTINUANCE OF EMPLOYMENT
-------------------------
Neither the Plan nor the granting of the Options or this Agreement shall
impose any obligation on the Company or a subsidiary to continue your
employment and nothing in the Plan or in the Options granted to you
pursuant thereto or in this Agreement shall confer upon you any right to
continue in the employ of the Company or a subsidiary or to compensation in
respect of the expiration and termination of an Option or restrict your
right or the right of the Company or a subsidiary to terminate such
employment at any time.
9. TRANSFER OF SHARES
------------------
Option Shares may be sold or otherwise transferred, subject to right of
first refusal of certain of the other Shareholders of the Company. Prior to
the sale of any of the Option Shares by you, you must provide a notice to
the Company 90 days before the proposed sale. Such notice shall specify the
number of Option Shares offered for sale, the identity of the Offeree and
the price and all other material terms of the proposed offer. The Company
shall then inform certain of the other shareholders of such terms and they
shall have 30 days to purchase some or all of the Shares to be sold by you
on the same terms as were described in the notice. If such first refusal
rights have not been exercised in respect of your shares proposed for sale
within 120 days of your notice to the Company, you shall be free to sell
such shares for 90 days thereafter on terms not more favorable to the
purchaser than were set forth in your notice to the Company.
10. TAX CONSEQUENCES
----------------
10.1 You understood and acknowledge that any tax consequences resulting
from the grant or exercise of the Options, from payment for shares
underlying the Options or other event or act relating to the Options
or the Option Shares (by the Company, any subsidiary, or yourself)
shall be borne solely by you.
10.2 You hereby agree and undertake to indemnify the Company and its
subsidiaries and hold it and each of them harmless against and from
any tax liability, including interest and penalties thereon, which may
be
<PAGE>
incurred as a result of the granting or exercise of an Option or the
issuance of Option Shares pursuant to such Options, or otherwise
arising out of this Agreement.
11. TERMS OF THE PLAN CONTROL
-------------------------
This Agreement is issued under the Plan and is subject to all of the terms
and provisions of the Plan. In the event of any conflict between the terms
of this Agreement and that of the Plan, the terms of the Plan shall
prevail.
12. GOVERNING LAWS
--------------
The Plan and all instruments issued thereunder, including but not limited
to this Agreement, shall be subject to, governed by and interpreted in
accordance with the laws of the State of Israel.
Sincerely,
INVERNESS SYSTEMS LTD.
