<PAGE>
As filed with the Securities and Exchange Commission on April 13, 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
of Incorporation or Organization) Identification No.)
2933 Bunker Hill Lane, Suite 201 95054
Santa Clara, California (Zip Code)
(Address of Principal Executive
Offices)
1999 STOCK INCENTIVE PLAN
1999 EMPLOYEE STOCK PURCHASE PLAN
1999 NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
(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
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
<CAPTION>
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Securities to be Offering Price Aggregate Registration
to be Registered Registered(1) Per Share Offering Price Fee
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$.001 per share(2)..... 3,587,243 $ 15.91 $ 57,073,036 $ 15,068
Common Stock, par value
$.001 per share(3)..... 200,000 $ 11.90 $ 2,380,000 $ 628
Common Stock, par value
$.001 per share(4)..... 320,000 $ 14.00 $ 4,480,000 $ 1,183
Common Stock, par value
$.001 per share(5)..... 5,992,757 $106.75(6) $618,376,810 $163,251
- ---------------------------------------------------------------------------------
Total................... 10,100,000 N/A $678,833,168 $180,130
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
</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) The 1999 Stock Incentive Plan authorizes the issuance of up to 5,800,000
shares of the Company's Common Stock, 3,369,145 of which were subject to
outstanding options as of April 2, 2000 that are exercisable at a weighted
average price of $15.91, and 2,212,757 of which are not currently subject
to outstanding awards. The remaining 218,098 shares were previously issued
and are also being registered hereunder at a weighted average exercise
price of $15.91.
(3) The 1999 Employee Stock Purchase Plan authorizes the issuance up to
3,100,000 shares of the Company's Common Stock, of which 200,000 are
estimated to be purchasable at a price of $11.90. The remaining 2,380,000
shares are not currently subject to purchase rights.
(4) The 1999 Non-Employee Director Compensation Plan authorizes the issuance of
up to 1,000,000 shares of the Company's Common Stock, 320,000 of which were
subject to outstanding options as of April 2, 2000 that are exercisable at
a price of $14.00. The remaining 680,000 shares are not subject to
outstanding awards.
(5) Represents 2,212,757 shares issuable under the 1999 Stock Incentive Plan,
2,380,000 shares issuable under the 1999 Employee Stock Purchase Plan and
680,000 shares issuable under the 1999 Non-Employee Director Compensation
Plan.
(6) Calculated pursuant to Rules 457(c) and 457(h)(1) based upon the average of
the high and low prices of the Common Stock on the Nasdaq National Market
on April 7, 2000, which was $93.97.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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 on Form S-1 filed on
September 3, 1999, 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.
Item 4. Description Of Securities.
Not applicable.
Item 5. Interests Of Named Experts And Counsel.
Not applicable.
Item 6. Indemnification Of Directors And Officers.
As permitted by applicable provisions of the Delaware General Corporation
Law (the "DGCL"), the Registrant's Certificate of Incorporation contains a
provision eliminating, to the fullest extent permitted by the DGCL as it exists
or may in the future be amended, the liability of a director to the Registrant
and its stockholders for monetary damages for breaches of fiduciary duty as a
director. However, in accordance with the DGCL, such provision does not limit
the liability of a director for (i) any breach of the director's duty of
loyalty to the Registrant or its stockholders, (ii) acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) payment of dividends, stock purchases or redemptions that violate
the DGCL or (iv) any transaction from which the director derived an improper
personal benefit. Such limitation of liability also does not affect the
availability of equitable remedies such as injunctive relief or rescission.
1
<PAGE>
The Certificate of Incorporation and Bylaws of the Registrant also provide
that, to the fullest extent permitted by the DGCL as it exists or may in the
future be amended, the Registrant will indemnify each of the officers and
directors of the Registrant (or their estates, if applicable), and may
indemnify any employee or agent of the Registrant (or their estates, if
applicable), who is or was a party to, or is threatened to be made a party to,
any threatened, pending or completed action, suit or proceeding, by reason of
the fact that such person is or was an officer, director, employee or agent of
the Registrant or is or was serving at the request of Registrant as an officer,
director, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise. The Registrant will so indemnify such officer or
director, and may so indemnify such employee or agent (if indemnification is
authorized by the Board of Directors), in the case of such actions (whether or
not by or in the right of the Registrant) if such person acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of the Registrant, and with respect to any criminal action or
proceeding other than by or in the right of the Registrant, had no reasonable
cause to believe such person's conduct was unlawful. With respect to
indemnification other than by or in the right of the Registrant, the
termination of any action, suit or proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, will not, of
itself, create a presumption that the person did not act in good faith and in a
manner which such person reasonably believed to be in or not opposed to the
best interests of the Registrant, and, with respect to any criminal action or
proceeding, that such person had reasonable cause to believe that such person's
conduct was unlawful. No indemnification will be made in connection with
actions by or in the right of the Registrant in respect of any claim, issue or
matter as to which such person has been adjudged to be liable for negligence or
misconduct in the performance of such person's duty to the Registrant unless
and only to the extent that the Court of Chancery or the court in which such
action or suit was brought determines upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court deems proper. In addition, to
the fullest extent permitted by the DGCL, expenses (including attorneys' fees),
judgments, fines incurred by and amount paid in settlement may be advanced by
the Registrant prior to the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on the behalf of such director,
officer, employee or agent to repay such amounts if it shall ultimately be
determined that he or she is not entitled to be indemnified as authorized in
accordance with the DGCL and the Registrant's Certificate of Incorporation.
Such indemnification is not exclusive of any other rights of the indemnified
party, including rights under any indemnification agreements or otherwise.
The Registrant currently maintains insurance on behalf of its officers and
directors against certain liabilities that may be asserted against any such
officer or director in his or her capacity as such, subject to certain
customary exclusions. The amount of such insurance coverage is deemed by the
Board of Directors to be adequate to cover any liabilities.
The Registrant has entered into indemnification agreements with its
directors, its executive officers and certain other officers providing for
indemnification by the Registrant, including in circumstances in which
indemnification is otherwise discretionary under Delaware law. These agreements
constitute binding agreements between the Registrant and each of the other
parties thereto, thus preventing the Registrant from modifying its
indemnification policy in a way that is adverse to any person who is a party to
such an agreement.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Securities Act"), may be permitted to directors,
officers or persons controlling the Registrant pursuant to the foregoing
provisions, the Registrant has been informed that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
Item 7. Exemption From Registration Claimed.
Not applicable.
2
<PAGE>
Item 8. Exhibits.
<TABLE>
<C> <S>
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.
24 Power of Attorney. Reference is made to the signature page hereto.
99.1 1999 Stock Incentive Plan
99.2 1999 Employee Stock Purchase Plan
99.3 1999 Non-Employee Director Compensation 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 to include any
material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, 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 Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered 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.
3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8, and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Santa Clara, California, on this 12th day of April, 2000
VIRATA CORPORATION
/s/ Andrew M. Vought
By: _________________________________
Andrew M. Vought,
Chief Financial Officer
Pursuant to the requirements of the Securities Act, the person who
administers the 1999 Stock Incentive Plan, 1999 Employee Stock Purchase Plan
and 1999 Non-Employee Director Compensation Plan has duly executed this
Registration Statement on Form S-8 in the city of Santa Clara, State of
California, on this 12th day of April, 2000.
VIRATA CORPORATION
/s/ Charles Cotton
By: _________________________________
Charles Cotton,
Chief Executive Officer and
Director
4
<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 April 12, 2000
____________________________________ Director (Principal
Charles Cotton Executive Officer)
/s/ Andrew Vought Senior Vice President, Chief April 12, 2000
____________________________________ Financial Officer and
Andrew Vought Secretary (Principal
Financial Officer and
Principal Accounting
Officer)
/s/ Hermann Hauser Chairman of the Board April 12, 2000
____________________________________
Hermann Hauser
/s/ Marco De Benedetti Director April 12, 2000
____________________________________
Marco de Benedetti
/s/ Gary Bloom Director April 12, 2000
____________________________________
Gary Bloom
/s/ Bandel Carano Director April 12, 2000
____________________________________
Bandel Carano
/s/ Andrew Hopper Director April 12, 2000
____________________________________
Andrew Hopper
/s/ Martin Jackson Director April 12, 2000
____________________________________
Martin Jackson
/s/ Peter Morris Director April 12, 2000
____________________________________
Peter Morris
/s/ Patrick Sayer Director April 12, 2000
____________________________________
Patrick Sayer
/s/ Giuseppe Zocco Director April 12, 2000
____________________________________
Giuseppe Zocco
</TABLE>
5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<C> <S>
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.
24 Power of Attorney (included on the signature page hereof).
99.1 1999 Stock Incentive Plan
99.2 1999 Employee Stock Purchase Plan
99.3 1999 Non-Employee Director Compensation Plan
</TABLE>
<PAGE>
EX-5
OPINION OF GIBSON DUNN AND CRUTCHER
[LETTERHEAD OF GIBSON, DUNN & CRUTCHER LLP APPEARS HERE]
April 13, 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 10,100,000 shares of
Common Stock, par value $0.001 per share (the Common Stock"), of the Company
issuable under the 1999 Stock Incentive Plan, 1999 Employee Stock Purchase Plan
and 1999 Non-Employee Director Compensation 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 April 13, 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/BRG
<PAGE>
EX-23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
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
April 12, 2000
<PAGE>
EX-99.1
VIRATA CORPORATION
1999 STOCK INCENTIVE PLAN
-------------------------
SECTION 1. PURPOSE OF PLAN.
---------------
The purpose of this 1999 Stock Incentive Plan (the "PLAN") of Virata
Corporation, a Delaware corporation, (the "COMPANY"), is to enable the Company
to attract, retain and motivate its employees, non-employee directors,
independent contractors and consultants by providing for or increasing the
proprietary interests of such employees, non-employee directors, independent
contractors or consultants in the Company.
SECTION 2. PERSONS ELIGIBLE UNDER PLAN.
---------------------------
Any employee, non-employee director, independent contractor or consultant
(each, a "PARTICIPANT") of the Company or any of its direct or indirect
subsidiaries, including a corporation that becomes a subsidiary after the
adoption of this Plan (each, a "SUBSIDIARY"), shall be eligible to be considered
for the grant of Awards (as defined in this Plan) under this Plan, provided that
"Incentive Stock Options" (as defined herein) may only be granted to employees
of the Company or any Subsidiary.
SECTION 3. AWARDS.
------
(a) On behalf of the Company, the Compensation Committee (as defined in
this Plan) is hereby authorized to enter into any type of arrangement with a
Participant that is not inconsistent with the provisions of this Plan and that,
by its terms, involves or might involve the issuance of common stock, par value
$0.001, of the Company (the "COMMON STOCK"). The entering into of any such
arrangement is referred to herein as the "GRANT" of an "AWARD."
(b) Awards are not restricted to any specified form or structure and may
include, without limitation, sales or bonuses of stock, restricted stock, stock
options, reload stock options, stock purchase warrants, other rights to acquire
stock, securities convertible into or redeemable for stock, stock appreciation
rights, phantom stock, dividend equivalents, performance units or performance
shares, and an Award may consist of one such security or benefit, or two or more
of them in tandem or in the alternative.
(c) Awards may be issued, and shares of Common Stock may be issued pursuant
to an Award, for any lawful consideration as determined by the Compensation
Committee, including, without limitation, services rendered by the recipient of
such Award.
(d) Any Award of an option to acquire shares of Common Stock shall be
granted subject to the terms, conditions and restrictions contained in a stock
option agreement (a "STOCK OPTION AGREEMENT") between the Participant and the
Company. Subject to the provisions of this Plan, the Compensation Committee, in
its sole and absolute discretion, shall determine all of the terms and
conditions of each Award granted under this Plan, which terms and conditions may
include, among other things:
(i) a provision permitting the recipient of such Award, including any
recipient who is a non-employee director or officer of the Company, to pay the
purchase price of the shares of Common Stock or other property issuable pursuant
to such Award, and such recipient's tax withholding obligation, if any, with
respect to such issuance, in whole or in part, by any one or more of the
following:
(A) the delivery of cash;
(B) the delivery of other property deemed acceptable by the
Compensation Committee;
<PAGE>
(C) the delivery of previously owned shares of capital stock of
the Company or other property; or
(D) a reduction in the amount of Common Stock or other property
otherwise issuable pursuant to such Award;
(ii) a provision conditioning or accelerating the receipt of benefits
pursuant to such Award, either automatically or in the discretion of the
Compensation Committee, upon the occurrence of specified events, including,
without limitation, a change of control of the Company (as defined by the
Compensation Committee), an acquisition of a specified percentage of the voting
power of the Company, the dissolution or liquidation of the Company, a sale of
substantially all of the property and assets of the Company, the termination of
the employment of the Participant or an event of the type described in Section 7
hereof;
(iii) provisions relating to the status of an Award as an incentive
stock option (an "INCENTIVE STOCK OPTION") under Section 422 of the Internal
Revenue Code of 1986, as amended (the "CODE") including but not limited to:
(A) a requirement that the exercise price for each Incentive
Stock Option granted hereunder shall be not less than one hundred percent
(100%) of the Fair Market Value (as defined in this Plan) of the Common
Stock on the date such Award is granted to a Participant (110% if the
Participant owns, directly or indirectly through the application of the
attribution rules of Section 424(d) of the Code, stock possessing more than
10% of the total combined voting power of all classes of stock of the
Company, its parent and any Subsidiary);
(B) a provision that any Incentive Stock Option granted under
this Plan shall by its terms be nontransferable by the Participant other
than by will or the laws of descent and distribution (in which case such
descendant or beneficiary shall be subject to all terms of the Plan
applicable to Participants) and is exercisable during the Participant's
lifetime only by the Participant or by the Participant's guardian or legal
representative in the event of the Participant's death or disability;
(C) a provision that for so long as required under Section 422 of
the Code and the regulations promulgated thereunder, during the term of the
Plan, the aggregate Fair Market Value of the Common Stock with respect to
which Incentive Stock Options are first exercisable by a Participant under
this Plan and all other plans of the Company, its parent or any Subsidiary
during any calendar year shall not exceed $100,000 and options in excess of
such amount shall be treated as non-qualified stock options. For the
purpose of this paragraph, the Fair Market Value of the Common Stock shall
be determined at the time the Incentive Stock Option is granted;
(D) a requirement that an Incentive Stock Option may not be
exercised after the expiration of ten years from the date such Option is
granted to a Participant (five years if the Participant owns, directly or
indirectly through the application of the attribution rules of Section
424(d) of the Code, stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company, its parent and any
Subsidiary); and
(E) a provision that the Participant notify the Company in
writing of any sale or other disposition of shares of Common Stock acquired
pursuant to an Incentive Stock Option if such sale or other disposition
occurs (i) within two years of the grant of the Incentive Stock Option or
(ii) within one year of the issuance of the shares of Common Stock to the
Participant.
(iv) a right to repurchase the Common Stock acquired upon exercise of
an Award if Participant's employment or association with the Company or any
Subsidiary is terminated for any reason, or in other circumstances, at either
the exercise price thereof or the Fair Market Value thereof on the last day of
the month preceding the month in which such termination or other circumstance
occurs; provided, however, that if the right to repurchase is at the exercise
-------- -------
price thereof, such repurchase right shall lapse at the rate of at least 20% of
the shares per year over five years from the date the Award is granted. Such
repurchase right shall be exercised for cash or cancellation of purchase money
indebtedness for the shares within 90 days of termination of employment (or in
the
2
<PAGE>
case of securities issued upon exercise of Awards after the date of termination,
within 90 days after the date of exercise). Each certificate representing Common
Stock subject to such provisions shall bear a legend to the effect that such
shares are subject to certain repurchase rights of the Company; or
(v) a provision that upon a termination of employment for cause, the
Participant will not be entitled to exercise any Award or other rights at any
time after such termination. For purposes of this Plan, "CAUSE" is defined as:
(i) an act of dishonesty or willful misconduct; (ii) a breach of fiduciary duty
owed to the Company, any Subsidiary or its stockholders involving personal
profit or any other material breach of fiduciary duty; (iii) an act of fraud,
embezzlement, malfeasance or misappropriation of Company property or any
Subsidiary's property; (iv) a conviction of an illegal act or felony, or
engaging in abuse of alcohol, illegal drugs or controlled substances; or (v) a
willful failure to perform reasonable duties, responsibilities or instructions
from the Company or any Subsidiary.
(e) Notwithstanding anything to the contrary herein, any Award of an option
to acquire shares of Common Stock granted under this Plan shall comply with the
following provisions:
(i) the exercise price per share of Common Stock of such option shall
not be less than 85% of the Fair Market Value of a share of Common Stock at the
time the option is granted (100% in case of an Incentive Stock Option), except
that the exercise price shall be 110% of the Fair Market Value in the case of
any person who owns, directly or indirectly through the application of the
attribution rules of Section 424(d) of the Code, stock possessing more than 10%
of the total combined voting power of all classes of stock of the Company, its
parent and any Subsidiary;
(ii) the exercise period of the option shall not be more than 120
months from the date the option is granted;
(iii) the option shall be nontransferable other than by will or the
laws of descent and distribution;
(iv) in the case of an option granted to persons other than officers,
non-employee directors or consultants of the Company or its affiliates, the
option's vesting period shall be at least 20% per year over five years from the
date the option is granted, subject to reasonable conditions including, without
limitation, continued employment; in the case of an option granted to officers,
non-employee directors or consultants of the Company or its affiliates, the
option shall vest at any time or during any period established by the
Compensation Committee;
(v) unless employment is terminated for cause (as defined above), the
optionee shall be entitled to exercise his or her options after termination of
employment as follows:
(A) at least six (6) months from the date of termination if
termination was caused by death or disability within the meaning of Section
22(e)(3) of the Code; and
(B) at least thirty (30) days from the date of termination if
termination was caused by other than death or disability;
(vi) all optionees shall be provided with financial statements at
least annually unless all optionees are key employees of the Company whose
duties in connection with the Company assure them the equivalent information;
and
(vii) the option shall be clearly identified as to its status as an
"Incentive Stock Option" or a "non-qualified stock option."
SECTION 4. STOCK SUBJECT TO PLAN.
---------------------
(a) Subject to adjustment as provided in Section 7, at any time, the
aggregate number of shares of Common Stock issued and issuable pursuant to all
Awards (including all Incentive Stock Options) granted under this Plan shall not
exceed Three Million, Eight Hundred Thousand (3,800,000) shares, plus an
automatic annual
3
<PAGE>
increase on the first day of each of the Company's fiscal years beginning in
2000 and 2001 equal to the lesser of (i) One Million (1,000,000) shares of
Common Stock, (ii) five percent (5%) of the total number of shares of Common
Stock outstanding on the last day of the immediately preceding fiscal year or
(iii) an amount unanimously determined by the Board of Directors of the Company
(the "BOARD"); provided, however, that adjustments pursuant to Section 7 with
-------- -------
respect to Incentive Stock Options issued under this Plan, shall be limited to
those that will not adversely affect the status of options as Incentive Stock
Options.
(b) Subject to adjustment as provided in Section 7, the aggregate number of
shares of Common Stock issued and issuable pursuant to all options (including
all Incentive Stock Options) granted under this Plan shall not exceed Three
Million, Eight Hundred Thousand (3,800,000) shares, plus an automatic annual
increase on the first day of each of the Company's fiscal years beginning in
2000 and 2001 equal to the lesser of (i) One Million (1,000,000) shares of
Common Stock, (ii) five percent (5%) of the total number of shares of Common
Stock outstanding on the last day of the immediately preceding fiscal year or
(iii) an amount unanimously determined by the Board; provided, however, that
-------- -------
adjustments pursuant to Section 7 with respect to Incentive Stock Options issued
under this Plan, shall be limited to those that will not adversely affect the
status of options as Incentive Stock Options.
(c) For purposes of Section 4(a) and (b) of this Plan, the aggregate number
of shares of Common Stock issued and issuable pursuant to Awards granted under
this Plan shall at any time be deemed to be equal to the sum of the following:
(i) the number of shares of Common Stock that were issued prior to
such time pursuant to Awards granted under this Plan, other than shares of
Common Stock that were subsequently reacquired by the Company pursuant to the
terms and conditions of such Awards and with respect to which the holder thereof
received no benefits of ownership, such as dividends; plus
(ii) the maximum number of shares of Common Stock that are or may be
issuable at or after such time pursuant to Awards granted under this Plan prior
to such time.
(d) For clarification purposes, if an Award expires or becomes
unexercisable without having been exercised in full, or is surrendered or
exchanged, the unpurchased shares of Common Stock which were subject thereto
shall become available for future grant under the Plan (unless the Plan has
terminated); provided, however, that shares of Common Stock that have actually
-------- -------
been issued under the Plan shall not be returned to the Plan and shall not
become available for future distribution under the Plan, unless they are
repurchased by the Company at their original purchase price.
(e) The aggregate number of shares of Common Stock subject to Awards
granted during any twelve-month period to any one Participant shall not exceed
Two Million (2,000,000) shares. Such number shall be subject to adjustment as
provided in Section 7; provided, however, that to the extent the Compensation
-------- -------
Committee deems necessary, adjustments pursuant to Section 7 shall be limited to
those that will not adversely affect the status of Awards as "performance-based
compensation" within the meaning of Section 162(m) of the Code.
SECTION 5. DURATION OF PLAN.
----------------
No Awards shall be made under this Plan after November 17, 2009. Although
shares of Common Stock may be issued after November 17, 2009 pursuant to Awards
made on or prior to such date, no shares of Common Stock shall be issued under
this Plan after November 17, 2019 (the "TERMINATION DATE").
SECTION 6. ADMINISTRATION OF PLAN.
----------------------
(a) This Plan shall be administered by the Compensation Committee (the
"COMPENSATION COMMITTEE") of the Board consisting of two or more directors,
provided that Awards hereunder shall be approved by the Board. In the event
- --------
that the Company becomes "publicly held" within the meaning of Section 162(m) of
the Code, then, (i) with respect to any Awards intended to qualify for the
"performance-based compensation" exception in Section 162(m) of the Code, the
Compensation Committee shall, to the extent necessary, consist of two or more
directors each of whom is an "outside director" within the meaning of Section
162(m) of the Code and such Award
4
<PAGE>
shall not be subject to Board approval, and (ii) with respect to any Award
subject to, and intended to be exempt from, Section 16 of the Securities
Exchange Act of 1934, as amended, such Award shall be granted in accordance with
the provisions of Rule 16b-3 of the Rules promulgated under the Securities
Exchange Act.
(b) Subject to the provisions of this Plan, the Compensation Committee
shall be authorized and empowered to do all things necessary or desirable in
connection with the administration of this Plan, including, without limitation,
the following:
(i) adopt, amend and rescind rules and regulations relating to this
Plan;
(ii) determine which persons are Participants and to which of such
Participants, if any, Awards shall be granted hereunder;
(iii) grant Awards to Participants and determine the terms and
conditions thereof, including the number of shares of Common Stock issuable
pursuant thereto;
(iv) accelerate the exercisability of an Award or extend the period
during which an owner of an Award may exercise his or her rights under such
Award (but not beyond the Termination Date);
(v) determine whether, and the extent to which adjustments are
required pursuant to Section 7 hereof; and
(vi) interpret and construe this Plan and the terms and conditions of
any Award granted this Plan.
SECTION 7. ADJUSTMENTS.
-----------
If the outstanding securities of the class then subject to this Plan are
increased, decreased or exchanged for or converted into cash, property or a
different number or kind of securities, or if cash, property or securities are
distributed in respect of such outstanding securities, in either case as a
result of a reorganization, merger, consolidation, recapitalization,
restructuring, reclassification, dividend (other than a regular, quarterly cash
dividend) or other distribution, stock split, reverse stock split or the like,
or if substantially all of the property and assets of the Company are sold,
then, unless the terms of such transaction or this Plan shall provide otherwise,
the Compensation Committee shall make appropriate and proportionate adjustments
in (a) the number, exercise price and type of shares or other securities or cash
or other property, as applicable, that may be acquired pursuant to Incentive
Stock Options and other Awards theretofore granted under this Plan, (b) the
maximum number and type of shares or other securities that may be issued
pursuant to Incentive Stock Options and other Awards thereafter granted under
this Plan, and (c) the maximum number of shares of Common Stock that may be
subject to Awards granted during any twelve-month period to any Participant, as
provided in Section 4(e) hereof; provided, however, that no adjustment shall be
-------- -------
made to the number of shares of Common Stock that may be acquired pursuant to
outstanding Incentive Stock Options or the maximum number of shares of Common
Stock with respect to which Incentive Stock Options may be granted under this
Plan to the extent such adjustment would result in such options being treated as
other than Incentive Stock Options; provided, further, that no such adjustment
-------- -------
shall be made to the extent the Compensation Committee determines that such
adjustment would result in the disallowance of a federal income tax deduction
for compensation attributable to Awards hereunder by causing such compensation
to be other than "performance-based compensation" within the meaning of Section
162(m)(4)(C) of the Code.
SECTION 8. AMENDMENT AND TERMINATION OF PLAN.
---------------------------------
The Board may amend or terminate this Plan at any time and in any manner,
subject to the following limitations:
(a) No such amendment or termination shall deprive the recipient of any
Award theretofore granted under this Plan, without the consent of such
recipient, of any of his or her rights thereunder or with respect thereto; and
5
<PAGE>
(b) If an amendment to this Plan would (i) increase the maximum number of
shares of Common Stock that may be issued pursuant to (A) all Awards granted
under this Plan, (B) all Incentive Stock Options granted under this Plan, or (C)
Awards granted under this Plan during any calendar year to any one Participant,
(ii) change the class of persons eligible to receive Awards under this Plan, or
(iii) affect this Plan's compliance with applicable provisions of the Code, as
amended from time to time, the amendment shall be subject to approval by the
Company's shareholders to the extent required to comply with Sections 422 and
162(m) of the Code, and other applicable provisions of or rules under the Code,
as amended from time to time.
SECTION 9. EFFECTIVE DATE OF PLAN.
----------------------
This Plan was adopted by the Board on September 21, 1999 and will become
effective upon the effectiveness of the Company's initial public offering of the
Common Stock; provided, however, that no shares of Common Stock may be issued
-------- -------
under this Plan until it has been approved by the affirmative votes of the
holders of a majority of the outstanding securities of the Company entitled to
vote for directors, which approval shall be obtained within twelve months from
the date hereof.
SECTION 10. DEFINITION OF FAIR MARKET VALUE.
-------------------------------
For purposes of this Plan, "FAIR MARKET VALUE" shall mean the fair market
value of the Common Stock. If the shares of Common Stock are not publicly
traded, fair market value shall be determined by the Board or the Compensation
Committee and may be computed by any method which the Board or the Compensation
Committee in good faith believes will reflect the fair market value of the
Common Stock on the date of such determination or, if necessary, in accordance
with Section 260.140.50 of Title 10 of the California Code of Regulations. If
the shares of Common Stock are publicly traded, fair market value shall be the
closing sale price per share of the Common Stock, if the shares of Common Stock
are listed on a national securities exchange, or if the shares of Common Stock
are not then so listed, the closing bid price per share of Common Stock, on the
day in question (or, if such day is not a trading day or if no sales of shares
of Common Stock were made on such day, on the nearest preceding trading day on
which sales of shares of Common Stock were made), as reported in the Wall Street
Journal, or, if trading in the shares of Common Stock is not then reported in
Wall Street Journal, at such closing sale or bid price as may then appear in
what the Board or the Compensation Committee in its judgment then deems to be
the most nearly comparable listing or reporting service.
SECTION 11. ADDITIONAL APPROVALS.
--------------------
Notwithstanding Section 3(d) hereof, to the extent necessary and/or
permitted and lawful for the Company to do so under UK law, if such law shall
apply hereto, the approval by the affirmative votes of the holders of a majority
of the securities of the Company shall be required for the exercise of any
option granted hereunder which may be deemed a "repurchase" under UK law.
SECTION 12. NO STOCKHOLDER AND EMPLOYMENT RIGHTS.
------------------------------------
(a) A Participant shall have no stockholder rights with respect to the
shares of Common Stock subject to his or her outstanding Awards until such
shares are purchased on the Participant's behalf in accordance with the
provisions of the Plan and the Participant has become a holder of record of the
purchased shares.
(b) Nothing in the Plan shall confer upon the Participant any right to
continue in the employ of the Company, its parent or any Subsidiary for any
period of specific duration or interfere with or otherwise restrict in any way
the rights of the Company, its parent or any Subsidiary or of the Participant,
which rights are hereby expressly reserved by each, to terminate such person's
employment at any time for any reason, with or without cause.
6
<PAGE>
EX-99.2
VIRATA CORPORATION
1999 EMPLOYEE STOCK PURCHASE PLAN
---------------------------------
I. PURPOSE OF THE PLAN
This Employee Stock Purchase Plan is intended to promote the interests of
Virata Corporation by providing Eligible Employees with the opportunity to
acquire a proprietary interest in the Corporation through participation in a
payroll-deduction based employee stock purchase plan designed to qualify under
Section 423 of the Code.
Capitalized terms used and not otherwise defined herein shall have the
meanings assigned to such terms in the attached Appendix.
II. ADMINISTRATION OF THE PLAN
This Plan will be supervised and administered by the Plan Administrator.
Except as otherwise set forth in this Plan, the Plan Administrator will have
full authority to interpret and construe any provision of the Plan, to adopt,
amend and rescind any rules and regulations deemed necessary, desirable or
appropriate for administering the Plan or in order to comply with the
requirements of Code Section 423, and to make all other determinations necessary
or advisable for the administration of the Plan. Decisions of the Plan
Administrator will be final and binding on all parties having an interest in the
Plan.
Notwithstanding the foregoing, with respect to any grant of purchase rights
subject to, and intended to be exempt from, Section 16 of the 1934 Act, such
grant shall be made in accordance with the applicable provisions of Rule 16b-3
of the Rules promulgated under the 1934 Act.
III. STOCK SUBJECT TO PLAN
A. The stock purchasable under the Plan will be shares of authorized
but unissued or reacquired Common Stock, including shares of Common Stock
purchased on the open market. Subject to Section III.B. below, the maximum
number of shares of Common Stock which may be issued over the term of the Plan
shall not exceed 600,000 shares, plus an automatic annual increase on the first
day of each of the Corporation's fiscal years beginning in 2001, 2002, 2003,
2004 and 2005 equal to the lesser of (i) 500,000 shares of Common Stock; (ii)
one percent (1%) of the total number of shares of Common Stock outstanding on
the last day of the immediately preceding fiscal year and (iii) an amount
unanimously determined by the Board.
B. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, then, unless the terms of such
transaction or this Plan shall provide otherwise, the Plan Administrator will
make appropriate adjustments to (i) the maximum number and class of securities
issuable under the Plan, (ii) the maximum number and class of securities
purchasable per Participant on any one Purchase Date, and (iii) the number and
class of securities and the price per share in effect under each outstanding
purchase right in order to prevent the dilution or enlargement of benefits
thereunder.
IV. OFFERING PERIODS
A. Shares of Common Stock will be offered for purchase under the Plan
through a series of successive offering periods (each an "Offering Period"), as
determined by the Plan Administrator, until such time as (i) the maximum number
of shares of Common Stock available for issuance under the Plan shall have been
purchased or (ii) the Plan shall have been sooner terminated.
<PAGE>
B. Each Offering Period will be of such duration (not to exceed
twenty-four (24) months) as determined by the Plan Administrator prior to the
start date. The initial Offering Period will commence at the Effective Time and
terminate on the last business day in October 2001. Subsequent Offering Periods
will commence as designated by the Plan Administrator. The Plan Administrator
shall have the power to change the duration and/or the frequency of Offering
Periods with respect to future offerings without stockholder approval if such
change is announced at least five (5) days prior to the scheduled beginning of
the first Offering Period to be affected.
C. Each Offering Period will generally consist of four successive Purchase
Intervals each terminating one day prior to the date which is six months
following the beginning of such intervals. The last day of a Purchase Interval
will be the Purchase Date for such Purchase Interval. Purchase Intervals will
generally run from the first business day in May each year to the last business
day in October of the same year and from the first business day in November each
year to the last business day in April of the following year. However, the first
Purchase Interval in effect under the initial Offering Period will commence at
the Effective Time and terminate on the last business day in April 2000. The
Plan Administrator will have the power to change the duration and/or frequency
of Purchase Periods with respect to future purchases without stockholder
approval if such change is announced at least five (5) days prior to the
scheduled beginning of the first Purchase Period to be affected.
D. Should the Fair Market Value per share of Common Stock on any Purchase
Date within an Offering Period be less than the Fair Market Value per share of
Common Stock on the start date of that Offering Period, then that Offering
Period will automatically terminate immediately after the purchase of shares of
Common Stock on such Purchase Date, and a new Offering Period will commence on
the next business day following such Purchase Date. The new Offering Period will
terminate on the termination date of the original Offering Period, unless a
shorter duration is established by the Plan Administrator within ten (10)
business days following the start date of that Offering Period.
V. ELIGIBILITY
A. Each individual who is an Eligible Employee on the start date of any
Offering Period under the Plan may enter that Offering Period on such start date
or on any subsequent Semi-Annual Entry Date within that Offering Period,
provided he or she remains an Eligible Employee.
B. Each individual who first becomes an Eligible Employee after the start
date of an Offering Period may enter that Offering Period on any subsequent
Semi-Annual Entry Date within that Offering Period, provided he or she remains
an Eligible Employee.
C. The date an Eligible Employee enters an Offering Period will be
designated his or her Entry Date for purposes of that Offering Period.
D. To participate in the Plan for a particular Offering Period, the
Eligible Employee must complete the enrollment forms prescribed by the Plan
Administrator (including a stock purchase agreement, a payroll deduction
authorization and certain representations and warranties) and file such forms
with the Plan Administrator (or its designate) on or before his or her scheduled
Entry Date.
VI. PAYROLL DEDUCTIONS
A. The payroll deduction authorized by the Participant for purposes of
acquiring shares of Common Stock during an Offering Period may be any integral
multiple of one percent (1%) of the Base Salary paid to the Participant during
each Purchase Interval within that Offering Period, up to a maximum of fifteen
percent (15%), or such other percentage as the Plan Administrator may establish
from time to time before the commencement of an Offering Period. The deduction
rate so authorized will continue in effect throughout the Offering Period,
except to the extent such rate is changed in accordance with the following
guidelines:
(i) The Participant may, at any time during the Offering Period,
reduce his or her rate of payroll deduction to become effective as soon as
reasonably possible after filing the appropriate
2
<PAGE>
form with the Plan Administrator. The Participant may not, however, effect
more than one (1) such reduction per Purchase Interval.
(ii) The Participant may, prior to the commencement of any new
Purchase Interval within the Offering Period, increase the rate of his or
her payroll deduction by filing the appropriate form with the Plan
Administrator. The new rate (which may not exceed the fifteen percent (15%)
maximum, or such other percentage as the Plan Administrator may establish
from time to time before the commencement of an Offering Period) will
become effective on the start date of the first Purchase Interval following
the filing of such form. The Participant may not, however, effect more than
one (1) such increase per Purchase Interval.
(iii) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section VIII herein, the Plan
Administrator may decrease a Participant's payroll deductions during any
Offering Period scheduled to end during the current calendar year to 0%.
Payroll deductions will re-commence at the rate previously authorized by
the Participant at the beginning of the first Offering Period which is
scheduled to end in the following calendar year, unless terminated by the
Participant pursuant to the terms of the Plan.
B. Payroll deductions will begin on the first pay day following the
Participant's Entry Date into the Offering Period and will (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that Offering Period. The amounts so
collected will be credited to the Participant's book account under the Plan, but
no interest will be paid on the balance from time to time outstanding in such
account. The amounts collected from the Participant shall not be held in any
segregated account or trust fund and may be commingled with the general assets
of the Corporation and used for general corporate purposes.
C. Payroll deductions will automatically cease upon the termination of the
Participant's purchase right in accordance with the provisions of the Plan.
D. Subject to Sections VII.A. and VIII, the Participant's acquisition of
Common Stock under the Plan on any Purchase Date will neither limit nor require
the Participant's acquisition of Common Stock on any subsequent Purchase Date,
whether within the same or a different Offering Period.
E. Individual accounts will be maintained for each Participant in the Plan.
Statements of account will be given to Participants at least annually, which
statements will set forth the aggregate amounts of payroll deductions, the per
share purchase price, the number of Shares purchased and the remaining cash
balance, if any.
VII. PURCHASE RIGHTS
A. GRANT OF PURCHASE RIGHT. A Participant will be granted a separate
-----------------------
purchase right for each Offering Period in which he or she participates. The
purchase right will be granted on the Participant's Entry Date into the Offering
Period and will provide the Participant with the right to purchase shares of
Common Stock, in a series of successive installments over the remainder of such
Offering Period, upon the terms set forth below. The Participant shall execute a
stock purchase agreement embodying such terms and such other provisions (not
inconsistent with the Plan) as the Plan Administrator may deem advisable.
Under no circumstances will purchase rights be granted under the Plan to
any Eligible Employee if such individual would, immediately after the grant, own
(within the meaning of Code Section 424(d)) or hold outstanding options or other
rights to purchase, stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Corporation or any
Corporate Affiliate.
B. EXERCISE OF THE PURCHASE RIGHT. Each purchase right will be
------------------------------
automatically exercised in installments on each successive Purchase Date within
the Offering Period, and shares of Common Stock will accordingly be purchased on
behalf of each Participant (other than Participants whose payroll deductions
have previously been refunded pursuant to the Termination of Purchase Right
provisions below) on each such Purchase Date. The purchase will be effected by
applying the Participant's payroll deductions for the Purchase Interval
3
<PAGE>
ending on such Purchase Date to the purchase of whole shares of Common Stock at
the purchase price in effect for the Participant for that Purchase Date.
C. PURCHASE PRICE. The purchase price per share at which Common Stock
--------------
will be purchased on the Participant's behalf on each Purchase Date within the
Offering Period shall not be less than eighty-five percent (85%) of the lower of
(i) the Fair Market Value per share of Common Stock on the Participant's Entry
Date into that Offering Period or (ii) the Fair Market Value per share of Common
Stock on that Purchase Date. However, for each Participant whose Entry Date is
other than the start date of the Offering Period, the clause (i) amount shall in
no event be less than the Fair Market Value per share of Common Stock on the
start date of that Offering Period.
D. NUMBER OF PURCHASABLE SHARES. The number of shares of Common Stock
----------------------------
purchasable by a Participant on each Purchase Date during the Offering Period
will be the number of whole shares obtained by dividing the amount collected
from the Participant through payroll deductions during the Purchase Interval
ending with that Purchase Date by the purchase price in effect for the
Participant for that Purchase Date. However, the maximum number of shares of
Common Stock purchasable per Participant on any one Purchase Date shall not
exceed two thousand (2,000) shares, subject to adjustments under Section III.B.
No fractional shares will be purchased.
E. EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not applied to the
-------------------------
purchase of shares of Common Stock on any Purchase Date because they are not
sufficient to purchase a whole share of Common Stock will be held for the
purchase of Common Stock on the next Purchase Date. However, any payroll
deductions not applied to the purchase of Common Stock by reason of the
limitation on the maximum number of shares purchasable by the Participant on the
Purchase Date will be promptly refunded.
F. TERMINATION OF PURCHASE RIGHT. In addition to Section X, the following
-----------------------------
provisions shall govern the termination of outstanding purchase rights:
(i) A Participant may, at any time prior to the next scheduled Purchase
Date in the Offering Period, terminate his or her outstanding purchase
right by filing the appropriate form with the Plan Administrator (or its
designate), and no further payroll deductions will be collected from the
Participant with respect to the terminated purchase right. Any payroll
deductions collected during the Purchase Interval in which such termination
occurs will be refunded to the Participant as soon as reasonably possible.
(ii) The termination of such purchase right shall be irrevocable, and the
Participant may not subsequently rejoin the Offering Period for which the
terminated purchase right was granted. In order to resume participation in
any subsequent Offering Period, such individual must re-enroll in the Plan
(by making a timely filing of the prescribed enrollment forms) on or before
his or her scheduled Entry Date into that Offering Period.
(iii) Should the Participant cease to remain an Eligible Employee for any
reason (including death, disability or change in status) while his or her
purchase right remains outstanding, then that purchase right shall
immediately terminate, and all of the Participant's payroll deductions for
the Purchase Interval in which the purchase right so terminates will be
refunded as soon as reasonably possible. However, should the Participant
cease to remain in active service by reason of an approved unpaid leave of
absence, then the Participant will have the right, exercisable up until the
last business day of the Purchase Interval in which such leave commences,
to (a) withdraw all the payroll deductions collected to date on his or her
behalf for that Purchase Interval or (b) have such funds held for the
purchase of shares on his or her behalf on the next scheduled Purchase
Date. In no event, however, will any further payroll deductions be
collected on the Participant's behalf during such leave. Upon the
Participant's return to active service, his or her payroll deductions under
the Plan will automatically resume at the rate in effect at the time the
leave began, unless the Participant withdraws from the Plan prior to his or
her return.
G. CORPORATE TRANSACTION. Each outstanding purchase right will
---------------------
automatically be exercised, immediately prior to the effective date of any
Corporate Transaction, by applying the payroll deductions of each
4
<PAGE>
Participant for the Purchase Interval in which such Corporate Transaction occurs
to the purchase of whole shares of Common Stock at a purchase price per share
not less than eighty-five percent (85%) of the lower of (i) the Fair Market
Value per share of Common Stock on the Participant's Entry Date into the
Offering Period in which such Corporate Transaction occurs or (ii) the Fair
Market Value per share of Common Stock immediately prior to the effective date
of such Corporate Transaction, unless the Board determines, in the exercise of
its sole discretion and in lieu of the automatic exercise of all outstanding
purchase rights, to shorten the Offering Period then in progress by setting a
new Purchase Date (the "New Purchase Date"). If the Board shortens the Offering
Period in lieu of the automatic exercise of each Participant's outstanding
purchase rights in the event of a Corporate Transaction, the Board will notify
each Participant in writing, at least ten (10) days prior to the New Purchase
Date, that the Purchase Date on which he or she may exercise the purchase right
has been changed to the New Purchase Date and that his purchase right will be
exercised automatically on the New Purchase Date, unless prior to such date he
or she has withdrawn from the Offering Period as provided in paragraph F.
However, the applicable limitation on the number of shares of Common Stock
purchasable per Participant will continue to apply to any such purchase, and the
clause (i) amount above shall not, for any Participant whose Entry Date for the
Offering Period is other than the start date of that Offering Period, be less
than the Fair Market Value per share of Common Stock on that start date.
The Corporation will use its reasonable efforts to provide at least ten
(10) days prior written notice of the occurrence of any Corporate Transaction,
and Participants will, following the receipt of such notice, have the right to
terminate their outstanding purchase rights prior to the effective date of the
Corporate Transaction and receive a refund of their accumulated payroll
deductions.
H. PRORATION OF PURCHASE RIGHTS. Should the total number of shares of
----------------------------
Common Stock to be purchased pursuant to outstanding purchase rights on any
particular date exceed the number of shares then available for issuance under
the Plan, the Plan Administrator will make a pro-rata allocation of the
available shares on a uniform and nondiscriminatory basis, and the payroll
deductions of each Participant, to the extent in excess of the aggregate
purchase price payable for the Common Stock pro-rated to such individual, will
be refunded.
I. DESIGNATION OF BENEFICIARY.
--------------------------
(a) A Participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the Participant's account under
the Plan in the event of such Participant's death subsequent to the end of the
Offering Period but prior to delivery to him or her of such shares and cash. In
addition, a Participant may file a written designation of a beneficiary who is
to receive any cash from the Participant's account under the Plan in the event
of such Participant's death prior to the Purchase Date of the Offering Period.
If a Participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be effective.
(b) Such designation of beneficiary may be changed by the Participant
at any time by written notice. In the event of the death of a Participant and in
the absence of a beneficiary validly designated under the Plan who is living at
the time of such Participant's death, the Corporation shall deliver such shares
and/or cash to the executor or administrator of the estate of the Participant,
or if no such executor or administrator has been appointed (to the knowledge of
the Corporation), the Corporation, in its discretion, may deliver such shares
and/or cash to the spouse or to any one or more dependents or relatives of the
Participant, or if no spouse, dependent or relative is known to the Corporation,
then to such other person as the Corporation may designate.
J. ASSIGNABILITY. The purchase right shall be exercisable only by the
-------------
Participant and shall not be assignable or transferable (other than by will, the
laws of descent and distribution or as provided in paragraph I hereof) by the
Participant. Any such attempt at assignment or transfer shall be without effect,
except that the Corporation may treat such act as an election to withdraw from
an Offering Period in accordance with paragraph F.
K. STOCKHOLDER RIGHTS. A Participant shall have no stockholder rights
------------------
with respect to the shares subject to his or her outstanding purchase right
until the shares are purchased on the Participant's behalf in accordance with
the provisions of the Plan and the Participant has become a holder of record of
the purchased shares.
5
<PAGE>
L. EMPLOYMENT RIGHTS. Nothing in the Plan shall confer upon the
-----------------
Participant any right to continue in the employ of any Participant Corporation
or any Corporate Affiliate for any period of specific duration or interfere with
or otherwise restrict in any way the rights of the Participant Corporation (or
any Corporate Affiliate employing such person) or of the Participant, which
rights are hereby expressly reserved by each, to terminate such person's
employment at any time for any reason, with or without cause.
VIII. ACCRUAL LIMITATIONS
A. No Participant shall be entitled to accrue rights to acquire Common
Stock pursuant to any purchase right outstanding under this Plan if and to the
extent such accrual, when aggregated with (i) rights to purchase Common Stock
accrued under any other purchase right granted under this Plan and (ii) similar
rights accrued under other employee stock purchase plans (within the meaning of
Code Section 423) of a Participant Corporation or any Corporate Affiliate, would
otherwise permit such Participant to purchase more than Twenty-Five Thousand
Dollars ($25,000) worth of stock of the Corporation or any Corporate Affiliate
(determined on the basis of the Fair Market Value per share on the date or dates
such rights are granted) for each calendar year such rights are at any time
outstanding.
B. For purposes of applying such accrual limitations to the purchase
rights granted under the Plan, the following provisions shall be in effect:
(i) The right to acquire Common Stock under each outstanding purchase right
will accrue in a series of installments on each successive Purchase Date during
the Offering Period on which such right remains outstanding.
(ii) No right to acquire Common Stock under any outstanding purchase right
will accrue to the extent the Participant has already accrued in the same
calendar year the right to acquire Common Stock under one (1) or more other
purchase rights at a rate equal to Twenty-Five Thousand Dollars ($25,000) worth
of Common Stock (determined on the basis of the Fair Market Value per share on
the date or dates of grant) for each calendar year such rights were at any time
outstanding.
C. If by reason of such accrual limitations, any purchase right of a
Participant does not accrue for a particular Purchase Interval, then the payroll
deductions which the Participant made during that Purchase Interval with respect
to such purchase right will be refunded as soon as reasonably possible.
D. In the event there is any conflict between the provisions of this
Article and one or more provisions of the Plan or any instrument issued
thereunder, the provisions of this Article will be controlling.
IX. EFFECTIVE DATE AND TERM OF THE PLAN
A. This Plan was adopted by the Board on September 21, 1999 and will become
effective at the Effective Time; provided no purchase rights granted under the
Plan shall be exercised, and no shares of Common Stock shall be issued
hereunder, until and unless (i) the Plan shall have been approved by the
stockholders of the Corporation and (ii) the exercise of such purchase right and
the issuance and delivery of such Shares pursuant thereto shall comply with all
applicable provisions or requirements of law, domestic or foreign, including,
without limitation, the 1933 Act, the 1934 Act, the rules and regulations
promulgated thereunder, applicable state securities laws and the requirements of
any stock exchange (or the Nasdaq National Market, if applicable) upon which the
Common Stock may then be listed.
B. In the event such stockholder approval is not obtained, or such
compliance is not effected, within twelve (12) months after the date on which
the Plan is adopted by the Board, the Plan will terminate and have no further
force or effect, and all sums collected from Participants during the initial
Offering Period hereunder will be refunded as soon as reasonably possible.
6
<PAGE>
C. Unless sooner terminated by the Board, the Plan will terminate upon the
earliest of (i) the last business day in October 2009, (ii) the date on which
all shares available for issuance under the Plan will have been sold pursuant to
purchase rights exercised under the Plan or (iii) the date on which all purchase
rights are exercised in connection with a Corporate Transaction. No further
purchase rights will be granted or exercised, and no further payroll deductions
will be collected, under the Plan following such termination.
X. AMENDMENT AND TERMINATION OF THE PLAN
A. The Plan Administrator may alter, amend, suspend or discontinue the Plan
at any time and for any reason to become effective immediately following the
close of any Purchase Interval, subject to the following:
(i) The Plan Administrator may not, without the approval of the
Corporation's stockholders, (1) materially increase the number of shares of
Common Stock issuable under the Plan or the maximum number of shares
purchasable per Participant on any one Purchase Date, except for
permissible adjustments in accordance with Section III.B., (2) alter the
purchase price formula so as to reduce the purchase price payable for the
shares of Common Stock purchasable under the Plan or (3) materially
increase the benefits accruing to Participants under the Plan or materially
modify the requirements for eligibility to participate in the Plan.
(ii) Except as provided in Sections III, VII.G. or in paragraph B
below, no amendment or termination of the Plan may affect purchase rights
previously granted such that the rights of any Participant are adversely
affected; provided that the Plan or an Offering Period may be amended or
terminated by the Plan Administrator on a Purchase Date or by the Plan
Administrator's setting a new Purchase Date with respect to an Offering
Period and Purchase Period then in progress if the Plan Administrator
determines that the amendment or termination of the Plan and/or the
Offering Period is in the best interests of the Corporation and the
stockholders, is necessary in order to comply with applicable law, or if
continuation of the Plan and/or the Offering Period would cause the
Corporation to incur adverse accounting charges as a result of a change
after the effective date of the Plan in the generally accepted accounting
rules applicable to the Plan.
B. Notwithstanding the paragraph A, without stockholder consent and without
regard to whether any Participant rights may be considered to have been
adversely affected, the Plan Administrator will be entitled to change the
Offering Periods and Purchase Periods, limit the frequency and/or number of
changes in the amount withheld during an Offering Period, reduce the payroll
deduction rate for any or all Participants, establish the exchange ratio
applicable to amounts withheld in a currency other than U.S. dollars, permit
payroll withholding in excess of the amount designated by a Participant in order
to adjust for delays or mistakes in the Corporation's processing of properly
completed withholding elections, establish reasonable waiting and adjustment
periods and/or accounting and crediting procedures to ensure that amounts
applied toward the purchase of Common Stock for each Participant properly
correspond with amounts withheld from the Participant's compensation, and
establish such other limitations or procedures as the Plan Administrator
determines in its sole discretion advisable which are consistent with the Plan.
XI. GENERAL PROVISIONS
A. All costs and expenses incurred in the administration of the Plan will
be paid by the Corporation.
B. All notices or other communications by a Participant to the Corporation
under or in connection with the Plan will be deemed to have been duly given when
received in the form specified by the Corporation at the location, or by the
person, designated by the Corporation for the receipt thereof.
C. The provisions of the Plan will be governed by the laws of the State of
Delaware without resort to that State's conflict of laws rules.
7
<PAGE>
APPENDIX
--------
The following definitions shall be in effect under the Plan:
A. BASE SALARY shall mean the (i) regular base salary paid to a Participant
-----------
by one or more Participating Companies during such individual's
period of participation in one or more Offering Periods under the Plan plus (ii)
any pre- tax contributions made by the Participant to any Code Section 401(k)
salary deferral plan or any Code Section 125 cafeteria benefit program now or
hereafter established by a Participating Corporation or any Corporate Affiliate.
The following items of compensation shall not be included in Base Salary: (i)
all overtime payments, bonuses, commissions (other than those functioning as
base salary equivalents), profit-sharing distributions and other incentive-type
payments and (ii) any and all contributions (other than Code Section 401(k) or
Code Section 125 contributions) made on the Participant's behalf by the
Corporation or any Corporate Affiliate under any employee benefit or welfare
plan now or hereafter established.
B. BOARD shall mean the Corporation's Board of Directors.
-----
C. CODE shall mean the Internal Revenue Code of 1986, as amended.
----
D. COMMON STOCK shall mean the Corporation's common stock, par value $0.001
------------
per share.
E. CORPORATE AFFILIATE shall mean any direct or indirect parent or
-------------------
subsidiary corporation of a Participating Corporation (as determined in
accordance with Code Section 424), whether now existing or subsequently
established.
F. CORPORATE TRANSACTION shall mean either of the following stockholder-
---------------------
approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the assets of the Corporation in complete liquidation or
dissolution of the Corporation.
G. CORPORATION shall mean Virata Corporation, a Delaware corporation, and
-----------
any corporate successor to all or substantially all of the assets or voting
stock of Virata Corporation which shall by appropriate action adopt the Plan.
H. EFFECTIVE TIME shall mean the time at which the Underwriting Agreement
--------------
is executed and finally priced. Any Corporate Affiliate which becomes a
Participating Corporation after such Effective Time shall designate a subsequent
Effective Time with respect to its Participants.
I. ELIGIBLE EMPLOYEE shall mean any Employee as defined in paragraph J who
-----------------
shall be employed by a Participating Corporation prior to the first day of each
Offering Period of the Plan.
J. EMPLOYEE shall mean any individual who is an employee of a Participating
--------
Corporation for purposes of tax withholding under the Code whose customary
employment with a Participating Corporation or any Corporate Affiliate is at
least twenty (20) hours per week and more than five (5) months in any calendar
year. For purposes of the Plan, the employment relationship shall be treated as
continuing intact while the individual is on sick leave or other leave of
absence approved by the Participating Corporation. Where the period of leave
exceeds 90 days and the individual's right to re-employment is not guaranteed
either by statute or by contract, the employment relationship will be deemed to
have terminated on the 91st day of such leave.
A-1
<PAGE>
K. ENTRY DATE shall mean the date an Eligible Employee first commences
----------
participation in the Offering Period in effect under the Plan. The earliest
Entry Date under the Plan will be the Effective Time.
L. FAIR MARKET VALUE per share of Common Stock on any relevant date shall
-----------------
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value will be the closing selling price per
share of Common Stock on the date in question, as such price is reported by
the National Association of Securities Dealers on the Nasdaq National
Market or any successor system. If there is no closing selling price for
the Common Stock on the date in question, then the Fair Market Value will
be the closing selling price on the last preceding date for which such
quotation exists.
(ii) If the Common Stock is at the time listed on any stock exchange,
then the Fair Market Value will be the closing selling price per share of
Common Stock on the date in question on the stock exchange determined by
the Plan Administrator to be the primary market for the Common Stock, as
such price is officially quoted in the composite tape of transactions on
such exchange. If there is no closing selling price for the Common Stock on
the date in question, then the Fair Market Value will be the closing
selling price on the last preceding date for which such quotation exists.
(iii) For purposes of the initial Offering Period which begins at the
Effective Time, the Fair Market Value will be deemed to be equal to the
price per share at which the Common Stock is sold in the initial public
offering pursuant to the Underwriting Agreement.
M. 1933 ACT shall mean the Securities Act of 1933, as amended.
--------
N. 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
--------
O. PARTICIPANT shall mean any Eligible Employee of a Participating
-----------
Corporation who is actively participating in the Plan.
P. PARTICIPATING CORPORATION shall mean the Corporation and such Corporate
-------------------------
Affiliate or Affiliates as may be authorized from time to time by the Board to
extend the benefits of the Plan to their Eligible Employees. The Participating
Corporations in the Plan as of the Effective Time are listed in attached
Schedule A.
Q. PLAN shall mean the Corporation's Employee Stock Purchase Plan, as set
----
forth in this document.
R. PLAN ADMINISTRATOR shall mean the Compensation Committee of the Board.
------------------
S. PURCHASE DATE shall mean the last business day of each Purchase
-------------
Interval. The initial Purchase Date will be the last business day of April 2000.
T. PURCHASE INTERVAL shall mean each successive six (6)-month period within
-----------------
the Offering Period at the end of which there will be purchased shares of Common
Stock on behalf of each Participant.
U. SEMI-ANNUAL ENTRY DATE shall mean the first business day in November and
----------------------
May each year on which an Eligible Employee may first enter an Offering Period.
V. UNDERWRITING AGREEMENT shall mean the agreement between the Corporation
----------------------
and the underwriter or underwriters managing the initial public offering of the
Common Stock.
A-2
<PAGE>
EX-99.3
VIRATA CORPORATION
1999 NON-EMPLOYEE DIRECTOR COMPENSATION PLAN
--------------------------------------------
1. Purpose
This 1999 Non-Employee Director Compensation Plan (the "Plan") is intended
to promote the interests of Virata Corporation, a Delaware corporation (the
"Corporation"), by providing eligible non-employee directors of the Corporation
and eligible members of the Corporation's technology advisory board with an
opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation and an incentive for such persons to
remain in the service of the Corporation. Under the Plan, an Eligible
Participant (as defined below) may be granted an option ("Option") to purchase
Common Stock of the Corporation as set forth below.
2. Eligibility
The individuals who shall be eligible to participate ("Eligible
Participants") in the Plan shall be limited to:
(a) each person serving on the Corporation's Board of Directors (the
"Board") who is not a full-time employee of the Corporation or any Affiliate (as
such term is defined under Rule 1-02(b) of the rules and regulations promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of
the Corporation (a "Non-Employee Board Member"); and
(b) each person serving on the Corporation's Technology Advisory Board
("Technology Advisory Board") who is not a full-time employee of the Corporation
or any Affiliate of the Corporation (a "Non-Employee Technology Advisory Board
Member");
provided, that any person who becomes a Non-Employee Board Member or a Non-
- --------
Employee Technology Advisory Board Member after the Effective Date (as defined
below) and was an employee of the Corporation or any Affiliate of the
Corporation at any time during the preceding 12-month period, shall not be
deemed an Eligible Participant under the Plan until 12-months after such person
ceased to be an employee of the Corporation or any Affiliate of the Corporation;
provided further, that a person shall immediately cease to be an Eligible
- -------- -------
Participant under the Plan in the event such person no longer satisfies the
requirements set forth in subsections (a) and (b) above, as the case may be.
Each Eligible Participant who is granted an Option under this Plan shall be an
"Optionee."
3. Administration of the Plan
The Plan will be administered by the director compensation committee of the
Board (the "Director Compensation Committee"). Subject to Section 10 of this
Plan and except as otherwise set forth in this Plan, the Director Compensation
Committee will have full authority to interpret and construe any provision of
the Plan, to adopt, amend and rescind any rules and regulations deemed
necessary, desirable or appropriate for administering the Plan and to make all
other determinations necessary or advisable for the administration of the Plan.
Decisions of the Director Compensation Committee will be final and binding on
all parties having an interest in the Plan. Notwithstanding the foregoing, to
the extent necessary to cause the grant of an Option hereunder to be exempt from
the requirements of Section 16b of the Exchange Act, any action taken by the
Director Compensation Committee shall be approved by the Board.
4. Stock Subject To The Plan
(a) The stock issuable under the Plan shall be shares of authorized
but unissued or reacquired Common Stock, including shares of Common Stock
purchased by the Corporation on the open market. The maximum number of shares
of Common Stock that may be issued over the term of the Plan shall not exceed
One Million (1,000,000) shares, subject to Section 7.
1
<PAGE>
(b) Shares of Common Stock subject to outstanding Options shall be
available for subsequent issuance under the Plan to the extent those Options
expire or terminate for any reason prior to exercise in full. However, should
the exercise price of an Option under the Plan be paid with shares of Common
Stock or should shares of Common Stock otherwise issuable under the Plan be
withheld by the Corporation in satisfaction of the withholding taxes incurred in
connection with the exercise of an Option or the vesting of a stock issuance
under the Plan, then the number of shares of Common Stock available for issuance
under the Plan shall be reduced by the gross number of shares for which the
Option is exercised or which vest under the stock issuance, and not by the net
number of shares of Common Stock issued to the holder of such Option or stock
issuance.
5. Option Grants
(a) Subject to the terms of this Plan and the stock option agreement
between the Non-Employee Board Member, each Non-Employee Board Member will be
granted an automatic Option as follows:
(i) if the Non-Employee Board Member was serving as a member of
the Board on the Effective Date, (A) on the Effective Date, an Option to
purchase Forty Thousand (40,000) shares of the Common Stock at an exercise
price per share equal to the initial public offering price per share to the
public in the Corporation's initial public offering ("IPO") of its Common
Stock, which Option shall vest proportionately (1/48) each month over a
period of four (4) years from the date of grant, and (B) on the fourth
anniversary of the Effective Date and on each anniversary thereafter, if on
each such date such Non-Employee Board Member shall continue to be serving,
and since the Effective Date shall have continuously served, as a member of
the Board, an Option to purchase Ten Thousand (10,000) shares of the Common
Stock at an exercise price per share equal to the Fair Market Value of a
share of the Common Stock on the date of grant, which Option shall vest
proportionately (1/12) each month over a period of one (1) year from the
date of grant;
(ii) if such Non-Employee Board Member was not serving as a
member of the Board on the Effective Date, (A) on the date of his or her
initial election as a member of the Board ("Board Election Date"), an
Option to purchase Forty Thousand (40,000) shares of the Common Stock at an
exercise price per share equal to the Fair Market Value of a share of the
Common Stock on the date of grant, which Option shall vest proportionately
(1/48) each month over a period of four (4) years from the date of grant,
and (B) on the fourth anniversary of such Non-Employee Board Member's Board
Election Date and on each anniversary thereafter, if on each such date such
Non-Employee Board Member shall continue to be serving, and since his or
her Board Election Date shall have continuously served, as a member of the
Board, an Option to purchase Ten Thousand (10,000) shares of the Common
Stock at an exercise price per share equal to the Fair Market Value of a
share of the Common Stock on the date of grant, which Option shall vest
proportionately (1/12) each month over a period of one (1) year from the
date of grant.
(b) Subject to the terms of this Plan, on behalf of the Corporation,
the Director Compensation Committee is hereby authorized to enter into a stock
option agreement with a Non-Employee Technology Advisory Board Member pursuant
to which the Non-Employee Technology Advisory Board Member may be granted an
Option to purchase a number of shares of the Common Stock as may be determined
by the Director Compensation Committee, at an exercise price per share equal to
the Fair Market Value of a share of the Common Stock on the date of grant and
which shall vest proportionately (1/48) each month over a period of four (4)
years from the date of grant and which shall have such other terms and
conditions as may be determined by the Director Compensation Committee.
Notwithstanding the above, each grant of an Option to a Non-Employee Technology
Advisory Board Member shall be subject to approval by the Board.
6. Option Terms
(a) Option Term. Each Option shall have a term of ten (10) years
-----------
measured from the applicable date of grant (the "Option Term").
2
<PAGE>
(b) Termination of Eligible Participant Status. The following
------------------------------------------
provisions shall govern the exercise of all Options held by an Optionee at the
time such Optionee ceases to be an Eligible Participant for any reason:
(i) On the date the Optionee ceases to be an Eligible
Participant, any portion of an Option that is unvested shall immediately
terminate.
(ii) Subject to subsection (iii) below, the Optionee (or, in the
event of Optionee's death, the personal representative of the Optionee's
estate or the person or persons to whom the Option is transferred pursuant
to the Optionee's will or in accordance with the laws of descent and
distribution) shall have a period of twelve (12) months following the date
the Optionee ceases to be an Eligible Participant in which to exercise any
portion of the Option that was vested as of the date the Optionee ceased to
be an Eligible Participant; provided that, in the event the Optionee ceases
--------
to be an Eligible Participant due the fact that the Optionee is or becomes
an employee of the Corporation or an Affiliate of the Corporation, then the
Optionee shall have until the later of (A) twelve (12) months following the
date the Optionee ceases to be an Eligible Participant and (B) 90 days
after such Optionee ceases to be an employee of the Corporation or a
Affiliate of the Corporation in which to exercise any portion of the Option
that was vested as of the date the Optionee ceased to be an Eligible
Participant; provided, further, that, in the event the Optionee ceases to
-------- -------
be an Eligible Participant or an employee of the Corporation as a result of
(1) an act of dishonesty or willful misconduct; (2) a breach of fiduciary
duty owed to the Corporation or its stockholders involving personal profit
or any other material breach of fiduciary duty; (3) an act of fraud,
embezzlement, malfeasance or misappropriation of Corporation property; (4)
a conviction of an illegal act or felony, or engaging in abuse of alcohol,
illegal drugs or controlled substances; or (5) a willful failure to perform
his or her reasonable duties or responsibilities, then any unexercised
portion of the Option shall immediately terminate.
(iii) Notwithstanding subsection (ii) above, in no event shall
any Option remain exercisable after the expiration of the Option Term for
such Option. Upon earlier of (A) the expiration of the applicable period
set forth in subsection (ii) above and (B) the expiration of the Option
Term, any remaining unexercised portion of the Option shall immediately
terminate and cease to be outstanding.
(c) Additional Terms. The Director Compensation Committee, in its
----------------
sole and absolute discretion, may determine any additional terms and conditions
of Options granted under this Plan, including terms, conditions and restrictions
contained in a stock option agreement between the Eligible Participant and the
Corporation.
7. Adjustments; Change In Control
(a) If any change is made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, then, unless the terms of such
transaction or this Plan shall provide otherwise, appropriate adjustments will
be made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities for which grants are
subsequently to be made under the Plan to Eligible Participants, and (iii) the
number and/or class of securities and the exercise price per share in effect
under each outstanding Option under the Plan; provided that the aggregate
--------
exercise price payable for such Option shall remain the same. Such adjustments
to the outstanding Options are to be effected in a manner which shall preclude
the enlargement or dilution of rights and benefits under such Options. The
adjustments determined by the Director Compensation Committee shall be final,
binding and conclusive.
(b) Upon the consummation of a Change in Control (as defined below),
the unvested portion of any Option granted under the Plan shall immediately
become vested. Following the effectiveness of the Change in Control, the
securities subject to the vested portion of each outstanding Option shall be
appropriately adjusted such that upon exercise of the Option, the Optionee shall
receive the number and class of securities which would have been issuable to the
Optionee upon effectiveness of such Change in Control had the Option been
exercised immediately prior to such Change in Control. Appropriate adjustments
shall also be made to the exercise price payable per share under each
outstanding Option; provided the aggregate exercise price payable for such
--------
securities
3
<PAGE>
shall remain the same. For purposes of this Plan, "Change in Control" shall
mean a change in ownership or control of the Corporation effected through
either of the following transactions:
(i) a reorganization, merger, consolidation or similar
transaction in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Corporation's outstanding securities
are transferred to a person or persons different from the persons holding
those securities immediately prior to such transaction, or
(ii) the sale, transfer or other disposition of all or
substantially all of the Corporation's assets in complete liquidation or
dissolution of the Corporation.
(c) The grant of Options under the Plan shall in no way affect the
right of the Corporation 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.
8. Tax Withholding
The Corporation's obligation to deliver shares of Common Stock upon the
exercise of Options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable U.S. federal, state,
foreign and local income and employment tax withholding requirements.
9. Effective Date And Term Of The Plan
(a) This Plan was adopted by the Board on September 21, 1999 and will
become effective immediately prior to the effectiveness of the IPO (the
"Effective Date"); provided that no Options granted under the Plan may be
exercised, and no shares of Common Stock shall be issued under the Plan, until
and unless (i) the Plan shall have been approved by the stockholders of the
Corporation and (ii) the exercise of any Option and the issuance and delivery of
such shares of Common Stock pursuant thereto shall comply with all applicable
provisions or requirements of law, domestic or foreign, including, without
limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules
and regulations promulgated thereunder, applicable state securities laws and the
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) upon which the Common Stock may then be listed.
(b) Unless sooner terminated by the Board, the Plan shall terminate
upon the earliest of (i) the tenth anniversary of the Effective Date, (ii) the
date on which all shares of Common Stock available for issuance under the Plan
shall have been issued, or (iii) the date of a Change in Control. Upon the
termination of the Plan, all outstanding Options granted pursuant to the Plan
shall thereafter continue to have force and effect until such Options shall
terminate in accordance with the provisions of this Plan and any stock option
agreement between the Eligible Participant and the Corporation.
10. Amendment Of The Plan
The Director Compensation Committee in its sole and absolute discretion may
alter, amend, suspend or discontinue the Plan at any time and for any reason;
provided that:
(a) the Plan may not be amended to increase the number of shares of
Common Stock issuable under the Plan without the approval of the Corporation's
stockholders, except for permissible adjustments in accordance with Section 7;
(b) no such amendment or modification shall adversely affect the
rights and obligations with respect to Options at the time outstanding under the
Plan, unless the Optionees so affected consent to such amendment or
modification; provided, that the Plan may be amended or terminated by the
--------
Director Compensation Committee if the Director Compensation Committee in good
faith determines that (i) the amendment or termination of the Plan is in the
best interests of the Corporation and its stockholders, (ii) the amendment or
termination of the Plan is necessary in order to comply with applicable law, or
(iii) the continuation of the Plan would cause the
4
<PAGE>
Corporation to incur adverse accounting charges as a result of a change after
the effective date of the Plan in the generally accepted accounting rules
applicable to the Plan;
(c) a change in the number of shares of Common Stock subject to an
Option shall require the approval of the Board; and
(d) to the extent necessary to cause the grants of Options therefor
under the Plan to be exempt from the requirements of Section 16b of the Exchange
Act, any action taken by the Director Compensation Committee shall be approved
by the Board.
11. Assignability
An Option shall be exercisable only by the Eligible Participant and shall
not be assignable or transferable (other than by will, the laws of descent and
distribution or as provided in paragraph I hereof) by the Eligible Participant.
Any such attempt at assignment or transfer shall be without effect.
12. No Stockholder, Employment or Continuing Service Rights
(a) An Eligible Participant shall have no stockholder rights with
respect to the shares of Common Stock subject an outstanding Option until such
shares Common Stock are purchased by the Eligible Participant in accordance with
the provisions of the Plan and any stock option agreement between the Eligible
Participant and the Corporation, and the Eligible Participant has become a
holder of record of the purchased shares.
(b) Nothing in the Plan shall confer upon any Eligible Participant
any right to continue to serve the Corporation or any Affiliate of the
Corporation as a member of the Board, as member of the Technology Advisory
Board, as an employee or in any other capacity for any specific duration or to
interfere with or otherwise restrict in any way the rights of the Corporation,
any Affiliate of the Corporation, the Corporation's stockholders or the Eligible
Participant, which rights are hereby expressly reserved by each, to terminate
the Eligible Participant's service as a member of the Board, as a member of the
Technology Advisory Board, as an employee or with respect to any other capacity
in which the Eligible Participant may now or in the future serve the Corporation
or any Affiliate of the Corporation.
13. General Provisions
(a) All costs and expenses incurred in the administration of this Plan
will be paid by the Corporation.
(b) All notices or other communications by an Eligible Participant to
the Corporation under or in connection with the Plan will be deemed to have been
duly given when received in the form specified by the Corporation at the
location, or by the person, designated by the Corporation for the receipt
thereof.
(c) The provisions of the Plan will be governed by the laws of the
State of Delaware without resort to that State's conflict of laws rules.
5
