As filed with the Securities and Exchange Commission on April 23, 1996.
Registration No. 33-42609
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form S-8
REGISTRATION STATEMENT
(Post effective Amendment No. 1)
Under
THE SECURITIES ACT OF 1933
SOURCE SCIENTIFIC, INC.
(Exact Name of Issuer as Specified in its Charter)
California 95-2943936
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
7390 Lincoln Way, Garden Grove, California 92641
(Address of Principal Executive Offices)
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SOURCE SCIENTIFIC, INC. 1981 STOCK OPTION PLAN
(Full Title of Plan)
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Richard A. Sullivan
7390 Lincoln Way, Garden Grove, California 92641
(Name and Address of Agent for Service)
(714) 898-9001
(Telephone Number, Including Area Code, of Agent for Service)
Copy to:
Randolf W. Katz, Esq.
Arter & Hadden
5 Park Plaza, Suite 1000, Irvine, California 92715
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CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of Securities Proposed Amount Proposed Maximum Maximum Aggregate Amount of
To Be Registered To Be Registered Offering Price Per Share Offering Price Registration Fee
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<S> <C> <C> <C> <C>
Common Stock, 2,375,000 (2) $0.14 (3) $332,500 (1) $111.21
no par value
(1) Estimated solely for the purpose of calculating the registration fee.
(2) The number of additional securities being registered with this
post-effective amendment. The aggregate number of securities in the Plan
including the additional securities being registered herein, is 3,500,000.
(3) The Proposed Maximum offering Price Per Share and the Proposed Maximum Agg-
regate Offering Price have been computed upon (i) the exercise price for
outstanding options, and (ii) pursuant to Rule 457(b), with respect to shares
not subject to outstanding options, the closing sale price of the Common Stock
on the Boston Stock Exchange on April 19, 1996.
</TABLE>
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<PAGE>
PART II INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
This is Post-effective Amendment Number 1to the Registration Statement
numbered 33-42609, filed with the Securities and Exchange Commission (the
"Commission"), on September 4, 1991 on Form S-8. The following documents filed
by Source Scientific, Inc. (formerly Alton Group, Inc.; formerly Wespercorp), a
California corporation (the "Company"), with the Commission are incorporated
herein by this reference and made a part hereof:
(a) The Company's Annual Report on Form 10-KSB for the year ended
June 30, 1995;
(b) All other reports filed by the Company pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 since June 30,
1995; Proxy Statement dated October 1, 1993 amending the 1981
Stock Option Plan (the "Plan"), for 875,000 additional shares
under the Plan, as approved by the shareholders of the Company at
the Annual Meeting of Shareholders on November 30, 1993; Proxy
Statement dated October 27, 1994 amending the Plan for 1,500,000
additional shares under the Plan, as approved by the shareholders
of the Company at the Annual Meeting of Shareholders on December
14, 1994;
Item 4. Description of Securities.
The Common Stock has been registered under Section 12 of the Securities
Exchange Act of 1934.
Item 5. Interest of Named Experts and Counsel.
Inapplicable.
Item 6. Indemnification of Directors and Officers
Section 317 of the California General Corporation Law provides that the
Company may indemnify an officer or director who was made a party to a
"proceeding" (including a lawsuit or derivative action) because of his position,
if he acted in good faith and in a manner he reasonably believed to be in the
best interests of the Company, and may advance expenses incurred in defending
any proceeding in certain cases. If the director or officer is successful on the
merits, he must be indemnified against all expenses incurred, including
attorneys' fees. With respect to derivative actions, indemnity can be made only
for expenses actually and reasonably incurred in defending the proceedings, and,
if the officer or director is adjudged liable, only by court order.
The Articles of Incorporation of the Company authorize the Company, by
Bylaws, agreement or otherwise, to indemnify its officers and directors in
excess of that permitted by Section 317 for breach of duty to the Company and
Stockholders, subject to certain exceptions. Pursuant to such provision, the
Company has entered into an agreement with one of its directors and officers to
provide indemnification and excess of that permitted by Section 317. In general,
pursuant to this agreement, among other things, the indemnitee must be
indemnified by the Company unless he did not act in good faith and in a manner
he reasonably believed to be in the best interest of the Company, and the
Company must advance expenses to him incurred in defending any proceeding.
Insofar as indemnification for liabilities arising under the Securities
Act. of 1933, as amended, is permitted to directors and officers of the Company
pursuant to the above statutory provisions, the Company understands that the
Securities and Exchange Commission is of the opinion that such indemnification
contravenes federal public policy as expressed in said Act and therefore is
unenforceable
<PAGE>
Item 7. Exemption from Registration Claimed.
Inapplicable
Item 8. Exhibits
4.1 1981 Stock Option Plan as amended, revised and updated
February 25, 1991 (Incorporated by reference, Exhibit 4.1 to
Form S-8 Registration Statement 33-42609, August 27, 1991.)
4.2 Form of Stock Option Agreement under the 1981 Stock Option
Plan (Incorporated by reference, Exhibit 4.2 to Form S-8
Registration Statement 33-42609, August 27, 1991.)
4.3 1981 Stock Option Plan as amended December 14, 1994, and
revised January 15, 1996.
4.4 Form of Incentive Stock Option Agreement under the 1981 Stock
Option Plan.
4.5 Form of Non-Statutory Stock Option Agreement under the 1981
Stock Option Plan.
4.6 Statement of Amendments of the Stock Option Plan Registration
Statement 33-42609
5.1 Opinion of Arter & Hadden.
24.1 Consent of Coopers & Lybrand, L.L.P.
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:
(a) to include any prospectus required by Section 10(a) (3) of the
Securities Act of 1933, (b) to reflect in the prospectus any facts or
events arising after the effective date of the 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 the registration statement; or (c) to include
any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration statement; provided,
however, that paragraphs (1) (a) and (1) (b) 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 Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, as amended, 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
hereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's Annual report pursuant to section 13(a) or Section
15(d) of the securities Exchange Act of 1934 that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is,
<PAGE>
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 a controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the act and will be governed by the final adjudication of
such issues.
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 Irvine, State of California, on this 15th day of
April, 1996.
SOURCE SCIENTIFIC, INC.
By: /s/ Richard A. Sullivan Richard A. Sullivan, President, CEO
and Director
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date indicated. Each person whose signature appears below
authorizes Richard A. Sullivan or Catherine Curtis, Secretary, or any of them as
attorney-in-fact, to sign all amendments to this Registration Statement.
SIGNATURES TITLES DATES
/s/ Richard A. Sullivan Director, President and
Richard A. Sullivan Chief Executive Officer April 15, 1996
/s/ Susan L. Preston Director, Counsel
Susan L. Preston April 15, 1996
/s/ John A. Karsten Director
John A. Karsten April 15, 1996
/s/ Thomas J. White Director
Thomas J. White April 15, 1996
/s/ Bruce Popko Director
Bruce Popko April 15, 1996
/s/ Jerry Gallwas Director
Jerry Gallwas April 15, 1996
/s/ Mokhtar A. Shawky Chief Financial Officer
Mokhtar A. Shawky April 15, 1996
SOURCE SCIENTIFIC, INC. 1981 STOCK OPTION PLAN
(REVISED AND UPDATED January 15, 1996 as
AMENDED at the Annual Shareholders' Meeting,
December 14, 1994.)
PART A.
1. PURPOSE
This 1981 Stock Option Plan (the "Plan") is intended to be an incentive
to, and to encourage stock ownership by selected employees and affiliates of
SOURCE SCIENTIFIC, INC., formerly known as Alton Group, Inc. (the "Company") or
a Subsidiary, so that such employees may acquire or increase a proprietary
interest in the Company. For purposes of this Plan, a "Subsidiary" in any
corporation which qualifies as a "subsidiary corporation" of the Company under
Section 425 of the Internal Revenue Code of 1954, as amended (the "Code"), and a
"parent" is any corporation which qualifies as a "parent corporation" of the
Company under Section 425 of the Code.
Two types of options may be issued under the Plan: options which are
intended to qualify as incentive stock options, as that term is defined in
Section 422A of the Code ("incentive stock options") and options which are
intended not to qualify as incentive stock options ("non-statutory stock
options"). Incentive stock options and non-statutory stock options are sometimes
referred to in the Plan collectively as "options." The Plan is not subject to
provisions of the Employee Retirement Income Security Act of 1974 ("ERISA").
2. ADMINISTRATION
(a) Subject to Section 2(b) of the Plan, the Plan shall be administered
by the Board of Directors of the Company (the "Board"). Subject to the
provisions of the Plan, the Board shall have authority to construe and interpret
the Plan, to promulgate, amend and rescind rules and regulations relating to its
administration, from time to time, to select from among the eligible persons (as
determined pursuant to Section 3 below) of the Company and its Subsidiaries
those persons to whom options will be granted, to determine the timing and
manner of the grant of the options, to determine the exercise price, the number
of shares covered by and all other terms of the options, and to make all of the
determinations necessary or advisable for administration of the Plan. The
interpretation and construction by the Board of any provision of interpretation
and construction by the Board of any provision of interpretation and
construction by the Board of any provision of the Plan, or if any agreement
issued and executed under the Plan, shall be final and binding upon all parties.
No member of the Board shall be liable for any action or determination
undertaken or made in good faith with respect to the Plan or any agreement
issued and executed under or pursuant to the Plan.
(b) The Board may, at its sole discretion, delegate any or all of its
administerial duties to the Compensation Committee (the "Committee") of not less
than three members of the Board to be appointed by and serve at the pleasure of
the Board. From time to time, the Board may increase or decrease (to not less
than three members) the size of the Committee, and add additional members to, or
remove members from, the Committee. The Committee shall act pursuant to a
majority vote, or the written consent of a majority of its members, and minutes
shall be kept of all of its meetings and copies thereof shall be provided to the
Board. Subject to the limitations prescribed by the Plan and the Board, the
Committee may establish and follow such rules and regulations for the conduct of
its business as it may deem advisable.
3. ELIGIBILITY
(a) Subject to the restrictions set forth in Sections 3(b) and 3(c) of
the Plan, any employee (including any officer who is a Director) of the Company
or any Subsidiary who does not own more than 10% of the total combined voting
power of all classes of shares of the Company shall be eligible to receive an
option under the Plan. An employee may receive more than one option under the
Plan.
(b) No employee shall be eligible to receive in any calendar year
incentive stock options to purchase shares of the Company 's Common Stock under
the Plan or any other plan within the meaning of Section 422A(b) of the Code of
the Company or any Parent or Subsidiary ("Related Plan"), which shares have an
aggregate Fair Market Value (determined as of the date the incentive stock
options are granted) in excess of $100,000 plus the Unused Limit Carryover for
the employee for each of the three prior calendar years provided that there
shall be no Unused Limit carryover for any calendar year prior to calendar year
1981.
(c) The persons who shall be eligible to purchase shares of the Common
Stock of the Company (the "Stock") under the Plan shall be those persons who are
qualified under one category of the following: (i) employee, (ii) outside
director, (iii) consultant and advisor of the Company or a Subsidiary
corporation of the Company, who are from time to time selected as eligible
employees by the Board of the Company. A person who has purchased shares under
the Plan (a "Purchaser") may be granted the right to purchase additional shares
under the Plan at a later date; however, no person shall be offered the
opportunity to purchase shares of the stock if after such purchase he would own
stock having in the aggregate more than five percent of the total combined
voting power or value of all outstanding equity securities of the Company.
(d) At the time of the grant of each option under this Plan for a
person qualified as an employee, the Committee shall determine whether such
option is to be designated as an Incentive Stock Option. If an option is to be
designated as an Incentive Stock Option, then the provisions of Section 3 of the
Plan shall be made applicable to such option. In addition, an option to be
granted to any employee who, at the time of such grant, owns stock possessing
more than ten percent of the total combined voting power of all classes of stock
of the Company or any Subsidiary, is not entitled to be designated as an
incentive stock option.
(e) The aggregate fair market value of the stock for which any employee
may be granted options designated as incentive stock options in any calendar
year shall not exceed $100,000 plus any unused limit carryover (as defined
below) to such year from any prior calendar year beginning on or after January
1, 1995. The unused limit carryover from any such calendar year shall be
one-half of any excess of $100,000 over the aggregate fair market value of the
stock for which an employee was granted options that qualify (whether from their
issuance or as a result of subsequent amendment and election by the Company) as
incentive stock options in any such calendar year The unused limit for any
calendar year shall be carried forward for three (3) years. incentive stock
options granted in any year shall be applied against the current year limitation
first and then against the remaining unused limit carryovers to such year in the
order of the calendar year in which the carryovers arose.
(f) The time of the grant of each option under this Plan for a person
qualified as an outside director, shall be the effective date of the director's
admittance or election to the Board of the Directors of the Company, and shall
be in the amounts established by the Committee from time to time for the
directors' options. Vesting of the Options shall be in increments of one-quarter
of the grant for each ninety (90) days of service on the Board completed by the
director. All grants of options under the Plan for person qualified as an
outside director, as a consultant or as an advisor shall not be incentive stock
options.
(g) At the time of the grant of each option under this Plan for a
person qualified as a consultant or advisor, the Committee shall determine the
amount, conditions and terms of the grant.
(h) As of January 14, 1996, the Plan Administrators (Members of the
Compensation Committee) are: John Karsten, 7390 Lincoln Way, Garden Grove,
California, 92641; Susan Preston, 7390 Lincoln Way, Garden Grove, California,
92641 and Thomas J. White, 7390 Lincoln Way, Garden Grove, California, 92641;,
all of whom are Directors of the Company.
The unused Limit Carryover for any employee for any calendar year shall
mean that portion of the Limit Carryover for such employee for such calendar
year to which no portion of the Excess Amount for such employee for any
subsequent calendar year has been allocated (the Excess Amount for any employee
for any calendar year shall be allocated first to the Unused Limit Carryover for
such employee for the third preceding calendar year, then for the second
preceding calendar year, and lastly, for the prior calendar year). For purposes
of determining the Unused Limit Carryover:
(i) the "Excess Amount" for any employee for any calendar year
shall mean the amount by which the aggregate Fair Market Value of Shares subject
to incentive stock options granted to such employee during such calendar year
under the Plan or any Related Plan exceeds $100,000 and
(ii) the "Limit carryover" for any employee for any calendar
year shall mean 50% of the amount by which $100,000 exceeds the aggregate Fair
Market Value of shares subject to incentive stock options granted to such
employee during such calendar year under the Plan or any Related Plan.
For purposes of this Plan, the "Fair Market Value" of any share of
common Stock at any date shall be: (A) if the Common Stock is listed on an
exchange or exchanges, the last reported sales price per share o the day prior
to such date of the principal exchange on which it is traded, or if no sale was
made on such day on such principal exchange; or (B) if the Common Stock is not
then traded on an exchange, the average of the closing bid and shed prices per
share for the Common Stock in the over-the-counter-market as quoted in NASDAQ in
the day prior to such date; or (C) if the Common stock is not listed on an
exchange or quoted on NASDAQ, an amount determined in good faith by the Board.
4. THE STOCK
The shares of Common Stock which shall be available for options granted
under the Plan shall be shares of the Company's authorized but unissued Common
Stock. Subject to adjustment as provided under Section 5(ix) of the Plan, the
total number of shares of Common Stock which may be purchased through the
exercise of option issued under the Plan shall not exceed 3,500,000 shares;
provided, however, that if any outstanding option under the Plan shall for any
reason expire or terminate, the shares of common Stock allocable to the
unexercised portion of the option shall again be available for options under the
Plan as if no option had been granted with respect to such shares.
5. TERMS AND CONDITIONS OF OPTIONS
(a) All Options. Options granted under the Plan shall be evidenced by
agreements in such form and containing such provisions as the Board or Committee
shall from time to time approve. Agreements evidencing options granted under the
Plan need not be identical and each case may contain such provisions as the
Board or Committee may determine appropriate. However, each agreement shall be
subject to and limited by the following terms and conditions:
(i) Employee's Agreement. Each Employee shall agree to remain
in the employ of, and to render services to, the Company or a Subsidiary for a
period of one year from the date the option is granted, but such agreement shall
not obligate the Company or any Subsidiary to continue to employ the employee
for any period whatever.
(ii) Character of Option. Each option agreement shall state
the character of the option which is the subject of the agreement, i.e., whether
it is an incentive stock option or a non-statutory stock option and the category
of optionee.
(iii) Number of Shares Subject to Option. Each option
agreement shall state the number of shares subject to the option.
(iv) Medium and Time of Payment. The purchase price (the
"Exercise Price") shall be paid in full United States Dollars upon exercise of
the option in cash, by check, or, at the discretion of the Board and upon such
terms and conditions as the Board shall approve, by transferring to the Company
for redemption shares of the Common Stock of the Company at their fair Market
Value. Shares of Common Stock transferred to the Company upon exercise of
options shall not increase the number of shares available for issuance under the
Plan.
(v) Term of Option. No option shall be exercisable after the
expiration of the earliest of: (A) ten years after the date the option is
granted; (B) three months after the date of the termination of the employee's
employment with the Company and its Subsidiaries, if such termination is for any
reason other than permanent disability or death; or (C) one year after the date
of the termination of the employee's employment with the Company and its
Subsidiaries if such termination is a result of death or permanent disability
provided, however, that the option agreement for any instances. For the purpose
of Section 5(a)(v) of the Plan, "permanent disability" shall mean a disability
of the type defined in Section 105(d)(4) of the Code.
(vi) Transfer of Option. No option shall be transferable
by the optionee otherwise than by will or the laws of descent and distribution.
(vii) Vesting of Option. No option shall be exercisable during
the lifetime of the optionee by any person other than the optionee or at any
time prior to one year from the date of option is granted. Unless provided
otherwise by the Board or the Committee: (i) each option granted under the Plan
shall become exercisable in five equal installments; (ii) the first installment
shall become exercisable, in whole or in part, at any time after one year from
the date the option is granted, and the second, third, fourth and fifth
installments shall become exercisable two, three, four and five years, as the
case may be, from the date the option is granted; and (iii) to the extent not
exercised, installments shall accumulate and be exercisable, in whole or in
part, in any subsequent period but not later than the date of termination of the
option.
(viii) Investment Purposes. Unless and until the issuance and
sale of the shares of Common Stock pursuant to options granted under the Plan
have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), each agreement under the Plan shall provide that the
purchases of shares of the Common Stock pursuant to the agreement shall be for
investment purposes and shall not be with a view to resale or distribution other
than as permitted under the Securities Act. Each agreement shall further provide
that no shares of the Common Stock shall be purchased thereunder or subsequently
sold unless and until (i) any then applicable requirements of state or federal
laws and regulatory agencies shall have been fully complied with to the
satisfaction of the Company and its counsel, and (ii) if required to do so by
the Company the optionee under the agreement shall have executed and delivered
to the Company a letter of investment intent in such form and containing such
provision as the Board or Committee may require.
(ix) Recapitalization.
(A) Subject to any required action by the holders,
the number of shares of Common Stock covered by each outstanding option and the
price per share thereof shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a
subdivision or consolidation of shares of Common Stock or the division or
consolidation of shares of Common Stock or the payment of a stock dividend (but
only on the Common Stock) or any other increase or decrease in the number of
such shares effected without receipt of consideration by the Company.
(B) Subject to any required action by the share-
holders, if the Company shall be the surviving corporation in any merger or
consolidation, each outstanding option shall pertain to and apply to the same
number of securities to which the optionee would have been entitled had the
optionee exercised the options immediately prior to such merger or
consolidation. A dissolution or liquidation of the Company or a merger or
consolidation in which the Company is not the surviving corporation shall cause
each outstanding option to terminate, provided that each optionee shall, in such
event, have the right exercisable during a ten day period ending on the fifth
day prior to such dissolution or liquidation, or merger or consolidation in
which the Company is not the surviving corporation to exercise the optionee's
option in whole or in part without regard to any installment provisions under
the optionee's option agreement.
(C) To the extent that the foregoing adjustment
relates to stock or securities of the Company, such adjustments shall be made by
the Board, whose determination in that respect shall be final, binding and
conclusive, subject to Paragraph 5(b)(iv) below.
(D) Except as expressly provided above in this
Section (a)(ix), no optionee shall have rights by reason of any subdivision or
consolidation of shares of stock of any class or the payment of any stock
dividend or any other increase or decrease in dissolution, liquidation, merger,
consolidation or split-up or sale of assets or stock of another corporation, or
any issue by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall not affect, and no
adjustment by reason thereof shall be made with respect to, the number of or
Exercise Price for shares of Common Stock subject to any option under the Plan.
(E) The grant of an option pursuant to the Plan
shall not affect in any way the right or power of the Company to make
adjustments, reclassification, reorganizations or changes of its capital or
business structure or to merge or to consolidate, dissolve or liquidate, or to
sell or transfer all or any part of its business or assets.
(x) Rights as a Shareholder. No optionee or transferee of an
option shall have any rights as a shareholder with respect to any shares of
Common Stock subject to the option until the date of the issuance of a stock
certificate for such shares. No adjustment shall be made for dividends (ordinary
or extraordinary, whether in cash, securities or other property) or distribution
or other rights for which the record date is prior to the date such stock
certificate is issued, except as provided in Section (a) (ix) above.
(xi) Modification, Extension and Renewal of Options. Subject
to the terms and conditions and within the limitation of the Plan, the Board or
Committee may modify, extend or renew outstanding options granted under the
Plan, or accept the surrender of outstanding options (to the extent not
theretofore exercised) and authorize the granting of new options in substitution
therefor (to the extent not theretofore exercised). The Board or Committee shall
not, however, modify any outstanding option in any manner which would cause the
option not to qualify as an incentive stock option within the meaning of Section
422A of the Code. Not withstanding the foregoing, no modification of an option
shall, without the consent of the optionee, alter or impair any rights or
obligations of the optionee under the option.
(b) Incentive Stock Options
(i) Each incentive stock option agreement shall state an
Exercise Price which shall be not less than the Fair Market Value of the shares
in the date of grant of the incentive stock option.
(ii) Each incentive stock option agreement shall provide that
the incentive stock option shall not be exercisable, in whole or in part, while
there is outstanding any incentive stock option to purchase stock in the
Company, any Subsidiary, and Parent or any predecessor Company of any of such
corporations if the outstanding incentive stock option was granted to the
optionee before the incentive stock option which is the subject of the
agreement. For this purpose of this Paragraph 5(b)(ii), an incentive stock
option shall be "outstanding" until such time as the incentive stock option is
exercised in full or expires by reason of lapse of time.
(iii) Any incentive stock option agreement shall contain such
limitations and restrictions as the Board or the Committee may deem appropriate
to assure that the option will be an "incentive stock option" within the meaning
of Section 422A of the Code.
(iv) No incentive stock option agreement shall be modified by
the Board or the Committee in a manner that causes the option to fail to
continue to quality as an incentive stock option within the meaning of Section
422A of the Code.
(c) Non-statutory Stock Options. Each non-statutory stock shall state
an Exercise Price which shall be approximately 99% of, and which shall in no
event be equal to or greater than, the Fair Market Value of the shares on the
date of grant of the non-statutory stock option.
6. DATE OF GRANT OF OPTION; EFFECTIVE DATE OF OPTION
The date of grant of an option under the Plan shall, for all purposes,
be the date which the Board or Committee shall specify when authorizing the
grant, or if no such date shall be specified, the date on which the Board or
Committee determined to authorize the grant of the option; provided, however,
that the option shall not be effective until the optionee executes and delivers
to the Company the stock option agreement as required by Section 5 of the Plan.
7. TERM OF THE PLAN
Unless sooner terminated by the Board in its sole discretion, the Plan
shall expire on December 31, 1999.
8. NO OBLIGATION TO EXERCISE OPTION
The granting of an option shall impose no obligation upon the optionee
to exercise such option.
9. INCENTIVE STOCK OPTIONS
Options granted under this Plan are intended to be "incentive stock
options" as that term is defined in Section 422A of the Code.
PART B.
FEDERAL INCOME TAX CONSEQUENCES
The following general discussion of principal tax
considerations is based upon the tax laws and regulations existing as of the
date of this Prospectus, all of which are subject to modification at any time.
Each prospective optionee who is considering whether to accept the grant of an
option under the Plan or to purchase shares upon exercise of the option is urged
to consult which his or her own tax advisors with respect to the tax
consequences of the option and the disposition of such shares acquired upon
exercise of the option, as those tax consequences relate to the prospective
optionee 's own particular circumstances.
The Plan does not constitute a qualified requirement plan
under Section 401(a) of the Internal Revenue Code (generally trusts forming part
of a stock bonus, pension or profit-sharing plan funded by the employer and/or
employee contributions which are designed to provide retirement benefits to
participants under certain circumstances) and is not subject to the Employee
Retirement Income Security Act of 1974 (the pension reform law which regulates
most types of privately-funded pension, profit-sharing and other employee
benefit plans).
Federal Income Tax Consequences to Optionees
A. Incentive Stock Options.
The following are the principal federal income tax consequences to
optionees in connection with options which are intended to be incentive stock
options within the meaning of Section 422A of the Internal Revenue Code.
1. Grant of Option. An optionee will not be required to recognize
income for federal income tax purposes as a result of the grant to him or her of
an incentive stock option under the Plan.
2. Exercise of an Option. Except in certain circumstances in which the
exercise price is paid with previously acquired shares of the Company's Common
Stock, an optionee will not be required to recognize income for federal income
tax purposes as a result of the purchase of shares upon exercise of an incentive
stock option. However, the amount by which the fair market value of the shares
at the time of exercise exceeds the exercise price for the shares will
constitute one of the several items of "tax preference" for purposes of
calculating the alternative minimum tax (unless the shares are disposed of in a
"disqualifying Disposition," as defined below under the caption "Disposition of
Shares Acquired").
If the incentive stock option agreement permits the optionee to pay,
and the optionee pays, the exercise price, in full or in part, by transferring
to the Company previously acquired shares of the Company's Common Stock, the
transfer will not affect the tax treatment of the exercise. However, if the
holder pays the exercise price using shares of the Company's Common Stock
acquired upon exercise of an incentive stock option, the exchange will be
considered a disposition of the previously acquired shares for the purpose of
determining whether a Disqualifying Disposition has occurred (see below).
3. Disposition of Shares Acquired.Upon disposition of shares acquired
through exercise of an incentive stock option, long-term capital gain or loss is
recognized in an amount equal to the difference between the sale price and
exercise price, provided the disposition has not occurred within two years from
the date of grant or within one year from the date of exercise. If the optionee
disposes of the acquired shares without complying with both holding period
requirements (a "disqualifying Disposition"), the optionee recognized ordinary
income at the time of the disposition in an amount equal to the lesser of the
amount of gain realized or the amount by which the fair market value of the
shares on the date of exercise exceeds the option exercise price. Any remaining
gain or loss is treated as a short-term or long-term capital gain or loss
depending upon whether the shares were held for more than six months. A
Disqualifying Disposition will also result if, within one year after acquiring
shares through exercise of an incentive stock option an optionee transfers those
shares to the Company to exercise an incentive stock option, an optionee
transfers those shares to the Company to exercise an incentive stock option or a
non-statutory stock option under the Plan. If the disposition is not a
Disqualifying Disposition, the optionee will be taxed at long-term capital gains
rates on the difference between the amount received upon disposition of shares
and the exercise price for the shares (the "Net Capital Gain"); however, an
amount equal to 60% if the Net Capital Gain will constitute an item of "tax
preference" for purpose of the alternative minimum tax.
B. Non-Statutory Stock Options. The following are the federal income
tax consequences to employees in connection with options which are intended not
to be incentive stock options within the meaning of Section 422A of the Internal
Revenue Code.
1. Grant of a Non-Statutory Stock Option. An optionee will not be
required to recognize income for federal income tax purposes as a result of the
grant to the optionee of a non-statutory stock option, assuming (as is usually
the case in a plan of this type) that the option does not have a readily
ascertaining fair market value at the time it is granted.
2. Exercise of a Non-Statutory Stock Option. An optionee will be
required to include in gross income in the year of exercise an amount equal to
the excess of the fair market value of the shares on the date of exercise over
the exercise price, unless the Optionee is subject to the provisions of Section
16(b) of the Securities Exchange Act of 1934, in which case the optionee will
recognize taxable income at such time as the sale of the shares would not
subject the recipient to suit under Section 16(b), in an amount equal to the
difference between the fair market value of the stock as of the date the Section
16(b) restriction lapses and the exercise price.
3. Disposition of Shares Acquired. An optionee will recognize taxable
gain or loss on the sale of shares acquired upon exercise of a non-statutory
stock option in an amount equal to the difference between the selling price and
the tax of the shares in the hands of the Optionee. The tax basis of the shares
in the Optionee's taxable income as a result of the exercise of the option.
Provided the shares are held as a capital gain or loss if he or she holds the
shares for more than six months, and short-term capital gain or loss if he or
she holds the shares for less than six months.
Federal Income Tax Consequences to the Company
A. Incentive Stock Options. The Company is not entitled to a tax deduction upon
the exercise of an incentive stock option or the disposition of shares acquired
upon exercise of an incentive stock option, except to the extent that the
Optionee recognized ordinary income in a Disqualifying Disposition and the
Company withholds from the employee's wages an amount sufficient to cover the
employee's tax liability resulting from the amount deemed to be compensation
income. The Company has the right to withhold federal income taxes in connection
with the exercise of an incentive stock option either by deducting the required
amounts from amounts the Company owes to the Optionee or by requiring the
Optionee to pay the required amounts to the Company before exercising the
option.
B.Non-Statutory Stock Options. The Company will be entitled to a deduction for
federal income tax purposes in the amount of the ordinary income the Optionee is
required to recognize as a result of exercising a non-statutory stock option,
provided that the Company withholds from the employee's wages an amount
sufficient to cover the employee's tax liability resulting from the amount
deemed to be compensation income. The Company has the right to withhold federal
income taxes in connection with the exercise of a non-statutory stock option
either by deducting the required amounts from amounts the Company owes to the
Optionee or by requiring the optionee to pay the required amounts to the Company
before exercising the option.
EXHIBIT 4.4
ANNEX I
STOCK OPTION AGREEMENT
(Incentive Stock Option)
This STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
on the execution date of the Option Certificate to which it is attached (the
"Certificate"), by and among SOURCE SCIENTIFIC, INC., formerly known as Alton
Group, Inc., a California corporation (the "Company"), and the employee named in
the Certificate ("Employee").
Pursuant to the 1981 Stock Option Plan of the Company (the "Plan"), the
Board of Directors of the Company has authorized the grant to Employee of an
incentive stock option to purchase shares of the Company's Common Stock (the
"Common Stock"), upon the terms and conditions set forth in this Agreement and
in the Plan.
The Company and the Employee agree as follows:
1. Grant of Option.
The Company hereby grants to Employee the right and option
(the "Option") upon the terms and subject to the conditions set forth in this
Agreement, to purchase all or any portion of that number of shares of he Common
Stock (the "Shares") set forth in the Certificate, at the option exercise price
set forth in the Certificate (the "Exercise Price").
2. Term of Option.
The Option shall terminate and expire on the Expiration Date
set forth in the Certificate, unless sooner terminated as provided herein.
3. Installments.
(a) Subject to the provisions of Paragraphs 3(b), 6 and 9 of
this Agreement, the Option shall become exercisable in installments. Each
installment shall include the number of Shares, and shall become exercisable (in
whole or in part) upon and after the dates, set forth under the caption
"Exercise Schedule" in the Certificate. The installments shall be cumulative,
i.e., the Option may be exercised, as to any or all Shares covered by an
installment, at any time or times after the installment first becomes
exercisable and until expiration or termination of the Option.
(b) Notwithstanding anything to the contrary contained in
Paragraphs 3(a) and 7(d) of this Agreement, the Option may not be exercised, in
whole or in part, unless and until any then-applicable requirements of all state
and federal laws and regulatory agencies shall have been fully complied with to
the satisfaction of the Company and its counsel.
4. Exercise of Option.
There is no obligation to exercise the Option, in whole or in
part. The Option may be exercised, in whole or in part, only by delivery to the
Company of:
(i) written notice of exercise in form and substance identical
to Exhibit "A" attached to this Agreement stating the number of shares of Common
Stock then being purchased (the "Purchased Shares"); and
(ii) payment of the Exercise Price of the Purchased Shares,
either in cash, by check or by transfer to the Company of issued and outstanding
shares of Common Stock, or by any combination of the above methods of payment.
If payment is made, in whole or in part, by transfer to the Company of issued
and outstanding shares of Common Stock, the value of the traded shares shall be
determined as follows: (a) if at the time of payment the Common Stock is traded
on any national or regional stock exchange, the value of each share shall be the
closing sales price of a share of Common Stock, as quoted on the exchange where
the shares are primarily traded on the business day immediately preceding the
payment or, if no sale was made on that date, the closing reported bid price on
such day on such exchange; (b) if (a) is not applicable, and if at the time of
payment sales of the Common Stock, are reported on the National Market System,
the value of each share shall be the closing price of a share of Common Stock,
as reported on the National Market System on the business day immediately
preceding payment or, if no sale was made on that date, on the most recent date
on which a sale was made; (c) if (a) and (b) are not applicable, and if at the
time of payment quotations with respect to the Common Stock are reported on the
NASDAQ System, the value of each share shall be the average of the closing bid
and asked prices of a share of Common Stock, as quoted on the NASDAQ System, the
value of each share shall be the average of the closing bid and asked prices of
a share of Common Stock, as quoted on the NASDAQ System on the business day
immediately preceding the payment or, if no quotations were made on that date,
on the most recent date when such quotations were made; or if (a), (b) and (c)
are not applicable, the value of each share shall be the fair market value of a
share, as determined by the Company's Board of Directors or any committee of the
Board.
Following receipt of the notice and payment referred to above, the
Company shall issue and deliver to Employee a stock certificate or stock
certificates evidencing the Purchased Shares; provided, however, that the
Company is not obligated to issue a fraction or fractions of a share of its
Common Stock, and my pay to Employee, in cash or by check, the fair market value
of any fraction or fractions of a share exercised by Employee, which fair market
value shall be determined by the Board of Directors of the Company (or a
committee thereof) as of the date of such exercise.
5. Employment.
In consideration for the grant of the Option to an Employee, the
Employee shall remain in the employ of, and shall continue to render services
to, the Company, any Subsidiary or any Parent, as the Board of Directors (or a
committee thereof) as the Company may from time to time direct, for a period of
one year from the date of this Agreement.
This provision shall not obligate the Company, any Subsidiary or any
Parent to continue to employ Employee, ("optionee") for any period whatsoever;
and the sole remedy to the Company should optionee breach his or her obligations
under this Paragraph 5 shall be to cancel this Agreement and the Option granted
under this agreement. For the purposes of this Agreement, the terms "Subsidiary"
and "Parent" shall mean any present or future corporation which would be a
"subsidiary corporation" or a "parent corporation", respectively, of the
Company, as those terms are defined in Section 425 of the Internal Revenue Code
of 1986, as amended (the "Code").
6. Termination of Employment.
(a) If Employee shall cease to be employed by the Company, any
Subsidiary or any Parent for any reason other than death or permanent
disability, Employee shall have the right to exercise the Option at any time
within 90 days after such termination of employment and prior to the Expiration
Date set forth in the Option Certificate, to the extent that his or her right to
exercise the Option had accrued pursuant to the provisions of Paragraph 3 of
this Agreement and had not previously been exercised, at the date of such
termination; and to the extent unexercised at the end of this period, the Option
shall terminate. The Board of Directors of the Company (or a committee thereof),
in its sole and absolute discretion, shall determine whether or not authorized
leaves of absence shall constitute termination of employment for the purposes of
this Agreement.
(b) If Employee shall die or become permanently disabled while
in the employ of the Company, any Subsidiary or any Parent, then the Employee,
the Employee's executors or administrators or any person or persons acquiring
the Option directly from the Employee by bequest or inheritance, may exercise
the Option in full, regardless of the provisions regarding installments set
forth in Paragraph 3 of this Agreement, but subject to the provisions regarding
employment in Paragraph 5 of this Agreement, at any time within one year after
Employee's death or permanent disability but no later than the Expiration Date
set forth in the Certificate; to the extent unexercised at the end of that
period, the Option shall terminate. If, prior to Employee's death or permanent
disability, Employee shall not have remained in the employ of, or shall not have
continued to render services to, the Company, any Subsidiary or any Parent for a
period of one year from the date of this Agreement, the Option shall terminate
as of the date of Employee's death or permanent disability.
7. Adjustments Upon Recapitalization.
Subject to any required action by the shareholders of the
Company:
(a) If outstanding shares of the Common Stock shall be divided
into a greater number of shares, or a dividend in Common Stock shall be paid in
respect of the Common Stock, the Exercise Price in effect immediately prior to
such subdivision or at the record date of such dividend shall, simultaneously
with the effectiveness of such subdivision or immediately after the record date
of such dividend, be proportionately reduced, and conversely, if the outstanding
shares of the Common Stock shall be combined into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination shall,
simultaneously with the effectiveness of such combination, be proportionately
increased.
(b) When any adjustment is required to be made in the Exercise
Price, the number of Shares purchasable upon the exercise of the Option shall be
changed to that number of Shares determined by (A) multiplying an amount equal
to the number of Shares purchasable on the exercise of the Option immediately
prior to such adjustment by the Exercise Price in effect immediately prior to
such adjustment, and then (B) dividing that product by the Exercise Price in
effect immediately after such adjustment.
(c) In case of any capital reorganization, any
reclassification of the Common Stock (other than a recapitalization described in
Paragraph 7(a) of this Agreement), or the consolidation or merger of the Company
with another person where the Company is the "surviving corporation," as defined
in Paragraph 7(h) below (collectively, "Reorganizations"), Employee shall
thereafter be entitled upon exercise of the Option to purchase the kind and
number of shares of stock or other securities or property of the Company
receivable upon such Reorganization by a holder of the number of shares of the
Common Stock which the Option entitles Employee to purchase from the Company
prior to such Reorganization; and in any such case, appropriate adjustments
shall be made in the application of the provisions set forth in this Agreement
with respect to Employee's rights and interests thereafter, to the end that the
provisions set forth in this Agreement (including the specified changes and
other adjustments to the Exercise Price) shall thereafter be applicable in
relation to any Shares or other property thereafter purchasable upon exercise of
the Option.
(d) If the Company is dissolved or liquidated, or is a party
to a merger or consolidation in which the Company is not the "surviving
corporation" (as defined in Paragraph 7(h) below), then the Option will
terminate on the effective date of the dissolution, liquidation, merger or
consolidation. However, the surviving corporation in any merger or consolidation
may tender to Employee a new option or new options to purchase shares of the
surviving corporation, containing such terms and provisions as shall
substantially preserve the rights and benefits of Employee under this Agreement;
provided, however, that if the surviving corporation does not tender such an
option to Employee, Employee shall have the right during a 10-day period ending
on the fifth day prior to the dissolution, liquidation, merger or consolidation,
to exercise the Option, in whole or in part, and without regard to the
installment provisions contained in Paragraph 3 of this Agreement.
(e) To the extend that the foregoing adjustments relate to
stock or securities of the Company, such adjustments shall be made by the Board
of Directors of the Company (or a committee thereof), and it determination shall
be final, binding and conclusive; provided that such adjustments shall not be
made in a manner that causes the Option to fail to continue to quality as an
incentive stock option within the meaning of Section 422A of the Code.
(f) The provisions of this Paragraph 7 are intended to be
exclusive, and Employee shall have no other rights upon the occurrence of any of
the events described in this Paragraph 7.
(g) The grant of the Option shall not affect in any way the
right or power of the Company to make adjustments, reclassification,
reorganizations or changes in is capital or business structure, or to merge,
consolidate, dissolve or liquidate, or to sell or transfer all or any part of
its business or assets.
(h) The determination as to which party to a Reorganization is
the "surviving corporation" shall be made on the basis of the relative equity
interests of the shareholders in the Company existing after the Reorganization,
as follows: If, following any Reorganization, the holders of outstanding voting
securities of the Company own equity securities possessing more than 50% of the
voting power of the Company existing after the Reorganization, then, for
purposes of this Agreement, the Company shall be the surviving corporation. In
all other cases, the Company shall not be the surviving corporation.
8. Waiver of Rights To Purchase Stock.
By signing this Agreement, Employee acknowledges and agrees
that neither the Company nor any other person or entity is under any obligation
to sell or transfer to Employee any option or equity security of the Company,
other than the shares of Common Subject to the Option and any other right or
option to purchase the Common Stock which was previously granted to Employee by
the Board of Directors of the Company (or a committee thereof). By signing this
Agreement, Employee specifically waives all rights which he or she may have had
prior to the date of this Agreement to receive any option or equity security of
the Company, other than an option or equity security granted to the Employee by
the Board of Directors of the Company (or a committee thereof).
<PAGE>
9. Prior Outstanding Option.
Notwithstanding anything to the contrary contained in this
Agreement, the Option may not be exercised, in whole or in part, while there is
"outstanding" any incentive stock option, granted to Employee prior to the grant
of the Option, to purchase stock in the Company, any Subsidiary or any Parent or
any predecessor corporation of any of such corporations. For the purpose of this
Paragraph 9, an Option shall be "outstanding" until it is exercised in full or
expires by reason of lapse of time.
10. No Rights as Shareholder.
Employee shall have no rights as shareholder with respect to
the Shares until the date of the issuance to Employee of a stock certificate or
stock certificates evidencing such Shares. Except as may be provided in
Paragraph 7 of this Agreement, no adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued.
11. Modification.
Subject to the terms and conditions and within the limitations
of the Plan, the Board of Directors of the Company (or a committee thereof) may
modify and extend or renew the Option or accept the surrender of, and authorize
the grant of a new option in substitution for, the Option (to the extent not
previously exercised). No modifications of the Option shall be made which would
cause the Option to fail to continue to qualify as an "incentive stock option"
within Section 422A of the Code. In addition, no modification of the Option
shall, without the consent of Employee, alter or impair any rights of the
Employee under the Option.
12. Sale within Two Years.
Employee agrees that should he or she sell all or any of the
Purchased Shares within two years from the date of the grant of the Option or
within one year after the issuance of such Purchased Shares, he or she shall
immediately advise the Company in writing as to the occurrence of the sale and
the price realized upon the sale of such Purchased Shares.
13. Character of Option.
The Option is intended to be an "incentive stock option" as
that term is defined in Section 422A of the Code.
14. General Provisions.
(a) Further Assurances. Employee shall promptly take all
actions and execute all documents requested by the Company which the Company
deems to be reasonably necessary to effectuate the terms and intent of this
Agreement. Any sale or transfer of the Purchased Shares by Employee to the
Company or its assignees shall be made free of any and all claims, encumbrances,
liens and restrictions of every kind, other than those imposed by this
Agreement.
(b) Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given if personally delivered or if mailed by first class
certified mail, return receipt requested, postage prepaid:
<PAGE>
(i) If to the Company, to:
Source Scientific, Inc.
7390 Lincoln Way
Garden Grove, California 92641
(ii) If to Employee, to the address set forth in
the records of the Company.
Either party to this Agreement may from time to time change the address
for purposes of receiving notice by giving written notice thereof in the manner
described above.
(c) Transfer of Rights under this Agreement. The Company may
at any time transfer and assign its rights and delegate its obligations under
this Agreement to any other person, corporation, firm or entity, including its
officers, directors and shareholders, with or without consideration, but no such
assignment shall relieve the Company of its obligations under this Agreement.
(d) Option Non-Transferable. Employee may not assign or
transfer the Option except by will or the laws of descent and distribution, and
only Employee may exercise the Option during his or her lifetime.
(e) Successors. Except to the extent specifically limited by
the terms and provisions of this Agreement, this Agreement is binding upon the
parties to this Agreement and their respective successors, assigns, heirs and
personal representatives.
(f) Choice of Law. This Agreement shall be construed in
accordance with the laws of the State of California applicable to contracts made
in, and to be performed within, that State.
(g) Attorneys' Fees. In the event that any action, suit or
other proceeding is instituted upon any breach of this Agreement, the prevailing
party shall be paid by the other party thereto an amount equal to all of the
prevailing party's costs and expenses, including attorneys' fees incurred in
each and every such action, suit or proceeding (including any and all appeals or
petitions therefrom). As used in this Agreement, "attorneys' fees" shall mean
the full and actual cost of any legal services actually performed in connection
with the matter involved calculated on the basis of the usual fee charged by the
attorney performing such services and shall not be limited to "reasonable
attorneys' fees" as defined in any statute or rule of court.
(h) The Plan. This Agreement is made pursuant to the
Plan, and it is intended, and shall be interpreted in a manner, to comply
therewith. Any provision of this Agreement inconsistent with the Plan shall be
superseded and governed by the Plan.
(i) Miscellaneous. Titles and captions contained in this
Agreement are inserted only as a matter of convenience and for reference, and in
no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision hereof. Except as specifically provided herein, neither
this Agreement nor any right pursuant hereto or interest herein shall be
assignable by any of the parties hereto without the prior written consent of the
other parties hereto.
15. Shareholder Approval.
This Option is subject to approval by the shareholders of the
Company of certain amendments to the Plan, and was approved by the shareholders
of the Company at the Annual Shareholders Meeting, December 14, 1994.
By signing this Agreement, the Optionee acknowledges and agrees to
abide by the terms and conditions of options granted to the Optionee under the
SOURCE SCIENTIFIC, INC. 1981 STOCK OPTION PLAN.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
"COMPANY" Source Scientific, Inc., a California corporation
By: Richard A. Sullivan, President
"OPTIONEE"
(Signature of Optionee)
(Print Name)
(Social Security number)
Address of Optionee:
<PAGE>
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
TO: Source Scientific, Inc.
The undersigned, the holder of the enclosed Stock Option
Agreement (Incentive Stock Option), hereby irrevocably elects to exercise the
purchase rights represented by the Option and to purchase thereunder * shares of
Common Stock of SOURCE SCIENTIFIC, INC. (the "Company") and herewith encloses
payment of $_______________ and/or _________ shares of the Company's Common
Stock in full payment of the purchase price of the shares being purchased.
Dated: ____________, 19__
------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Option)
------------------------------
(Address)
* Insert here the number of shares called for on the face of
the Option (or, in the case of a partial exercise, the number of shares being
exercised), in either case without making any adjustment for additional Common
Stock, other securities or property which, pursuant to the adjustment provisions
of the Option, may be deliverable upon exercise.
ANNEX II
STOCK OPTION AGREEMENT
(Non-statutory Stock Option)
This STOCK OPTION AGREEMENT (this "Agreement") is made and entered into
on the execution date of the Option Certificate to which it is attached (the
"Certificate"), by and among SOURCE SCIENTIFIC, INC., formerly known as Alton
Group, Inc., a California corporation (the "Company"), and the optionee named in
the Certificate ("Optionee").
Pursuant to the 1981 Stock Option Plan of the Company (the "Plan"), the
Board of Directors of the Company has authorized the grant to Optionee of an
incentive stock option to purchase shares of the Company's Common Stock (the
"Common Stock"), upon the terms and conditions set forth in this Agreement and
in the Plan.
The Company and the Optionee agree as follows:
1. Grant of Option.
The Company hereby grants to Optionee the right and option
(the "Option") upon the terms and subject to the conditions set forth in this
Agreement, to purchase all or any portion of that number of shares of he Common
Stock (the "Shares") set forth in the Certificate, at the option exercise price
set forth in the Certificate (the "Exercise Price").
2. Term of Option.
The Option shall terminate and expire on the Expiration Date
set forth in the Certificate, unless sooner terminated as provided herein.
3. Installments.
(a) Subject to the provisions of Paragraphs 3(b), 6 and 9 of
this Agreement, the Option shall become exercisable in installments. Each
installment shall include the number of Shares, and shall become exercisable (in
whole or in part) upon and after the dates, set forth under the caption
"Exercise Schedule" in the Certificate. The installments shall be cumulative,
i.e., the Option may be exercised, as to any or all Shares covered by an
installment, at any time or times after the installment first becomes
exercisable and until expiration or termination of the Option.
(b) Notwithstanding anything to the contrary contained in
Paragraphs 3(a) and 7(d) of this Agreement, the Option may not be exercised, in
whole or in part, unless and until any then-applicable requirements of all state
and federal laws and regulatory agencies shall have been fully complied with to
the satisfaction of the Company and its counsel.
4. Exercise of Option.
There is no obligation to exercise the Option, in whole or in
part. The Option may be exercised, in whole or in part, only by delivery to the
Company of:
(i) written notice of exercise in form and substance identical
to Exhibit "A" attached to this Agreement stating the number of shares of Common
Stock then being purchased (the "Purchased Shares"); and
(ii) payment of the Exercise Price of the Purchased Shares,
either in cash, by check or by transfer to the Company of issued and outstanding
shares of Common Stock, or by any combination of the above methods of payment.
If payment is made, in whole or in part, by transfer to the Company of issued
and outstanding shares of Common Stock, the value of the traded shares shall be
determined as follows: (a) if at the time of payment the Common Stock is traded
on any national or regional stock exchange, the value of each share shall be the
closing sales price of a share of Common Stock, as quoted on the exchange where
the shares are primarily traded on the business day immediately preceding the
payment or, if no sale was made on that date, the closing reported bid price on
such day on such exchange; (b) if (a) is not applicable, and if at the time of
payment sales of the Common Stock, are reported on the National Market System,
the value of each share shall be the closing price of a share of Common Stock,
as reported on the National Market System on the business day immediately
preceding payment or, if no sale was made on that date, on the most recent date
on which a sale was made; (c) if (a) and (b) are not applicable, and if at the
time of payment quotations with respect to the Common Stock are reported on the
NASDAQ System, the value of each share shall be the average of the closing bid
and asked prices of a share of Common Stock, as quoted on the NASDAQ System, the
value of each share shall be the average of the closing bid and asked prices of
a share of Common Stock, as quoted on the NASDAQ System on the business day
immediately preceding the payment or, if no quotations were made on that date,
on the most recent date when such quotations were made; or if (a), (b) and (c)
are not applicable, the value of each share shall be the fair market value of a
share, as determined by the Company's Board of Directors or any committee of the
Board.
Following receipt of the notice and payment referred to above, the
Company shall issue and deliver to Optionee a stock certificate or stock
certificates evidencing the Purchased Shares; provided, however, that the
Company is not obligated to issue a fraction or fractions of a share of its
Common Stock, and my pay to Optionee, in cash or by check, the fair market value
of any fraction or fractions of a share exercised by Optionee, which fair market
value shall be determined by the Board of Directors of the Company (or a
committee thereof) as of the date of such exercise.
5. Services Rendered by Optionee.
In consideration for the grant of the Option to the Optionee,
the Optionee shall continue to render services, whether as an employee, a
director, a consultant or an adviser, to the Company, any Subsidiary or any
Parent, as the Board of Directors (or a committee thereof) as the Company may
from time to time direct, from the date of this Agreement until the date of the
following event according to the respective category of the Optionee:
(a) Employee: shall remain in the employ of, and shall
continue to render services to, the Company, any Subsidiary or any Parent, as
the Board of Directors (or a committee thereof) as the Company may from time to
time direct, throughout each vesting period of 90 days of the respective grant;
or
(b) Outside Director: shall continue to render services to
the Board of Directors (or a committee thereof) as the Company may from time to
time direct, throughout each vesting period of 90 days of the respective grant;
or
(c) Consultant or Advisor: shall continue to render services
to the Company, any Subsidiary or any Parent, as the Board of Directors (or a
committee thereof) as the Company may from time to time direct, throughout each
vesting period of the respective grant.
This provision shall not obligate the Company, any Subsidiary or any
Parent to continue its relationship with the Employee, Outside Director,
Consultant or Advisor for any period whatsoever; and the sole remedy to the
Company should Optionee breach his or her obligations under this Paragraph 5
shall be to cancel this Agreement and the Option granted under this Agreement.
For the purposes of this Agreement, the terms "Subsidiary" and "Parent" shall
mean any present or future corporation which would be a "subsidiary corporation"
or a "parent corporation", respectively, of the Company, as those terms are
defined in Section 425 of the Internal Revenue Code of 1986, as amended (the
"Code").
6. Termination of Services of Optionee.
(a) If Optionee shall cease to render services to the Company,
any Subsidiary or any Parent for any reason other than death or permanent
disability, Optionee shall have the right to exercise the then vested portion of
the Option at any time after such termination and prior to the Expiration Date
set forth in the Option Certificate, to the extent that his or her right to
exercise the Option had accrued pursuant to the provisions of Paragraph 3 of
this Agreement and had not previously been exercised, at the date of such
termination; and to the extent unexercised at the end of this period, the Option
shall terminate. The Board of Directors of the Company (or a committee thereof),
in its sole and absolute discretion, shall determine whether or not authorized
leaves of absence shall constitute termination of services for the purposes of
this Agreement.
(b) If Optionee shall die or become permanently disabled while
in the service of the Company, any Subsidiary or any Parent, then the Optionee,
the Optionee's executors or administrators or any person or persons acquiring
the Option directly from the Optionee by bequest or inheritance, may exercise
the Option in full, regardless of the provisions regarding installments set
forth in Paragraph 3 of this Agreement, but subject to the provisions regarding
services rendered in Paragraph 5 of this Agreement, at any time after Optionee's
death or permanent disability but no later than the Expiration Date set forth in
the Certificate; to the extent unexercised at the end of that period, the Option
shall terminate.
7. Adjustments Upon Recapitalization.
Subject to any required action by the shareholders of the
Company:
(a) If outstanding shares of the Common Stock shall be divided
into a greater number of shares, or a dividend in Common Stock shall be paid in
respect of the Common Stock, the Exercise Price in effect immediately prior to
such subdivision or at the record date of such dividend shall, simultaneously
with the effectiveness of such subdivision or immediately after the record date
of such dividend, be proportionately reduced, and conversely, if the outstanding
shares of the Common Stock shall be combined into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination shall,
simultaneously with the effectiveness of such combination, be proportionately
increased.
(b) When any adjustment is required to be made in the Exercise
Price, the number of Shares purchasable upon the exercise of the Option shall be
changed to that number of Shares determined by (A) multiplying an amount equal
to the number of Shares purchasable on the exercise of the Option immediately
prior to such adjustment by the Exercise Price in effect immediately prior to
such adjustment, and then (B) dividing that product by the Exercise Price in
effect immediately after such adjustment.
(c) In case of any capital reorganization, any
reclassification of the Common Stock (other than a recapitalization described in
Paragraph 7(a) of this Agreement), or the consolidation or merger of the Company
with another person where the Company is the "surviving corporation", as defined
in Paragraph 7(h) below (collectively, "Reorganizations"), Optionee shall
thereafter be entitled upon exercise of the Option to purchase the kind and
number of shares of stock or other securities or property of the Company
receivable upon such Reorganization by a holder of the number of shares of the
Common Stock which the Option entitles Optionee to purchase from the Company
prior to such Reorganization; and in any such case, appropriate adjustments
shall be made in the application of the provisions set forth in this Agreement
with respect to Optionee's rights and interests thereafter, to the end that the
provisions set forth in this Agreement (including the specified changes and
other adjustments to the Exercise Price) shall thereafter be applicable in
relation to any Shares or other property thereafter purchasable upon exercise of
the Option.
(d) If the Company is dissolved or liquidated, or is a party
to a merger or consolidation in which the Company is not the "surviving
corporation" (as defined in Paragraph 7(h) below), then the Option will
terminate on the effective date of the dissolution, liquidation, merger or
consolidation. However, the surviving corporation in any merger or consolidation
may tender to Optionee a new option or new options to purchase shares of the
surviving corporation, containing such terms and provisions as shall
substantially preserve the rights and benefits of Optionee under this Agreement;
provided, however, that if the surviving corporation does not tender such an
option to Optionee, Optionee shall have the right during a 10-day period ending
on the fifth day prior to the dissolution, liquidation, merger or consolidation,
to exercise the Option, in whole or in part, and without regard to the
installment provisions contained in Paragraph 3 of this Agreement.
(e) To the extend that the foregoing adjustments relate to
stock or securities of the Company, such adjustments shall be made by the Board
of Directors of the Company (or a committee thereof), and it determination shall
be final, binding and conclusive; provided that such adjustments shall not be
made in a manner that causes the Option to fail to continue to quality as an
incentive stock option within the meaning of Section 422A of the Code.
(f) The provisions of this Paragraph 7 are intended to be
exclusive, and Optionee shall have no other rights upon the occurrence of any of
the events described in this Paragraph 7.
(g) The grant of the Option shall not affect in any way the
right or power of the Company to make adjustments, reclassification,
reorganizations or changes in is capital or business structure, or to merge,
consolidate, dissolve or liquidate, or to sell or transfer all or any part of
its business or assets.
(h) The determination as to which party to a Reorganization is
the "surviving corporation" shall be made on the basis of the relative equity
interests of the shareholders in the Company existing after the Reorganization,
as follows: If following any Reorganization, the holders of outstanding voting
securities of the Company own equity securities possessing more than 50% of the
voting power of the Company existing after the Reorganization, then for purposes
of this Agreement, the Company shall be the surviving corporation. In all other
cases, the Company shall not be the surviving corporation.
8. Waiver of Rights To Purchase Stock.
By signing this Agreement, Optionee acknowledges and agrees
that neither the Company nor any other person or entity is under any obligation
to sell or transfer to Optionee any option or equity security of the Company,
other than the shares of Common Subject to the Option and any other right or
option to purchase the Common Stock which was previously granted to Optionee by
the Board of Directors of the Company (or a committee thereof). By signing this
Agreement, Optionee specifically waives all rights which he or she may have had
prior to the date of this Agreement to receive any option or equity security of
the Company, other than an option or equity security granted to the Optionee by
the Board of Directors of the Company (or a committee thereof).
9. No Rights as Shareholder.
Optionee shall have no rights as shareholder with respect to
the Shares until the date of the issuance to Optionee of a stock certificate or
stock certificates evidencing such Shares. Except as may be provided in
Paragraph 7 of this Agreement, no adjustment shall be made for dividends
(ordinary or extraordinary, whether in cash, securities or other property) or
distributions or other rights for which the record date is prior to the date
such stock certificate is issued.
10. Modification.
Subject to the terms and conditions and within the limitations
of the Plan, the Board of Directors of the Company (or a committee thereof) may
modify and extend or renew the Option or accept the surrender of, and authorize
the grant of a new option in substitution for, the Option (to the extent not
previously exercised). No modifications of the Option shall, without the consent
of Optionee, alter or impair any rights of the Optionee under the Option.
11. Character of Option.
The Option is intended to be a "non-statutory stock option",
i.e. a stock option which is intended not to be an "incentive stock option" as
that term is defined in Section 422A of the Code.
12. General Provisions.
(a) Further Assurances. Optionee shall promptly take all
actions and execute all documents requested by the Company which the Company
deems to be reasonably necessary to effectuate the terms and intent of this
Agreement. Any sale or transfer of the Purchased Shares by Optionee to the
Company or its assignees shall be made free of any and all claims, encumbrances,
liens and restrictions of every kind, other than those imposed by this
Agreement.
(b) Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be deemed to
have been duly given if personally delivered or if mailed by first class
certified mail, return receipt requested, postage prepaid:
(i) If to the Company, to:
Source Scientific, Inc.
7390 Lincoln Way
Garden Grove, California 92641
(ii) If to Optionee, to the address set forth in
the records of the Company.
Either party to this Agreement may from time to time change the address
for purposes of receiving notice by giving written notice thereof in the manner
described above.
(c) Transfer of Rights under this Agreement. The Company may
at any time transfer and assign its rights and delegate its obligations under
this Agreement to any other person, corporation, firm or entity, including its
officers, directors and shareholders, with or without consideration, but no such
assignment shall relieve the Company of its obligations under this Agreement.
(d) Option Non-Transferable. Optionee may not assign or trans-
fer the Option except by will or the laws of descent and distribution, and only
Optionee may exercise the Option during his or her lifetime.
(e) Successors Except to the extent specifically limited by
the terms and provisions of this Agreement, this Agreement is binding upon the
parties to this Agreement and their respective successors, assigns, heirs and
personal representatives.
(f) Choice of Law. This Agreement shall be construed in
accordance with the laws of the State of California applicable to contracts made
in, and to be performed within, that State.
(g) Attorneys' Fees. In the event that any action, suit or
other proceeding is instituted upon any breach of this Agreement, the prevailing
party shall be paid by the other party thereto an amount equal to all of the
prevailing party's costs and expenses, including attorneys' fees incurred in
each and every such action, suit or proceeding (including any and all appeals or
petitions therefrom). As used in this Agreement, "attorneys' fees" shall mean
the full and actual cost of any legal services actually performed in connection
with the matter involved calculated on the basis of the usual fee charged by the
attorney performing such services and shall not be limited to "reasonable
attorneys' fees" as defined in any statute or rule of court.
(h) The Plan. This Agreement is made pursuant to the Plan,
and it is intended, and shall be interpreted in a manner, to comply therewith.
Any provision of this Agreement inconsistent with the Plan shall be superseded
and governed by the Plan.
(i) Miscellaneous. Titles and captions contained in this
Agreement are inserted only as a matter of convenience and for reference, and in
no way define, limit, extend or describe the scope of this Agreement or the
intent of any provision hereof. Except as specifically provided herein, neither
this Agreement nor any right pursuant hereto or interest herein shall be
assignable by any of the parties hereto without the prior written consent of the
other parties hereto.
13. Shareholder Approval.
This Option is subject to approval by the shareholders of the
Company of certain amendments to the Plan, and was approved by the shareholders
of the Company at the Annual Shareholders Meeting, December 14, 1994.
By signing this Agreement, the Optionee acknowledges and agrees to abide
by the terms and conditions of options granted to the Optionee under the SOURCE
SCIENTIFIC, INC. 1981 STOCK OPTION PLAN.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
"COMPANY"
Source Scientific, Inc., a California corporation
By: Richard A. Sullivan, President
"OPTIONEE"
(Signature of Optionee)
(Print Name)
(Social Security number)
Address of Optionee:
<PAGE>
NOTICE OF EXERCISE
(To be signed only upon exercise of the Option)
TO: Source Scientific, Inc.
The undersigned, the holder of the enclosed Stock Option
Agreement (Incentive Stock Option), hereby irrevocably elects to exercise the
purchase rights represented by the Option and to purchase thereunder * shares of
Common Stock of SOURCE SCIENTIFIC, INC. (the "Company") and herewith encloses
payment of $_______________ and/or _________ shares of the Company's Common
Stock in full payment of the purchase price of the shares being purchased.
Dated: ____________, 19__
------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of the
Option)
-----------------------------------
(Address)
* Insert here the number of shares called for on the face of
the Option (or, in the case of a partial exercise, the number of shares being
exercised), in either case without making any adjustment for additional Common
Stock, other securities or property which, pursuant to the adjustment provisions
of the Option, may be deliverable upon exercise.
EXHIBIT 4.6
AMENDMENTS OF THE STOCK OPTION PLAN
The Board of Directors has adopted, and the shareholders of the Company
have approved, the following amendments (the "Plan Amendments") to the Company's
1981 Stock Option Plan (the "Plan"):
1. The number of shares of the Common Stock which may be issued under
the Plan shall be increased from 1,125,000 shares to 3,500,000 shares.
2. There shall be three categories of optionee:
(i) Employees
(ii) Outside Directors of the Company
(iii) Consultants and advisors
Description of the Plan Amendments.
1. Increase in Number of Shares. Section 4 of the Plan will be
amended to increase the number of shares which may be issued under the Plan form
1,125,000 shares to 3,500,000 shares.
2. Revise Eligibility and Limitations on Options granted
under the Plan. Section 3 of the Plan will be amended as follows:
"(a) The persons who shall be eligible to purchase shares of
the Common Stock of the Company (the "Stock") under the Plan shall be those
persons who are qualified under one category of the following: (i) employee,
(ii) outside director, (iii) consultant and advisor of the Company or a
subsidiary corporation of the Company, who are from time to time selected as
eligible employees by the Board of the Company. A person who has purchased
shares under the Plan (a "Purchaser") may be granted the right to purchase
additional shares under the Plan at a later date; however, no person shall be
offered the opportunity to purchase shares of the Stock if after such purchase
he would own Stock having in the aggregate more than five percent (5%) of the
total combined voting power or value of all outstanding equity securities of the
Company.
(b) At the time of the grant of each option under this Plan
for a person qualified under the category, (i) employee, the Committee shall
determine whether such option is to be designated as an incentive stock option.
If an option is to be designated as an incentive stock option, then the
provisions of Section 3 of this Plan shall be made applicable to such option. In
addition, no option granted to any employee who at the time of such grant, owns
stock possessing more than 10 percent of the total combined voting power of all
classes of stock of the Company or any of its subsidiaries, may be designated as
an incentive stock option.
(c) The aggregate fair market value of the stock for which any
employee may be granted options designated as incentive stock options in any
calendar year shall not exceed $100,000 plus any unused limit carryover (as
defined in 3(d) hereof) to such year from any prior calendar year beginning on
or after January 1, 1995.
(d) The unused limit carryover from any such calendar year
shall be one-half of any excess of $100,000 over the aggregate fair market value
of the stock for which an employee was granted options that qualify (whether
from their issuance or as a result of subsequent amendment and election by the
Company) as incentive stock options in any such calendar year The unused limit
for any calendar year shall be carried forward for three (3) years. incentive
stock options granted in any year shall be applied against the current year
limitation first and then against the remaining unused limit carryovers to such
year in the order of the calendar year in which the carryovers arose.
(e) The time of the grant of each option under this Plan for a
person qualified under category (ii) outside directors, shall be the effective
date of the director's admittance or election to the Board of the Directors of
the Company, and shall be in the amounts established by the Committee from time
to time for the category (ii) directors options. Vesting of the Options shall be
in increments of one-quarter of the grant for each ninety (90) days completed by
the director having served on the Board.
(f) At the time of the grant of each option under this Plan
for a person qualified under the category, (iii) consultant or advisor, the
Committee shall determine the amount, conditions and terms of the grant.
(g) All grants of options under this Plan for persons qualified
under the categories of (ii) director and (iii) consultant or advisor, shall not
be incentive stock options."
ARTER & HADDEN
ATTORNEYS AT LAW
founded 1843
In California: Jamboree Center Other Offices:
Five Park Plaza / Suite 1000
Los Angeles Irvine, California 92714 Cleveland
Ontario Columbus
San Diego 714/252-7500 telephone Dallas
San Francisco 714/833-9604 facsimile Washington, D.C.
April 15, 1996
Source Scientific, Inc.
73'30 Lincoln 'Way
Garden Grove, CA 92641
RE: Registration of 2,375,000 Shares of Common Stock
Issuable Under the 1981 Stock Option Plan
Gentlemen;
We understand that Source Scientific, Inc., a California corporation,
intends to file Post-effective Amendment No. 1 to its Registration Statement on
Form S-8 (the "Amended Registration Statement") for the purpose of registering
an additional 2,375,000 shares (the "Shares") of the Common Stock, no par value
per share, available for issuance under its 1981 Stock Option Plan (the "Plan").
You have requested that we render the opinion of counsel, required to be filed
with the Registration Statement.
Assuming compliance with applicable state securities and "Blue Sky" laws, we are
of the opinion that the Shares have been duly authorized and, when issued and
sold in accordance with the terms of the Plan (and upon receipt of the
consideration therefor), the Shares will be legally and validly issued, fully
paid, and non-assessable.
We consent with the inclusion of this opinion in the Registration
Statement.
Very truly yours,
ARTER & HADDEN
INDEPENDENT ACCOUNTANTS' CONSENT
We consent to the incorporation by reference in the Registration Statement of
Source Scientific, Inc. and Subsidiaries (formerly Alton Group, Inc.) on Form
S-8 of our report, which includes an explanatory paragraph with respect to the
uncertainty as to the Company's ability to continue as a going concern, dated
December 14, 1995, on our audits of the consolidated financial statements as of
June 30, 1995 and 1994, and for the years then ended, which report is included
in the Company's Annual Report on Form 10-KSB.
Coopers & Lybrand L.L.P.
Newport Beach, California
April 23, 1996
