<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER ___, 1998
REGISTRATION NO. 33- _______________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------
DATA DIMENSIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 06-085248
(State of Incorporation) (I.R.S. Employer Identification No.)
--------------------------------
ST LABS, INC.
(formerly Software Testing Laboratories, Inc.)
1995 AND 1997 STOCK OPTION PLANS
(Full Title of the Plans)
Larry W. Martin, President
Data Dimensions, Inc.
One Bellevue Center
411 - 108th Avenue NE, Suite 2100
Bellevue, Washington 98004
(425) 688-1000
(Name, Address and Telephone Number of Agent for Service)
--------------------------------
COPY TO:
Bruce A. Robertson
GARVEY, SCHUBERT & BARER
1191 Second Avenue, 18th Floor Seattle,
Washington 98101-2939
--------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
Title of Securities Number to Be Proposed Maximum Proposed Maximum
to be Registered Registered (1) Offering Price Per Aggregate Offering Amount of Fee
Share (2) Price (2)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 157,625 $6.05 $953,631.25 $281.32
par value per share
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement shall also cover any additional
shares of Common Stock that become issuable under the ST Labs,
Inc. 1995 and 1997 Stock Option Plans as the result of any
future stock split, stock dividend or similar adjustment of
the outstanding Common Stock of the Registrant.
(2) Estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(h) of the Securities Act
of 1933, as amended, on the basis of the weighted average
exercise price of the options.
<PAGE> 2
PART II
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
Data Dimensions, Inc. (the "Registrant") hereby incorporates by
reference into this Registration Statement the following documents previously
filed with the Securities and Exchange Commission (the "Commission"):
(a) The Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1997.
(b) All other reports filed pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") since December
31, 1997.
(c) The description of the Registrant's Common Stock contained in the
Registration Statement on Form SB-2 filed on February 9, 1996 (Registration No.
333-841), including all amendments and reports filed for the purpose of updating
such description.
All documents filed by the Registrant pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act after the date hereof, and prior to the
filing of a post-effective amendment which indicates that the securities offered
hereby have been sold or which deregisters the securities covered hereby then
remaining unsold, shall also be deemed to be incorporated by reference into this
Registration Statement and to be a part hereof commencing on the respective
dates on which such documents are filed.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Delaware General Corporation Law ("DGCL") a corporation may
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative (other than an action by or in
the right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust of other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
The DGCL permits similar indemnification in the case of derivative
actions, except that no indemnification may be made in respect of any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability and 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 shall deem proper.
Indemnification for settlement of a suit by or in the right of the corporation
is not permitted under the DGCL. A director, officer, employee or agent who is
successful, on the merits or otherwise, in defense of any proceeding subject to
the DGCL's indemnification provisions must be indemnified by the corporation for
reasonable expenses incurred in connection therewith, including attorneys' fees.
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<PAGE> 3
The Company's Bylaws provide, in substance, that each person made a
party or threatened to be made a party to any type of proceeding, by reason of
the fact that he or she is or was a director or officer of the Company or that,
being or having been such a director or officer or an employee of the Company,
he or she is or was serving at the request of an executive officer of the
Company as a director, officer, employee or agent of another corporation, will
be indemnified and held harmless by the Company to the full extent permitted by
the DGCL, against all expense, liability and loss actually and reasonably
incurred by such person in connection therewith. In certain cases, the
indemnified party will be entitled to the advancement of certain expenses
relating to indemnification.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not Applicable.
ITEM 8. EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
4.1 ST Labs, Inc. (formerly Software Testing Laboratories, Inc.) 1995 Stock Option
Plan
4.2 ST Labs, Inc. 1997 Stock Option Plan
5.1 Opinion of Garvey, Schubert & Barer regarding legality of the Common Stock
being registered
23.1 Consent of BDO Seidman, LLP, Independent Certified Public Accountants
23.2 Consent of PricewaterhouseCoopers LLP, Independent Public Accountants
23.3 Consent of Garvey, Schubert & Barer (included in opinion filed as Exhibit 5.1)
24.1 Power of Attorney of Thomas W. Fife
24.2 Power of Attorney of Lucie J. Fjeldstad
99.1 Form of Stock Option Assumption Agreement
</TABLE>
ITEM 9. UNDERTAKINGS
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
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<PAGE> 4
provided, however, that paragraphs (1)(i) and (1)(ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act (and, where applicable, each filing of an employee benefits plan's annual
report pursuant to Section 15(d) of the Exchange Act) that is incorporated by
reference in this Registration Statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Bellevue, State of Washington, on the ____ day of
_________________________, 1998.
DATA DIMENSIONS, INC.
By: /s/ Larry W. Martin
---------------------------------------
Larry W. Martin
Its: Chief Executive Officer, President,
and Chairman of the Board of Directors
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the ____ day of ___________________, 1998.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
/s/ Larry W. Martin Chief Executive Officer, President, Director
------------------------------------
Larry W. Martin
/s/ Gordon A. Gardiner Chief Financial Officer
------------------------------------
Gordon A. Gardiner
* /s/ Thomas W. Fife Director
------------------------------------
Thomas W. Fife
* /s/ Lucie J. Fjeldstad Director
------------------------------------
Lucie J. Fjeldstad
* By /s/ Larry W. Martin
---------------------------------
Larry W. Martin, Attorney-in-Fact
</TABLE>
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<PAGE> 6
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------ -----------
<S> <C>
4.1 ST Labs, Inc. (formerly Software Testing Laboratories, Inc.) 1995 Stock Option
Plan
4.2 ST Labs, Inc. 1997 Stock Option Plan
5.1 Opinion of Garvey, Schubert & Barer regarding legality of the Common Stock
being registered
23.1 Consent of BDO Seidman, LLP, Independent Certified Public Accountants
23.2 Consent of PricewaterhouseCoopers LLP, Independent Public Accountants
23.3 Consent of Garvey, Schubert & Barer (included in opinion filed as Exhibit 5.1)
24.1 Power of Attorney of Thomas W. Fife
24.2 Power of Attorney of Lucie J. Fjeldstad
99.1 Form of Stock Option Assumption Agreement
</TABLE>
-6-
<PAGE> 1
EXHIBIT 4.1
SOFTWARE TESTING LABORATORIES, INC.
1995 STOCK OPTION PLAN
This Stock Option Plan (the "Plan") provides for the grant of options to
acquire shares of Common Stock, without par value (the "Common Stock"), of
Software Testing Laboratories, Inc., a Washington corporation (the "Company").
Stock options granted under this Plan that qualify under Section 422A of the
Internal Revenue Code of 1986, as amended (the "Code"), are referred to in this
Plan as "Incentive Stock Options." Incentive Stock Options and stock options
that do not qualify under Section 422A of the Code ("Non-Qualified Stock
Options") granted under this Plan are referred to as "Options."
1. PURPOSES.
The purposes of this Plan are to retain the services of valued key employees and
consultants of the Company and such other persons as the Plan Administrator
shall select in accordance with Section 3 below, to encourage such persons to
acquire a greater proprietary interest in the Company, thereby strengthening
their incentive to achieve the objectives of the shareholders of the Company,
and to serve as an aid and inducement in the hiring of new employees and
consultants.
2. ADMINISTRATION.
This Plan shall be administered by the Board of Directors of the Company (the
"Board"), except that the Board may, in its discretion, establish a committee
composed of members of the Board or other persons to administer this Plan,
which committee (the "Committee") may be an executive, compensation or other
committee, including a separate committee especially created for this purpose.
The Committee shall have such of the powers and authority vested in the Board
hereunder as the Board may delegate to it (including the power and authority to
interpret any provision of this Plan or of any Option). The members of any such
Committee shall serve at the pleasure of the Board. The Board, and/or the
Committee if one has been established by the Board, are referred to in this
Plan as the "Plan Administrator." Following registration of any of the
Company's securities under Section 12 of the Securities Exchange Act of 1934,
as amended, no person shall serve as a member of the Plan Administrator if his
or her service would disqualify this Plan from eligibility under Securities and
Exchange Commission Rule 16b-3, as amended, or any successor rule or regulatory
requirements; provided, that the Plan Administrator shall consist of at least
the minimum number of persons required by Securities and Exchange Commission
Rule 16b-3, as amended, or any successor rule or regulatory requirements.
Subject to the provisions of this Plan, and with a view to effecting its
purpose, the Plan Administrator shall have sole authority, in its absolute
discretion, to (a) construe and interpret this Plan; (b) define the terms used
in this Plan; (c) prescribe, amend and rescind rules and regulations relating
to this Plan; (d) correct any defect, supply any omission or reconcile any
inconsistency in this Plan; (e) determine the individuals to whom Options shall
be granted under this Plan and whether the Option is an Incentive Stock Option
or a Non-Qualified Stock Option; (f) determine the time or times at which
Options shall be granted under this Plan; (g) determine the number of shares of
Common Stock subject to each Option, the exercise price of each Option, the
duration of each Option and the times at which each Option shall become
exercisable; (h) determine all other terms and conditions of Options; and (i)
make all other determinations necessary or advisable for the administration of
this Plan. All decisions, determinations and interpretations made by the Plan
Administrator shall be binding and conclusive on all participants in this Plan
and on their legal representatives, heirs and beneficiaries.
3. ELIGIBILITY.
Incentive Stock Options may be granted to any individual who, at the time the
Option is granted, is an employee of the Company or any Related Corporation (as
defined below), including employees who are directors of the Company
("Employees"). Non-Qualified Stock Options may be granted to Employees and
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<PAGE> 2
to such other persons other than directors who are not Employees as the Plan
Administrator shall select. Options may be granted in substitution for
outstanding Options of another corporation in connection with the merger,
consolidation, acquisition of property or stock or other reorganization
between such other corporation and the Company or any subsidiary of the
Company. Options also may be granted in exchange for outstanding Options. Any
person to whom an Option is granted under this Plan is referred to as an
"Optionee."
As used in this Plan, the term "Related Corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock of one of the other
corporations in such chain. When referring to a parent corporation, the term
"Related Corporation" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of
granting of the Option, each of the corporations other than the Company owns
stock possessing 50 percent or more of the total combined voting power of all
classes of stock of one of the other corporations in such chain.
4. STOCK.
The Plan Administrator is authorized to grant Options to acquire up to a total
of two hundred thousand (200,000) shares of the Company's authorized but
unissued, or reacquired, Common Stock. The number of shares with respect to
which Options may be granted hereunder is subject to adjustment as set forth in
Section 5(m) hereof. In the event that any outstanding Option expires or is
terminated for any reason, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subject to an Option to the
same Optionee or to a different person eligible under Section 3 of this Plan.
5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under this Plan shall be evidenced by a written agreement
approved by the Plan Administrator (the "Agreement"). Agreements may contain
such additional provisions, not inconsistent with this Plan, as the Plan
Administrator in its discretion may deem advisable. All Options also shall
comply with the following requirements:
(a) Number of Shares and Type of Option.
Each Agreement shall state the number of shares of Common Stock to which it
pertains and whether the Option is intended to be an Incentive Stock Option or
a Non-Qualified Stock Option. In the absence of action to the contrary by the
Plan Administrator in connection with the grant of an Option, all Options shall
be Non-Qualified Stock Options. The aggregate fair market value (determined at
the Date of Grant, as defined below) of the stock with respect to which
Incentive Stock Options are exercisable for the first time by the Optionee
during any calendar year (granted under this Plan and all other Incentive Stock
Option plans of the Company, a Related Corporation or a predecessor
corporation) shall not exceed $100,000, or such other limit as may be prescribed
by the Code as it may be amended from time to time. Any Option which exceeds
the annual limit shall not be void but rather shall be a Non-Qualified Stock
Option.
(b) Date of Grant.
Each Agreement shall state the date the Plan Administrator has deemed to be the
effective date of the Option for purposes of this Plan (the "Date of Grant").
(c) Option Price.
Each Agreement shall state the price per share of Common Stock at which it is
exercisable. The exercise price shall be fixed by the Plan Administrator at
whatever price the Plan Administrator may determine in the exercise of its sole
discretion; provided, that the per share exercise price for any Option granted
following the effective date of registration of any of the Company's securities
under Section 12 of the
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<PAGE> 3
Securities Exchange Act of 1934 shall not be less than the fair market value
per share of the Common Stock at the Date of Grant as determined by the Plan
Administrator in good faith; provided further, that the per share exercise
price for an Incentive Stock Option shall not be less than the fair market
value per share of the Common Stock at the Date of Grant as determined by the
Plan Administrator in good faith; provided further, that with respect to
Incentive Stock Options granted to greater-than-10 percent shareholders of the
Company (as determined under Section 425(d) of the Code), the exercise price
per share shall not be less than 110 percent of the fair market value per share
of the Common Stock at the Date of Grant; and, provided further, that Incentive
Stock Options granted in substitution for outstanding Options of another
corporation in connection with the merger, consolidation, acquisition of
property or stock or other reorganization involving such other corporation and
the Company or any subsidiary of the Company may be granted with an exercise
price equal to the exercise price for the substituted Option of the other
corporation, subject to any adjustment consistent with the terms of the
transaction pursuant to which the substitution is to occur.
(d) Duration of Options.
At the time of the grant of the Option, the Plan Administrator shall designate,
subject to paragraph 5(g) below, the expiration date of the Option, which date
shall not be later than 10 years from the Date of Grant in the case of
Incentive Stock Options; provided, that the expiration date of any Incentive
Stock Option granted to a greater-than-10 percent shareholder of the Company
(as determined under Section 425(d) of the Code) shall not be later than five
years from the Date of Grant. In the absence of action to the contrary by the
Plan Administrator in connection with the grant of a particular Option, and
except in the case of Incentive Stock Options as described above, all Options
granted under this Plan shall expire 10 years from the Date of Grant.
(e) Vesting Schedule.
No Option shall be exercisable until it has vested. The vesting schedule for
each Option shall be specified by the Plan Administrator at the time of grant
of the Option; provided, that if no vesting schedule is specified at the time
of grant, the Option shall vest according to the following schedule:
<TABLE>
<CAPTION>
Number of Years Percentage of Total Option
Following Date of Grant to be Exercisable
- ----------------------- --------------------------
<S> <C>
1 33.3%
2 33.3%
3 33.4%
</TABLE>
(f) Acceleration of Vesting.
The vesting of one or more outstanding Options may be accelerated by the Plan
Administrator at such times and in such amounts as it shall determine in its
sole discretion. The vesting of Options also shall be accelerated under the
circumstances described in Sections 5(m) and 5(n).
(g) Term of Option.
Vested Options shall terminate, to the extent not previously exercised, upon
the occurrence of the first of the following events: (i) the expiration of the
Option, as designated by the Plan Administrator in accordance with Section 5(d)
above; (ii) the expiration of 90 days from the date of an Employee Optionee's
termination of employment with the Company or any Related Corporation for any
reason whatsoever other than death or disability unless, in the case of a
Non-Qualified Stock Option, the exercise period is extended by resolution
adopted by the Plan Administrator until a date not later than the expiration
date of the Option; or (iii) the expiration of one year from (A) the date of
death of the Optionee or (B) cessation of an Employee Optionee's employment by
reason of Disability (as defined below). If an Employee Optionee's employment
is terminated by death, any Option held by the Optionee shall be exercisable
only by the person or persons to whom such Optionee's rights under such Option
shall pass by the Optionee's will or by the laws of descent and distribution of
the state or county of the Employee Optionee's domicile
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<PAGE> 4
at the time of death. "Disability" shall mean that a person is unable to engage
in any substantial gainful activity by reason of any medically determinable
physical or mental impairment that can be expected to result in death or that
has lasted or can be expected to last for a continuous period of not less than
12 months. The Plan Administrator shall determine whether an Optionee has
incurred a Disability on the basis of medical evidence acceptable to the Plan
Administrator. Upon making a determination of Disability, the Committee shall,
for purposes of the Plan, determine the date of an Optionee's termination of
employment.
Unless accelerated in accordance with Section 5(f) above, unvested Options shall
terminate immediately upon termination of employment of the Optionee by the
Company for any reason whatsoever, including death or disability. If, in the
case of an Incentive Stock Option, an Optionee's relationship with the Company
changes (e.g., from an Employee to a non-Employee, such as a consultant) such
change shall constitute a termination of an Optionee's employment with the
Company and the Optionee's Incentive Stock Option shall terminate in accordance
with this subsection. For purposes of this Plan, transfer of employment between
or among the Company and/or any Related Corporation shall not be deemed to
constitute a termination of employment with the Company or any Related
Corporations. For purposes of this subsection with respect to Incentive Stock
Options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bona fide leave of absence (as determined by
the Plan Administrator). The foregoing notwithstanding, employment shall not be
deemed to continue beyond the first 90 days of such leave, unless the Optionee's
re-employment rights are guaranteed by statute or by contract.
(h) Exercise of Options.
Options shall be exercisable, either all or in part, at any time after vesting,
until termination. If less than all of the shares included in the vested portion
of any Option are purchased, the remainder may be purchased at any subsequent
time prior to the expiration of the Option term. No portion of any Option for
less than 50 shares (as adjusted pursuant to Section 5(m) below) may be
exercised, provided that if the vested portion of any Option is less than 50
shares, it may be exercised with respect to all shares for which it is vested.
Only whole shares may be issued pursuant to an Option, and to the extent that an
Option covers less than one share, it is unexercisable. Options or portions
thereof may be exercised by giving written notice to the Company, which notice
shall specify the number of shares to be purchased, and be accompanied by
either: (i) payment in the amount of the aggregate exercise price for the Common
Stock so purchased, which payment shall be in the form specified in Section 5(i)
below, or (ii) upon prior consent of the Plan Administrator, delivery of an
irrevocable subscription agreement obligating the Optionee to take and pay for
the shares of Common Stock to be purchased within one year of the date of such
exercise. The Company shall not be obligated to issue, transfer or deliver a
certificate of Common Stock to any Optionee, or to his personal representative,
until the aggregate exercise price has been paid for all shares for which the
Option shall have been exercised and adequate provision has been made by the
Optionee for satisfaction of any tax withholding obligations associated with
such exercise. During the lifetime of an Optionee, Options are exercisable only
by the Optionee.
(i) Payment upon Exercise of Option.
Upon the exercise of any Option, the aggregate exercise price shall be paid to
the Company in cash or by certified or cashier's check. In addition, upon
approval of the Plan Administrator, an Optionee may pay for all or any portion
of the aggregate exercise price by delivering to the Company shares of Common
Stock previously held by such Optionee or, with the prior consent of the Plan
Administrator, by having shares withheld from the amount of shares of Common
Stock to be received by the Optionee. The shares of Common Stock received or
withheld by the Company as payment for shares of Common Stock purchased upon the
exercise of Options shall have a fair market value at the date of exercise (as
determined by the Plan Administrator) equal to the aggregate exercise price (or
portion thereof) to be paid by the Optionee upon such exercise.
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<PAGE> 5
(j) Rights as a Shareholder.
An Optionee shall have no rights as a shareholder with respect to any shares
covered by an Option until such Optionee becomes a record holder of such shares,
irrespective of whether such Optionee has given notice of exercise. Subject to
the provisions of Sections 5(m) and 5(n) hereof, no rights shall accrue to an
Optionee and no adjustments shall be made on account of dividends (ordinary or
extraordinary, whether in cash, securities or other property) or distributions
or other rights declared on, or created in, the Common Stock for which the
record date is prior to the date the Optionee becomes a record holder of the
shares of Common Stock covered by the Option, irrespective of whether such
Optionee has given notice of exercise.
(k) Transfer of Option.
Options granted under this Plan and the rights and privileges conferred by this
Plan may not be transferred, assigned, pledged or hypothecated in any manner
(whether by operation of law or otherwise) other than by will or by applicable
laws of descent and distribution, and shall not be subject to execution,
attachment or similar process. Upon any attempt to transfer, assign, pledge,
hypothecate or otherwise dispose of any Option or of any right or privilege
conferred by this Plan contrary to the provisions hereof, or upon the sale, levy
or any attachment or similar process upon the rights and privileges conferred by
this Plan, such Option shall thereupon terminate and become null and void.
(l) Securities Regulation and Tax Withholding.
(1) Shares shall not be issued with respect to an Option unless the
exercise of such Option and the issuance and delivery of such shares shall
comply with all relevant provisions of law, including, without limitation, any
applicable state securities laws, the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, the rules and regulations
thereunder and the requirements of any stock exchange upon which such shares may
then be listed, and such issuance shall be further subject to the approval of
counsel for the Company with respect to such compliance, including the
availability of an exemption from registration for the issuance and sale of such
shares. The inability of the Company to obtain from any regulatory body the
authority deemed by the Company to be necessary for the lawful issuance and
sale of any shares under this Plan, or the unavailability of an exemption from
registration for the issuance and sale of any shares under this Plan, shall
relieve the Company of any liability with respect to the non-issuance or sale of
such shares.
As a condition to the exercise of an Option, the Company may require the
Optionee to represent and warrant in writing at the time of such exercise that
the shares are being purchased only for investment and without any then-present
intention to sell or distribute such shares. At the option of the Company, a
stop-transfer order against such shares may be placed on the stock books and
records of the Company, and a legend indicating that the stock may not be
pledged, sold or otherwise transferred unless an opinion of counsel is provided
stating that such transfer is not in violation of any applicable law or
regulation, may be stamped on the certificates representing such shares in order
to assure an exemption from registration. The Plan Administrator may also
require such other documentation as may from time to time be necessary comply
with federal and state securities laws. THE COMPANY HAS NO OBLIGATION TO
UNDERTAKE REGISTRATION OF OPTIONS OR THE SHARES OF STOCK ISSUABLE UPON THE
EXERCISE OF OPTIONS.
(2) As a condition to the exercise of any Option granted under this
Plan, the Optionee shall make such arrangements as the Plan Administrator may
require for the satisfaction of any federal, state or local withholding tax
obligations that may arise in connection with such exercise.
(3) The issuance, transfer or delivery of certificates of Common
Stock pursuant to the exercise of Options may be delayed, at the discretion of
the Plan Administrator, until the Plan
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<PAGE> 6
Administrator is satisfied that the applicable requirements of the federal and
state securities laws and the withholding provisions of the Code have been met.
(m) Stock Dividend, Reorganization or Liquidation.
(1) If (i) the Company shall at any time be involved in a transaction
described in Section 425(a) of the Code (or any successor provision) or any
"corporate transaction" described in the regulations thereunder; (ii) the
Company shall declare a dividend payable in, or shall subdivide or combine, its
Common Stock or (iii) any other event with substantially the same effect shall
occur, the Plan Administrator shall, with respect to each outstanding Option,
proportionately adjust the number of shares of Common Stock and/or the exercise
price per share so as to preserve the rights of the Optionee substantially
proportionate to the rights of the Optionee prior to such event, and to the
extent that such action shall include an increase or decrease in the number of
shares of Common Stock subject to outstanding Options, the number of shares
available under Section 4 of this Plan shall automatically be increased or
decreased, as the case may be, proportionately, without further action on the
part of the Plan Administrator, the Company or the Company's shareholders.
(2) If the Company is liquidated or dissolved, the Plan Administrator
shall allow the holders of any outstanding Options to exercise all or any part
of the unvested portion of the Options held by them; provided, however, that
such Options must be exercised prior to the effective date of such liquidation
or dissolution. If the Option holders do not exercise their Options prior to
such effective date, each outstanding Option shall terminate as of the
effective date of the liquidation or dissolution.
(3) The foregoing adjustments in the shares subject to Options shall
be made by the Plan Administrator, or by any successor administrator of this
Plan, or by the applicable terms of any assumption or substitution document.
(4) The grant of an Option shall not affect in any way the right or
power of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, to merge, consolidate or
dissolve, to liquidate or to sell or transfer all or any part of its business
or assets.
(n) Change in Control; Declaration of Extraordinary Dividend.
(1) Change in Control. If at any time there is a Change in Control
(as defined below) of the Company, all Options shall accelerate and become
fully vested and immediately exercisable for the duration of the Option term.
For purposes of this Subsection (n)(1), "Change in Control" shall mean either
one of the following: (i) When any "person," as such term is used in sections
13(d) and 14(d) of the Exchange Act (other than the Company, a Subsidiary or a
Company employee benefit plan, including any trustee of such plan acting as
trustee) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Exchange Act) directly or indirectly, of securities of the Company
representing 50% or more of the combined voting power of the Company's then
outstanding securities; or (ii) the occurrence of a transaction requiring
shareholder approval, and involving the sale of all or substantially all of the
assets of the Company or the merger of the Company with or into another
corporation.
(2) Declaration of Extraordinary Dividend. If at any time the Company
declares an Extraordinary Dividend (as defined below), all Options shall
accelerate and thereupon become fully vested and immediately exercisable for
the duration of the Option term. For purposes of this Subsection (n)(2),
"Extraordinary Dividend" shall mean a cash dividend payable to holders of
record of the Common Stock in an amount in excess of 10% of the then fair
market value of the Company's Common Stock. The fair market value of the
Company's Common Stock shall be determined in good faith by the Board of
Directors of the Company.
-6-
<PAGE> 7
6. EFFECTIVE DATE; TERM.
This Plan shall be effective as of January 1, 1995. Options may be granted by
the Plan Administrator from time to time thereafter until January 1, 2005.
Termination of this Plan shall not terminate any Option granted prior to such
termination. Any Incentive Stock Options granted by the Plan Administrator
prior to the approval of this Plan by a majority of the shareholders of the
Company shall be granted subject to ratification of this Plan by the
shareholders of the Company, and if shareholder ratification is not obtained,
each and every Incentive Stock Option shall become a Non-Qualified Stock
Option.
7. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option shall impose no obligation upon the Optionee to
exercise such Option.
8. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
Whether or not any Options are to be granted under this Plan shall be
exclusively within the discretion of the Plan Administrator, and nothing
contained in this Plan shall be construed as giving any person any right to
participate under this Plan. The grant of an Option shall in no way constitute
any form of agreement or understanding binding on the Company or any Related
Corporation, express or implied, that the Company or any Related Corporation
will employ or contract with an Optionee for any length of time.
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock issued upon
the exercise of Options shall be used for general corporate purposes, unless
otherwise directed by the Board.
10. INDEMNIFICATION OF PLAN ADMINISTRATOR.
In addition to all other rights of indemnification they may have as members of
the Board, members of the Plan Administrator shall be indemnified by the
Company for all reasonable expenses and liabilities of any type or nature,
including attorneys' fees, incurred in connection with any action, suit or
proceeding to which they or any of them are a party by reason of, or in
connection with, this Plan or any Option granted under this Plan, and against
all amounts paid by them in settlement thereof (provided that such settlement
is approved by independent legal counsel selected by the Company), except to
the extent that such expenses relate to matters for which it is adjudged that
such Plan Administrator member is liable for willful misconduct; provided, that
within 15 days after the institution of any such action, suit or proceeding,
the Plan Administrator member involved therein shall, in writing, notify the
Company of such action, suit or proceeding so that the Company may have the
opportunity to make appropriate arrangements to prosecute or defend the same.
11. AMENDMENT OF PLAN.
The Plan Administrator may, at any time, modify, amend or terminate this Plan
and Options granted under this Plan; provided, that no amendment with respect
to an outstanding Option shall be made over the objection of the Optionee
thereof; and provided further, that the approval of the holders of a majority
of the Company's outstanding shares of voting capital stock is required within
12 months before or after the adoption by the Plan Administrator of any
amendment that will permit the granting of Options to a class of persons other
than those currently eligible to receive Options under this Plan or that would
cause this Plan to no longer comply with Securities and Exchange Commission
Rule 16b-3, as amended, or any successor rule or other regulatory requirements.
Without limiting the generality of the foregoing, the Plan Administrator may
modify grants to persons who are eligible to receive Options under this Plan
who are foreign nationals or employed outside the United States to recognize
differences in local law, tax policy or custom.
Date Approved by Board of Directors of Company: January 4, 1995
-7-
<PAGE> 8
THE OPTION EVIDENCED BY THIS AGREEMENT AND THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF SUCH OPTION HAVE NOT BEEN REGISTERED UNDER STATE OR FEDERAL
SECURITIES LAWS. THIS OPTION AGREEMENT MAY NOT BE TRANSFERRED EXCEPT BY WILL OR
UNDER THE LAWS OF DESCENT AND DISTRIBUTION. THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE OF THE OPTION MAY NOT BE OFFERED OR SOLD, PLEDGED (EXCEPT A
PLEDGE PURSUANT TO THE TERMS OF WHICH ANY OFFER OR SALE UPON FORECLOSURE WOULD
BE MADE IN A MANNER THAT WOULD NOT VIOLATE THE REGISTRATION PROVISION OF
FEDERAL OR STATE SECURITIES LAWS) OR OTHERWISE DISTRIBUTED FOR VALUE, NOR MAY
THE SHARES OF COMMON STOCK ISSUED UPON EXERCISE OF THE OPTION BE TRANSFERRED ON
THE BOOKS OF THE COMPANY, WITHOUT AN OPINION OF COUNSEL, CONCURRED IN BY
COUNSEL FOR THE COMPANY, THAT NO VIOLATION OF SAID REGISTRATION PROVISIONS
WOULD RESULT THEREFROM.
SOFTWARE TESTING LABORATORIES, INC.
1995 STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT is entered into as of April 1, 1996 (the "Date of Grant")
between SOFTWARE TESTING LABORATORIES, INC., a Washington corporation (the
"Company"), and George Neff (the "Optionee")
RECITALS
A. The Company has approved and adopted the 1995 Stock Option Plan (the
"Plan"), pursuant to which the Plan Administrator is authorized to grant to
employees of the Company and other persons selected by the Plan Administrator
options to purchase common stock, without par value, of the Company (the
"Common Stock");
B. The options granted hereunder are intended to BE nonstatutory stock
options under the Internal Revenue Code of 1986,as amended (the "Code).
AGREEMENT
NOW, THEREFORE, the Company hereby grants to Optionee the option to purchase
3000 shares of Common Stock (the "Option") upon the terms and conditions set
forth herein and in the Plan.
1. EXERCISE PRICE. The exercise price for the Option shall be $4.50 per share.
2. VESTING SCHEDULE. The Option shall not be exercisable until it has vested.
The Option shall vest according to the following schedule:
<TABLE>
<CAPTION>
Number of Years Following Date of Grant Percentage of Total Option to be Exercisable
--------------------------------------- --------------------------------------------
<S> <C>
1 33.3%
2 33.3%
3 33.4%
</TABLE>
3. OPTION NOT TRANSFERABLE. The Option is not transferable except by will or
the laws of descent and distribution.
4. INVESTMENT INTENT. By accepting the Option, Optionee represents and agrees
for himself and all persons who acquire rights in the Option through Optionee,
that none of the shares of Common Stock purchased upon exercise of the Option
will be distributed in violation of applicable federal and state securities
laws and regulations. If requested by the Company, Optionee shall furnish
evidence satisfactory to the Company (including a written and
-1-
<PAGE> 9
signed representation letter and a consent to be bound by all transfer
restrictions imposed by applicable law, legend condition or otherwise) to that
effect, prior to delivery of the purchased shares of Common Stock.
5. TERMINATION OF OPTION. A vested option shall terminate to the extent not
previously exercised, upon the occurrence of the first of the following events:
(i) ten (10) years from the Date of Grant;
(ii) the expiration of 90 days from the date of Optionee's termination of
employment with the Company for any reason whatsoever other than death or
Disability (as defined in the Plan) (unless the exercise period is extended by
the Plan Administrator until a date not later than the expiration date of the
Option); or
(iii) the expiration of one (1) year from the date of death of the Optionee or
the cessation of Optionee's employment by reason of Disability (as defined in
the Plan) (unless the exercise period is extended by the Plan Administrator
until a date not later than the expiration date of the Option).
If Optionee's employment is terminated by death, any Option held by Optionee
shall be exercisable only by the person or persons to whom such Optionee's
rights under such Option shall pass by Optionee's will or by the laws of
descent and distribution of the state or country of Optionee's domicile at the
time of death. Subject to Section 5(g) of the Plan, each unvested Option
granted pursuant hereto shall terminate upon Optionee's termination of
employment for any reason whatsoever, including death or Disability.
6. STOCK. In case of any stock split, stock dividend or like change in the
nature of shares granted by the Agreement, the number of shares and option
price shall be proportionately adjusted as set forth in Section 5(m) of the
Plan.
7. EXERCISE OF OPTION. Each exercise of the Option shall be by means of
delivery of a Notice of Election to Exercise (which shall be in the form
attached hereto as Exhibit A) to the Secretary of the Company at its principal
executive office, specifying the number of shares of Common Stock to be
purchased and accompanied by payment in cash, or by certified or cashier's
check payable to the order of the Company, of the full exercise price for the
Common Stock to be purchased. Upon approval of the Plan Administrator, Optionee
may pay for all or any portion of the exercise price by (i) delivery of
previously held shares of Common Stock or (ii) by having shares withheld from
the amount of shares of Common Stock to be received by the Optionee. The shares
of Common Stock received or withheld by the Company as payment for shares of
Common Stock purchased upon the exercise of Options shall have a fair market
value at the date of exercise (as determined by the Plan Administrator) equal
to the aggregate exercise price (or portion thereof) to be paid by the Optionee
upon such exercise. Optionee agrees that he will also pay to the Company the
amount necessary for the Company to satisfy its withholding obligations under
the Code.
8. OPTIONEE ACKNOWLEDGMENTS. Optionee acknowledges that he or she has read and
understands the terms of this Agreement and the Plan, and that:
(a) The issuance of shares of Common Stock pursuant to the exercise of the
Option, and any resale of the shares of Common Stock, may only be effected in
compliance with applicable state and federal laws and regulations and that
Optionee may be required to execute and deliver representations and warranties
to that effect prior to the exercise of any portion of the Option;
(b) Optionee is not entitled to any rights as a shareholder with respect to any
shares of Common Stock issuable hereunder until Optionee becomes a shareholder
of record;
(c) The shares of Common Stock subject hereto may be adjusted in the event of
certain changes in the capital structure of the Company or for any other reason
required or permitted by the Plan;
(d) As a condition to the exercise of the Option, Optionee may be required to
make such arrangements as the Plan Administrator requires for the satisfaction
of any federal, state or local withholding tax obligations; and
-2-
<PAGE> 10
(e) This Agreement does not constitute an employment agreement nor does it
entitle Optionee to any specific employment or contractual relationship, or to
any employment or contractual relationship for a period of time, and that
Optionee's continued employment or contractual relationship with the Company,
if any, shall be at will and is subject to termination in accordance with the
Company's prevailing policies and any other agreement between Optionee and the
Company.
9. PROFESSIONAL ADVICE. The acceptance and exercise of the Option and the
sale of Common Stock issued pursuant to the exercise of the Option may have
consequences under federal and state tax and securities laws which may vary
depending on the individual circumstances of Optionee. Accordingly, Optionee
acknowledges that Optionee has been advised to consult his or her personal
legal and tax advisor in connection with this Agreement and Optionee's dealings
with respect to the Option or the Common Stock.
10. NOTICES. Any notice required or permitted to be made or given hereunder
shall be mailed or delivered personally to the addresses set forth below, or as
changed from time to time by written notice to the other:
Company: Software Testing Laboratories, Inc.
83 South King Street, Suite 414
Seattle, Washington 98104
ATTN: Secretary
Optionee: _________________________________
_________________________________
_________________________________
_________________________________
11. AGREEMENT SUBJECT TO PLAN: The Option and this Agreement evidencing and
confirming the same are subject to the terms and conditions set forth in the
Plan and in any amendments to the Plan existing now or in the future, which
terms and conditions are incorporated herein by reference. A copy of the Plan
previously has been delivered to Optionee. Should any conflict exist between
the provisions of the Plan and those of this Agreement, those of the Plan shall
govern and control. This Agreement and the Plan comprise the entire
understanding between the Company and the Optionee with respect to the Option
and shall be construed and enforced under the laws of the State of Washington.
IN WITNESS WHEREOF, this Agreement has been entered into as of the day and year
first above written.
SOFTWARE TESTING LABORATORIES, INC.
_________________________________
By: Tye V. Minckler
Its: Secretary
OPTIONEE
_________________________________
-3-
<PAGE> 1
EXHIBIT 4.2
ST LABS, INC.
1997 STOCK OPTION PLAN
This 1997 Stock Option Plan (the "Plan") provides for the grant of options to
acquire shares of Common Stock, without par value (the "Common Stock"), of ST
Labs, Inc., a Washington corporation (the "Company"). Stock options granted
under this Plan that qualify under Section 422 of the Internal Revenue Code of
1986, as amended (the "Code"), are referred to in this Plan as "Incentive Stock
Options." Incentive Stock Options and stock options that do not qualify under
Section 422 of the Code ("Non-Qualified Stock Options") granted under this Plan
are referred to collectively as "Options."
1. PURPOSES.
The purposes of this Plan are to retain the services of valued key employees and
consultants of the Company and such other persons as the Plan Administrator
shall select in accordance with Section 3 below, to encourage such persons to
acquire a greater proprietary interest in the Company, thereby strengthening
their incentive to achieve the objectives of the shareholders of the Company,
and to serve as an aid and inducement in the hiring of new employees and
consultants.
2. ADMINISTRATION.
This Plan shall be administered by the Board of Directors of the Company (the
"Board"), except that the Board may, in its discretion, establish a committee
composed of members of the Board or other persons to administer this Plan,
which committee (the "Committee") may be an executive, compensation or other
committee, including a separate committee especially created for this purpose.
The Committee shall have such of the powers and authority vested in the Board
hereunder as the Board may delegate to it (including the power and authority to
interpret any provision of this Plan or of any Option). The members of any such
Committee shall serve at the pleasure of the Board. The Board and/or the
Committee if one has been established by the Board, are referred to in this
Plan as the "Plan Administrator."
In the event the Company registers any of its equity securities pursuant to
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), it is the intention of the Company that this Plan, and options
granted under this Plan, comply in all respects with Rule 16b-3 promulgated
under the Exchange Act and, if any Plan provision is later found not to be in
compliance with such Rule, the provision shall be deemed null and void, and in
all events this Plan shall be construed in favor of its meeting the
requirements of Rule 16b-3. Notwithstanding anything in this Plan to the
contrary, the Board, in its absolute discretion, may bifurcate this Plan so as
to restrict, limit or condition the use of any provision of this Plan to
participants who are officers and directors subject to Section 16(b) of the
Exchange Act without so restricting, limiting or conditioning other Plan
participants.
Subject to the provisions of this Plan, and with a view to effecting its
purpose, the Plan Administrator shall have sole authority, in its absolute
discretion, to (a) construe and interpret this Plan; (b) define the terms used
in this Plan; (c) prescribe, amend and rescind rules and regulations relating
to this Plan; (d) correct any defect, supply any omission or reconcile any
inconsistency in this Plan; (e) determine the individuals to whom Options shall
be granted under this Plan and whether the Option is an Incentive Stock Option
or a Non-Qualified Stock Option; (f) determine the time or times at which
Options shall be granted under this Plan; (g) determine the number of shares of
Common Stock subject to each Option, the exercise price of each Option, the
duration of each Option and the times at which each Option shall become
exercisable; (h) determine all other terms and conditions of Options; and (i)
make all other determinations necessary or advisable for the administration of
this Plan. All decisions, determinations and interpretations made by the Plan
Administrator shall be binding and conclusive on all participants in this Plan
and on their legal representatives, heirs and beneficiaries.
3. ELIGIBILITY.
Incentive Stock Options may be granted to any individual who, at the time the
Option is granted, is an employee of the Company or any Related Corporation (as
defined below), including employees who are directors of the Company
("Employees"). Non-Qualified Stock Options may be granted to Employees and to
such other persons as the Plan Administrator shall select. Options may be
granted in substitution for outstanding Options of another corporation in
connection with the merger, consolidation, acquisition of property or stock or
other reorganization between such other corporation and the Company or any
subsidiary of the Company. Options also may be granted in exchange for
outstanding Options. Any person to whom an Option is granted under this Plan is
referred to as an "Optionee."
<PAGE> 2
As used in this Plan, the term "Related Corporation," when referring to a
subsidiary corporation, shall mean any corporation (other than the Company) in
an unbroken chain of corporations beginning with the Company if, at the time of
the granting of the Option, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock of one of the other
corporations in such chain. When referring to a parent corporation, the term
"Related Corporation" shall mean any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if, at the time of
granting of the Option, each of the corporations other than the Company owns
stock possessing 50 percent or more of the total combined voting power of all
classes of stock of one of the other corporations in such chain.
4. STOCK.
The Plan Administrator is authorized to grant Options to acquire up to a total
of five hundred thousand (500,000) shares of the Company's authorized but
unissued, or reacquired, Common Stock. The number of shares with respect to
which Options may be granted hereunder is subject to adjustment as set forth in
Section 5(m) hereof. In the event that any outstanding Option expires or is
terminated for any reason, the shares of Common Stock allocable to the
unexercised portion of such Option may again be subject to an Option to the
same Optionee or to a different person eligible under Section 3 of this Plan.
5. TERMS AND CONDITIONS OF OPTIONS.
Each Option granted under this Plan shall be evidenced by a written agreement
approved by the Plan Administrator (the "Agreement"). Agreements may contain
such additional provisions, not inconsistent with this Plan, as the Plan
Administrator in its discretion may deem advisable. All Options also shall
comply with the following requirements:
(a) Number of Shares and Type of Option. Each Agreement shall state the
number of shares of Common Stock to which it pertains and whether the Option is
intended to be an Incentive Stock Option or a Non-Qualified Stock Option. The
aggregate fair market value (determined at the Date of Grant, as defined below)
of the stock with respect to which Incentive Stock Options are exercisable for
the first time by the Optionee during any calendar year (granted under this
Plan and all other Incentive Stock Option plans of the Company, a Related
Corporation or a predecessor corporation) shall not exceed $100,000, or such
other limit as may be prescribed by the Code as it may be amended from time to
time. Any Option which exceeds the annual limit shall not be void but rather
shall be a Non-Qualified Stock Option.
(b) Date of Grant. Each Agreement shall state the date the Plan
Administrator has deemed to be the effective date of the Option for purposes of
this Plan (the "Date of Grant").
(c) Option Price. Each Agreement shall state the price per share of Common
Stock at which it is exercisable. The exercise price shall be fixed by the Plan
Administrator at whatever price; the Plan Administrator may determine in the
exercise of its sole discretion; provided, that the per share exercise price
for any Option granted following the effective date of registration of any of
the Company's securities under Section 12 of the Exchange Act shall not be less
than the fair market value per share of the Common Stock at the Date of Grant
as determined by the Plan Administrator in good faith; provided further, that
the per share exercise price for an Incentive Stock Option shall not be less
than the fair market value per share of the Common Stock at the Date of Grant
as determined by the Plan Administrator in good faith; provided further, that
with respect to Incentive Stock Options granted to greater-than-10 percent
shareholders of the Company (as determined under Section 424(d) of the Code),
the exercise price per share shall not be less than 110 percent of the fair
market value per share of the Common Stock at the Date of Grant; and, provided
further, that Incentive Stock Options granted in substitution for outstanding
Options of another corporation in connection with the merger, consolidation,
acquisition of property or stock or other reorganization involving such other
corporation and the Company or any subsidiary of the Company may be granted
with an exercise price equal to the exercise price for the substituted Option
of the other corporation, subject to any adjustment consistent with the terms
of the transaction pursuant to which the substitution is to occur, in
accordance with Code Section 424(a).
(d) Duration of Options. At the time of the grant of the Option, the Plan
Administrator shall designate, subject to paragraph 5(g) below, the expiration
date of the Option, which date shall not be later than 10 years from the Date
of Grant in the case of Incentive Stock Options, provided, that the expiration
date of any Incentive Stock Option granted to a greater-than-10 percent
shareholder of the Company (as determined under Section 424(d) of the Code)
shall not be later than five years from the Date of Grant. In the absence of
action to the contrary by the Plan
<PAGE> 3
Administrator in connection with the grant of a particular Option and except in
the case of Incentive Stock Options as described above, all Options granted
under this Plan shall expire 10 years from the Date of Grant.
(e) Vesting Schedule. No Option shall be exercisable until it has
vested. The vesting schedule for each Option shall be specified by the Plan
Administrator at the time of grant of the Option, provided, that if no vesting
schedule is specified at the time of grant, the Option shall vest according to
the following schedule
<TABLE>
<CAPTION>
NUMBER OF YEARS PERCENTAGE OF TOTAL OPTION
FOLLOWING DATE OF GRANT TO BE VESTED
------------------------ ---------------------------
<S> <C>
1 33.3%
2 66.6%
3 100.0%
</TABLE>
(f) Acceleration of Vesting. The vesting of one or more outstanding
Options may be accelerated by the Plan Administrator at such times and in such
amounts as it shall determine in its sole discretion. The vesting of Options
also shall be accelerated under the circumstances described in Section 5(m).
(g) Term of Option. Vested Options shall terminate, to the extent not
previously exercised, upon the occurrence of the first of the following events:
(i) the expiration of the Option, as designated by the Plan Administrator in
accordance with Section 5(d) above; (ii) the expiration of three (3) months from
the date of an Employee Optionee's termination of employment with the Company or
any Related Corporation for any reason whatsoever other than death or disability
unless, in the case of a Non-Qualified Stock Option, the exercise period is
extended by resolution adopted by the Plan Administrator until a date not
later than the expiration date of the Option; or (iii) the expiration of one
year from (A) the date of death of the Optionee or (B) cessation of an Employee
Optionee's employment by reason of Disability (as defined below). If an Employee
Optionee's employment is terminated by death, any Option held by the Optionee
shall be exercisable only by the person or persons to whom such Optionee's
rights under such Option shall pass by the Optionee's will or by the laws of
descent and distribution of the state or county of the Employee Optionee's
domicile at the time of death. Notwithstanding the foregoing, an Optionee may
during the Optionee's lifetime, designate a person who may exercise the option
after the Optionee's death by giving written notice of such designation to the
Plan Administrator. Such designation may be changed from time to time by the
Optionee by giving written notice to the Plan Administrator revoking any earlier
designation and making a new designation. "Disability" shall have the same
meaning provided in Code Section 22(e)(3). The Plan Administrator shall
determine whether an Optionee has incurred a Disability on the basis of medical
evidence acceptable to the Plan Administrator. Upon making a determination of
Disability, the Committee shall, for purposes of the Plan, determine the date of
an Optionee's termination of employment.
Unless accelerated in accordance with Section 5(f) above, unvested Options shall
terminate immediately upon termination of employment of the Optionee by the
Company for any reason whatsoever, including death or disability. If, in the
case of an Incentive Stock Option, an Optionee's relationship with the Company
changes (e.g. from an Employee to a non-Employee, such as a consultant) such
change shall constitute a termination of an Optionee's employment with the
Company and the Optionee's Incentive Stock Option shall terminate in accordance
with this subsection. For purposes of this Plan, transfer of employment between
or among the Company and/or any Related Corporation shall not be deemed to
constitute a termination of employment with the Company or any Related
Corporations. For purposes of this subsection with respect to Incentive Stock
Options, employment shall be deemed to continue while the Optionee is on
military leave, sick leave or other bonafide leave of absence (as determined by
the Plan Administrator). The foregoing notwithstanding, employment shall not be
deemed to continue beyond the first 90 days of such leave, unless the Optionee's
re-employment rights are guaranteed by statute or by contract.
(h) Exercise of Options. Options shall be exercisable, either all or in
part, at any time after vesting until termination. If less than all of the
shares included in the vested portion of any Option are purchased, the
remainder may be purchased at any subsequent time prior to the expiration of
the Option term. No portion of any Option for less than 50 shares (as adjusted
pursuant to Section 5(m) below) may be exercised, provided that if the vested
portion of any Option is less than 50 shares, it may be exercised with respect
to all shares for which it is vested. Only whole shares may be issued pursuant
to an Option, and to the extent that an Option covers less than one share, it
is unexercisable. Options or portions thereof may be exercised by giving written
notice to the Company, which notice shall specify the number of shares to be
purchased and be accompanied by either (i) payment in the amount of the
aggregate exercise price for the Common Stock so purchased, which payment shall
be in the form specified in Section 5(i) below, or (ii)
<PAGE> 4
upon prior consent of the Plan Administrator, delivery of an irrevocable
subscription agreement obligating the Optionee to take and pay for the shares
of Common Stock to be purchased within one year of the date of such exercise.
The Company shall not be obligated to issue, transfer or deliver a certificate
of Common Stock to any Optionee, or to his personal representative, until the
aggregate exercise price has been paid for all shares for which the Option
shall have been exercised and adequate provision has been made by the Optionee
for satisfaction of any tax withholding obligations associated with such
exercise. During the lifetime of an Optionee, Options are exercisable only by
the Optionee.
(i) Payment upon Exercise of Option. Upon the exercise of any Option, the
aggregate exercise price shall be paid to the Company in cash or by certified
or cashier's check. In addition, upon approval of the Plan Administrator, an
Optionee may pay for all or any portion of the aggregate exercise price by
delivering to the Company shares of Common Stock previously held by such
Optionee or, upon the Optionee's request and the consent of the Plan
Administrator, by having shares withheld from the amount of shares of Common
Stock to be received by the Optionee, provided the Plan Administrator shall have
complete discretion whether to honor or deny the Optionee's request. The shares
of Common Stock received or withheld by the Company as payment for shares of
Common Stock purchased upon the exercise of Options shall have a fair market
value at the date of exercise (as determined by the Plan Administrator) equal
to the aggregate exercise price (or portion thereof) to be paid by the Optionee
upon such exercise.
(j) Rights as a Shareholder. An Optionee shall have no rights as a
shareholder with respect to any shares covered by an Option until such Optionee
becomes a record holder of such shares, irrespective of whether such Optionee
has given notice of exercise. Subject to the provisions of Section 5(m) hereof,
no rights shall accrue to an Optionee and no adjustments shall be made on
account of dividends (ordinary or extraordinary, whether in cash, securities or
other property) or distributions or other rights declared on, or created in,
the Common Stock for which the record date is prior to the date the Optionee
becomes a record holder of the shares of Common Stock covered by the Option,
irrespective of whether such Optionee has given notice of exercise.
(k) Transfer of Option. Options granted under this Plan and the rights
and privileges conferred by this Plan may not be transferred, assigned, pledged
or hypothecated in any manner (whether by operation of law or otherwise) other
than by will or by applicable laws of descent and distribution, and shall not
be subject to execution, attachment or similar process. Upon any attempt to
transfer, assign, pledge, hypothecate or otherwise dispose of any Option or of
any right or privilege conferred by this Plan contrary to the provisions
hereof, or upon the sale, levy or any attachment or similar process upon the
rights and privileges conferred by this Plan, such Option shall thereupon
terminate and become null and void. The foregoing notwithstanding, with respect
to a Non-Qualified Stock Option, an Optionee may transfer the Option to a
revocable trust created by the Optionee for the benefit of his or her
descendants, to an immediate family member or to a partnership in which only
immediate family members or such trusts are partners.
(l) Securities Regulation and Tax Withholding
(1) Shares shall not be issued with respect to an Option unless the
exercise of such Option and the issuance and delivery of such shares shall
comply with all relevant provisions of law, including, without limitation,
any applicable state securities laws, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations thereunder and the
requirements of any stock exchange upon which such shares may then be
listed, and such issuance shall be further subject to the approval of
counsel for the Company with respect to such compliance, including the
availability of an exemption from registration for the issuance and sale of
such shares. The inability of the Company to obtain from any regulatory
body the authority deemed by the Company to be necessary for the lawful
issuance and sale of any shares under this Plan, or the unavailability of
an exemption from registration for the issuance and sale of any shares
under this Plan, shall relieve the Company of any liability with respect to
the non-issuance or sale of such shares.
As a condition to the exercise of an Option, the Company may require the
Optionee to represent and warrant in writing at the time of such exercise
that the shares are being purchased only for investment and without any
then-present intention to sell or distribute such shares. At the option of
the Company, a stop-transfer order against such shares may be placed on
the stock books and records of the Company, and a legend indicating that
the stock may not be pledged, sold or otherwise transferred unless an
opinion of counsel is provided.
<PAGE> 5
stating that such transfer is not in violation of any applicable law or
regulation, may be stamped on the certificates representing such shares in order
to assure an exemption from registration. The Plan Administrator may also
require such other documentation as may from time to time be necessary to comply
with federal and state securities laws. THE COMPANY HAS NO OBLIGATION TO
UNDERTAKE REGISTRATION OF OPTIONS OR THE SHARES OF STOCK ISSUABLE UPON THE
EXERCISE OF OPTIONS.
(2) As a condition to the exercise of any Option granted under this Plan,
the Optionee shall make such arrangements as the Plan Administrator may require
for the satisfaction of any federal, state or local withholding tax obligations
that may arise in connection with such exercise.
(3) The issuance, transfer or delivery of certificates of Common Stock
pursuant to the exercise of Options may be delayed, at the discretion of the
Plan Administrator, until the Plan Administrator is satisfied that the
applicable requirements of the federal and state securities laws and the
withholding provisions of the Code have been met.
(m) Stock Dividend, Reorganization or Liquidation.
(1) If (i) the Company shall at any time be involved in a transaction
described in Section 424(a) of the Code (or any successor provision) or any
"corporate transaction" described in the regulations thereunder; (ii) the
Company shall declare a dividend payable in, or shall subdivide or combine, its
Common Stock; or (iii) any other event with substantially the same effect shall
occur, the Plan Administrator shall, with respect to each outstanding Option,
proportionately adjust the number of shares of Common Stock and/or the exercise
price per share so as to preserve the rights of the Optionee substantially
proportionate to the rights of the Optionee prior to such event, and to the
extent that such action shall include an increase or decrease in the number of
shares of Common Stock subject to outstanding Options, the number of shares
available under Section 4 of this Plan shall automatically be increased or
decreased, as the case may be, proportionately, without further action on the
part of the Plan Administrator, the Company or the Company's shareholders. The
foregoing adjustments in the shares subject to Options shall be made by the Plan
Administrator, or by any successor administrator of this Plan, or by the
applicable terms of any assumption or substitution document.
(2) If the Company is liquidated or dissolved, Options must be exercised
prior to the effective date of such liquidation or dissolution. If the Option
holders do not exercise their Options prior to such effective date, each
outstanding Option shall terminate as of the effective date of the liquidation
or dissolution.
(3) The grant of an Option shall not affect in any way the right or power
of the Company to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, to merge, consolidate or dissolve,
to liquidate or to sell or transfer all or any part of its business or assets.
6. EFFECTIVE DATE; TERM.
This Plan shall be effective as of April 1, 1997. Options may be granted by the
Plan Administrator from time to time thereafter until April 1, 2007. Termination
of this Plan shall not terminate any Option granted prior to such termination.
Any Incentive Stock Options granted by the Plan Administrator prior to the
approval of this Plan by a majority of the shareholders of the Company shall be
granted subject to ratification of this Plan by the shareholders of the Company,
and if shareholder ratification is not obtained, each and every Incentive Stock
Option shall become a Non-Qualified Stock Option.
7. NO OBLIGATIONS TO EXERCISE OPTION.
The grant of an Option shall impose no obligation upon the Optionee to exercise
such Option.
8. NO RIGHT TO OPTIONS OR TO EMPLOYMENT.
Whether or not any Options are to be granted under this Plan shall be
exclusively within the discretion of the Plan Administrator, and nothing
contained in this Plan shall be construed as giving any person any right to
participate under this Plan. The grant of an Option shall in no way constitute
any form of agreement or understanding binding on the Company or any Related
Corporation, express or implied, that the Company or any Related Corporation
will employ or contract with an Optionee for any length of time.
<PAGE> 6
9. APPLICATION OF FUNDS.
The proceeds received by the Company from the sale of Common Stock issued upon
the exercise of Options shall be used for general corporate purposes, unless
otherwise directed by the Board.
10. INDEMNIFICATION OF PLAN ADMINISTRATOR.
In addition to all other rights of indemnification they may have as members
of the Board, members of the Plan Administrator shall be indemnified by
the Company for all reasonable expenses and liabilities of any type or nature,
including attorneys' fees, incurred in connection with any action, suit or
proceeding to which they or any of them are a party by reason of, or in
connection with, this Plan or any Option granted under this Plan, and against
all amounts paid by them in settlement thereof (provided that such settlement
is approved by independent legal counsel selected by the Company), except to
the extent that such expenses relate to matters for which it is adjudged that
such Plan Administrator member is liable for willful misconduct, provided, that
within 15 days after the institution of any such, action, suit or proceeding,
the Plan Administrator member involved therein shall, in writing, notify the
Company of such action, suit or proceeding, so that the Company may have the
opportunity to make appropriate arrangements to prosecute or defend the same.
11. AMENDMENT OF PLAN.
The Plan Administrator may, at any time modify, amend or terminate this
Plan and Options granted under this Plan, provided, that no amendment with
respect to an outstanding Option shall be made over the objection of the
Optionee thereof; and provided further, that the approval of the holders of a
majority of the Company's outstanding shares of voting capital stock is
required within 12 months before or after the adoption by the Plan
Administrator of any amendment that (i) will permit the granting of Options to
a class of persons other than those currently eligible to receive Options under
this Plan; (ii) will increase the number of shares available pursuant to
Options issued under this Plan; or (iii) require shareholder approval under
applicable law, including Section 16(b) of the Exchange Act. Without limiting
the generality of the foregoing, the Plan Administrator may modify grants to
persons who are eligible to receive Options under this Plan who are foreign
nationals or employed outside the United States to recognize differences in
local law, tax policy or custom.
Date Approved by Board of Directors of Company March 31, 1997
<PAGE> 7
Exhibit A
Notice of Election to Exercise
This Notice of Election to Exercise shall constitute proper notice pursuant to
Section 5(h) of the Software Testing Laboratories, Inc. 1995 Stock Option Plan
(the "Plan") and Section 7 of that certain Non-qualified Stock Option Agreement
(the "Agreement") dated as of __________________ between Software Testing
Laboratories, Inc. (the "Company") and the undersigned.
The undersigned hereby elects to exercise Optionee's option to purchase _______
shares of the common stock of the Company at a purchase price of $_________ per
share, for aggregate consideration of $_______, on the terms and conditions set
forth in the Agreement and the Plan. Such aggregate consideration, in the form
specified in Section 7 of the Agreement, accompanies this Notice.
The undersigned has executed this Notice this __ day of ______________, _____.
OPTIONEE
______________________________
Name (type or print)
______________________________
Signature
-4-
<PAGE> 1
Exhibit 5.1
Data Dimensions, Inc.
One Bellevue Center
411 - 108th Avenue NE, Suite 2100
Bellevue, Washington 98004
RE: 157,625 SHARES OF COMMON STOCK ($.001 PAR VALUE PER SHARE) OF DATA
DIMENSIONS, INC. (THE "COMPANY")
Ladies and Gentlemen:
We have acted as counsel to you in connection with the preparation of a
Registration Statement on Form S-8 (the "Registration Statement") pursuant to
the Securities Act of 1933, as amended (the "Act"), which you are filing with
the Securities and Exchange Commission with respect to 157,625 shares of Common
Stock, $.001 par value per share (the "Shares"), which are to be issued pursuant
to the ST Labs, Inc. (formerly Software Testing Laboratories, Inc.) 1995 Stock
Option Plan and the ST Labs 1997 Stock Option Plan (collectively, the "Plans").
We have examined the Registration Statement and such other documents and records
of the Company, as we have deemed relevant and necessary for the purposes of
this opinion.
Based upon and subject to the foregoing, we are of the opinion that the
Shares that will be issued pursuant to the Plans, upon the due execution by the
Company and the registration by its registrar of the Shares and the issuance
thereof by the Company in accordance with the terms of the Plans, and the
receipt of consideration therefor in accordance with the terms of the Plans,
will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. In giving such consent, we do not admit that we are in
the category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
GARVEY, SCHUBERT & BARER
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Data Dimensions, Inc.
One Bellevue Center
411 - 108th Avenue NE, Suite 2100
Bellevue, Washington 98004
RE: DATA DIMENSIONS, INC. FORM S-8
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 of Data Dimensions, Inc. of our report dated February 17,
1998, appearing on page F-2 of Data Dimensions, Inc.'s Annual Report on Form
10-KSB for the year ended December 31, 1997.
BDO SEIDMAN, LLP
Seattle, Washington
September 10, 1998
<PAGE> 1
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Data Dimensions, Inc.
One Bellevue Center
411 - 108th Avenue NE, Suite 2100
Bellevue, Washington 98004
RE: DATA DIMENSIONS, INC. FORM S-8
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-8 of our report dated July 13, 1998 relating
to the financial statements of ST Labs, Inc., which appears in the Current
Report on Form 8-K of Data Dimensions, Inc., dated August 7, 1998.
PRICEWATERHOUSECOOPERS LLP
Seattle, Washington
September 8, 1998
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
Know by all these presents, that the undersigned hereby constitutes and
appoints Gordon A. Gardiner and Larry W. Martin, or either of them, the
undersigned's true and lawful attorney-in-fact to:
(1) execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of Data Dimensions, Inc.
(the "Company"), a registration statement on Form S-8,
registering 157,625 shares of the Company's Common Stock
issuable upon exercise of options granted pursuant to the ST
Labs 1995 and 1997 Stock Option Plans.
(2) do and perform any and all acts or and on behalf of the
undersigned which may be necessary or desirable to complete
and execute any such registration statement on Form S-8 and
timely file such registration statement with the United States
Securities and Exchange Commission and any stock exchange or
similar authority; and
(3) take any other action of any type whatsoever in connection
with the foregoing which, in the opinion of such
attorney-in-fact, may be of benefit to, in the best interest
of, or legally required by, the undersigned, it being
understood that the documents executed by such
attorney-in-fact on behalf of the undersigned pursuant to this
Power of Attorney shall be in such form and shall contain such
terms and conditions as such attorney-in-fact may approve in
such attorney-in-fact's discretion.
The undersigned hereby grants to such attorney-in-fact full power and
authority to do and perform any and every act and thing whatsoever requisite,
necessary, or proper to be done in the exercise of any of the rights and powers
herein granted, as fully to all intents and purposes as the undersigned might or
could do if personally present, with full power of substitution or revocation,
hereby ratifying and confirming all that such attorney-in-fact, or such
attorney-in-fact's substitute or substitutes, shall lawfully do or cause to be
done by virtue of this Power of Attorney and the rights and powers herein
granted.
This Power of Attorney shall remain in full force and effect until
revoked by the undersigned in a signed writing delivered to the foregoing
attorney-in-fact.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this _____ day of ___________________, 1998.
/s/ THOMAS W. FIFE
-----------------------------------
Thomas W. Fife
<PAGE> 1
EXHIBIT 24.2
POWER OF ATTORNEY
Know by all these presents, that the undersigned hereby constitutes and
appoints Gordon A. Gardiner and Larry W. Martin, or either of them, the
undersigned's true and lawful attorney-in-fact to:
(1) execute for and on behalf of the undersigned, in the
undersigned's capacity as a director of Data Dimensions, Inc.
(the "Company"), a registration statement on Form S-8,
registering 157,625 shares of the Company's Common Stock
issuable upon exercise of options granted pursuant to the ST
Labs 1995 and 1997 Stock Option Plans.
(2) do and perform any and all acts or and on behalf of the
undersigned which may be necessary or desirable to complete
and execute any such registration statement on Form S-8 and
timely file such registration statement with the United States
Securities and Exchange Commission and any stock exchange or
similar authority; and
(3) take any other action of any type whatsoever in connection
with the foregoing which, in the opinion of such
attorney-in-fact, may be of benefit to, in the best interest
of, or legally required by, the undersigned, it being
understood that the documents executed by such
attorney-in-fact on behalf of the undersigned pursuant to this
Power of Attorney shall be in such form and shall contain such
terms and conditions as such attorney-in-fact may approve in
such attorney-in-fact's discretion.
The undersigned hereby grants to such attorney-in-fact full power and
authority to do and perform any and every act and thing whatsoever requisite,
necessary, or proper to be done in the exercise of any of the rights and powers
herein granted, as fully to all intents and purposes as the undersigned might or
could do if personally present, with full power of substitution or revocation,
hereby ratifying and confirming all that such attorney-in-fact, or such
attorney-in-fact's substitute or substitutes, shall lawfully do or cause to be
done by virtue of this Power of Attorney and the rights and powers herein
granted.
This Power of Attorney shall remain in full force and effect until
revoked by the undersigned in a signed writing delivered to the foregoing
attorney-in-fact.
IN WITNESS WHEREOF, the undersigned has caused this Power of Attorney
to be executed as of this _____ day of ___________________, 1998.
/s/ LUCIE J. FJELDSTAD
-----------------------------------
Lucie J. Fjeldstad
<PAGE> 1
EXHIBIT 99.1
STOCK OPTION ASSUMPTION AGREEMENT
STOCK OPTION ASSUMPTION AGREEMENT (this "Agreement") dated as of the
___ day of __________, 1998 by Data Dimensions, Inc., a Delaware corporation
("DDI") and the undersigned individual ("Optionee").
WHEREAS, Optionee holds one or more outstanding options to purchase
shares of the common stock of ST Labs, Inc., a Washington corporation ("STL"),
which were granted to Optionee under either the STL 1995 Stock Option Plan or
the STL 1997 Stock Option Plan (together, the "Plans"), and each of which is
evidenced by a Stock Option Agreement (the "Option Agreement") between STL and
Optionee;
WHEREAS, pursuant to the Agreement and Plan of Reorganization dated as
of July 28, 1998 by and among DDI, STL, DS Acquisition Corporation and certain
shareholders of STL (the "Reorganization Agreement"), STL will be acquired by
DDI through a merger of a wholly-owned DDI subsidiary ("DS Acquisition
Corporation") with and into STL (the "Merger");
WHEREAS, the provisions of the Reorganization Agreement require DDI to
assume all obligations of STL under all options outstanding under the Plans upon
the consummation of the Merger (the "Effective Time") and to issue to the holder
of each outstanding option an agreement evidencing the assumption of such
option;
WHEREAS, pursuant to the provisions of the Reorganization Agreement,
all outstanding shares of STL Common Stock will be converted into shares of the
Common Stock, par value $0.001, of DDI ("DDI Stock") in accordance with an
exchange ratio (the "Exchange Ratio") determined as set forth in Exhibit A
attached hereto;
WHEREAS, this Agreement is effective immediately upon the Effective
Time in order to reflect certain adjustments to Optionee's outstanding options
under the Plans which have become necessary by reason of the assumption of those
options by DDI in connection with the Merger.
NOW, THEREFORE, it is hereby agreed as follows:
1. The stock options held by Optionee under the Plans immediately prior
to the Effective Time (the "STL Options") and the exercise price payable per
share are set forth in Exhibit B hereto. DDI hereby assumes, as of the Effective
Time, all the duties and obligations of STL under each of the STL Options. In
connection with such assumption, the number of shares of DDI Stock issuable
under each STL Option hereby assumed and the exercise price payable thereunder
shall be adjusted to reflect the Exchange Ratio. After completion of the Merger,
DDI will notify Optionee of the exact number of shares of DDI Stock subject to
each STL Option hereby assumed, and the adjusted exercise price payable per
share of DDI Stock under such assumed STL Option.
1
<PAGE> 2
2. The intent of the foregoing adjustments to each assumed STL Option
is to assure that the spread between the aggregate fair market value of the
shares of DDI Stock issuable under each such option and the aggregate exercise
price as adjusted pursuant to this Agreement will, immediately after the
consummation of the Merger, equal the spread that existed, immediately prior to
the Merger, between the then aggregate fair market value of the STL common stock
("STL Stock") subject to the STL Option and the aggregate exercise price in
effect at such time under the Option Agreement. Such adjustments are also
designed to preserve, immediately after the Merger, on a per share basis, the
same ratio of exercise price per option share to fair market value per share
which existed under the STL Option immediately prior to the Merger.
3. The following provisions shall govern each STL Option hereby assumed
by DDI:
(a) Unless the context otherwise requires, all references to the
"Company" in each Option Agreement and in the Plans (as incorporated into such
Option Agreement) shall mean DDI, all references to "Common Stock" shall mean
shares of DDI Stock, and all references to the "Board of Directors" or the
"Committee" shall mean the Board of Directors of DDI or the Compensation
Committee of such Board.
(b) The grant date and the expiration date of each assumed STL
Option and all other provisions which govern either the exercisability or the
termination of the assumed STL Option shall remain the same as set forth in the
Option Agreement applicable to that option and shall accordingly govern and
control Optionee's rights under this Agreement to purchase DDI Stock.
(c) The minimum exercise requirement, if any, under each assumed STL
Option shall be adjusted in accordance with the Exchange Ratio. However, such
requirement shall not be applicable to the extent the assumed STL Option is
exercised for the total number of shares of DDI Stock at the time issuable
thereunder.
(d) In accordance with the provisions of the Plans, at the Effective
Time, each assumed STL Option granted thereunder shall become fully exercisable
without regard to the vesting schedule in effect under the applicable Option
Agreement immediately prior to the Effective Time.
(e) For purposes of applying any and all provisions of the Option
Agreement relating to Optionee's continuous status as an employee, director or
consultant with the Company, Optionee shall be deemed to continue in such status
for so long as Optionee renders services as an employee, director or consultant
to DDI or any present or future DDI subsidiary, including (without limitation)
STL. Accordingly, the provisions of the Option Agreement governing Optionee's
status as an employee, director or consultant with STL shall hereafter be
applied on the basis of Optionee's status with DDI and its subsidiaries.
(f) The adjusted exercise price payable for the DDI Stock subject to
each assumed STL Option shall be payable in any of the forms authorized under
the Option Agreement applicable to that option.
2
<PAGE> 3
(g) In order to exercise each assumed STL Option, Optionee must
deliver to DDI a written notice of exercise in which the number of shares of DDI
Stock to be purchased thereunder must be indicated. The exercise notice must be
accompanied by payment of the adjusted exercise price payable for the purchased
shares of DDI Stock and should be delivered to DDI at the following address:
Data Dimensions, Inc.
411 - 108th Avenue N.E., Suite 2100
Bellevue, Washington 98004
Attn: Human Resources Department
4. Optionee hereby agrees that Optionee will not transfer or otherwise
reduce such Optionee's risks relative to the shares of DDI Common Stock acquired
upon exercise of the STL Options until such time as DDI notifies the Optionee
that the requirements of Accounting Series Release Numbers ("ASR") 130 and 135,
as amended, promulgated by the Securities and Exchange Commission (the "SEC"),
have been met. Optionee understands that ASR 130 and 135 relate to the
publication of financial results of post-closing combined operations of DDI and
STL. DDI agrees that it will publish such results on or before the date that the
SEC requires DDI to file a quarterly or annual report with respect to the first
three month fiscal quarter after the Effective Time which includes thirty (30)
days of post-closing operating results, the period of post-closing operations
required by ASR 130 and 135.
5. Except to the extent specifically modified by this Agreement, all of
the terms and conditions of each Option Agreement as in effect immediately prior
to the Merger shall continue in full force and effect and shall not in any way
be amended, revised or otherwise affected by this Agreement. Optionee
understands that all rights and liabilities with respect to each of his or her
STL Options hereby assumed by DDI are as set forth in the Option Agreement, the
Plans and this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed as of the date first above written.
DATA DIMENSIONS, INC. OPTIONEE
By: By
--------------------------------- ---------------------------------
(SIGNATURE OF OPTIONEE)
--------------------------------- ---------------------------------
(PRINT NAME) (PRINT NAME)
---------------------------------
(TITLE)
3
<PAGE> 4
EXHIBIT A
Calculation of Exchange Ratio
The Exchange Ratio is equal to the quotient obtained by dividing (i)
the amount obtained by dividing (a) $9,675,000 by (b) the Parent Average Closing
Price, by (ii) the number of Fully Diluted Company Shares at the Effective Time.
The "Parent Average Closing Price" is the average of the closing prices
of DDI Common Stock as reported in the Wall Street Journal beginning on and
including July 28, 1998 and ending on and including the date that is two (2)
trading days prior to the Closing Date; provided that (i) if such average is
less than $14.00, the "Parent Average Closing Price" shall be $14.00, and (ii)
if such average is more than $16.00, the "Parent Average Closing Price" shall be
$16.00. "Fully Diluted Company Shares" shall mean the sum of (i) the number of
shares of STL Common Stock outstanding as of the Effective Time plus (ii) the
number of shares of STL Common Stock subject to issuance pursuant to stock
options outstanding under STL Stock Option Plans, plus (iii) 58,690 shares of
STL Common Stock to be converted into shares of DDI Common Stock at the Exchange
Ratio in exchange for a warrant held by U.S. Bancorp.
4
<PAGE> 5
EXHIBIT B
Optionee's Outstanding Options to Purchase Shares of
ST Labs, Inc.
Common Stock (Pre-merger)
Number of Option Shares Exercise Price
----------------------- --------------
5
