<PAGE> 1
As filed with the Securities and Exchange Commission on JUNE 16 1999
Registration No. 333-______
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
THORATEC LABORATORIES CORPORATION
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2340464
---------- ----------
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
6035 Stoneridge Drive, Pleasanton, California 94588
(Address of principal executive offices)
(1) 1997 STOCK OPTION PLAN
(2) 1996 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
---------------------------------------------------
(Full title of the plan)
D. Keith Grossman
Thoratec Laboratories Corporation
6035 Stoneridge Drive
Pleasanton, California 94588
-----------------------------------------
(Name and address of agent for service)
(925) 847-8600
---------------------------------------------------------------
(Telephone number, including area code, of agent for service)
Copy to: August J. Moretti
Heller, Ehrman, White & McAuliffe
2500 Sand Hill Road, Suite 100
Menlo Park, California 94025-7063
(650) 234-4200
<PAGE> 2
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
==============================================================================================
Proposed Proposed
Title of maximum maximum
securities Amount offering aggregate Amount of
to be to be price per offering registration
registered registered share (1) price fee
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
no par value 2,000,000 $9.3125 $18,625,000 $5,177.75
==============================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the amount of the
registration fee pursuant to Rule 457(c) under the Securities Act of 1933,
as amended, and based on the average of the high and low prices reported on
the NASDAQ Stock Market on June 14, 1999.
EXPLANATORY NOTE: This Registration Statement on Form S-8 relates to the
issuance of up to 2,000,000 additional shares of Common Stock (the "Shares") of
Thoratec Laboratories Corporation ("Thoratec") under Thoratec's 1997 Stock
Option Plan and Thoratec's 1996 Nonemployee Directors Stock Option Plan (the
"Plans"). The Registration Statement covers 1,800,000 additional shares under
Thoratec's 1997 Stock Option Plan and 200,000 additional shares under Thoratec's
1996 Nonemployee Directors Stock Option Plan. As a result of this increase,
there is an aggregate of 3,150,000 shares reserved for issuance, of which
1,350,000 shares were previously registered on Registration Statements on Form
S-8 under the Securities Act of 1933, as amended (the "Act").
2
<PAGE> 3
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed or to be filed with the Securities and
Exchange Commission (the "Commission") by Thoratec Laboratories Corporation are
incorporated by reference in this registration statement:
(a) Thoratec's Annual Report on Form 10-K for the fiscal year ended
January 2, 1999;
(b) Thoratec's Quarterly Report on Form 10-Q for the quarter ended
April 3, 1999;
(c) The description of the Common Stock contained in Thoratec's
registration statement on Form 8-A, filed May 18, 1981, under the
Securities Exchange Act of 1934, as amended ("Exchange Act"),
including any amendment or reports filed for the purpose of
updating such description.
All documents subsequently filed by the registrant pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Exchange Act, prior to the filing of a
post-effective amendment which indicates that all securities offered hereby have
been sold or which deregisters all securities then remaining unsold, shall be
deemed to be incorporated by reference in this registration statement and to be
part thereof from the date of filing of such documents.
ITEM 4. DESCRIPTION OF SECURITIES
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Pursuant to Section 204(a) and 317 of the California Corporations Code,
as amended, the registrant has included in its articles of incorporation and
By-laws provisions regarding the indemnification of officers and directors of
the registrant.
3
<PAGE> 4
Article Fourth of registrant's Restated Articles of Incorporation, as amended,
provides as follows:
"Fourth: The liability of the directors of this corporation for monetary
damages shall be eliminated to the fullest extent permissible under California
law. This corporation is also authorized, to the fullest extent permissible
under California law, to indemnify its agents (as defined in Section 317 of the
California Corporations Code), whether by-law, agreement or otherwise, in excess
of the indemnification expressly permitted by Section 317 and to advance defense
expenses to its agents in connection with such matters as they are incurred. If,
after the effective date of this Article, California law is amended in a manner
which permits a corporation to limit the monetary or other liability of its
directors or to authorize indemnification of, or advancement of such defense
expense to, its directors or other persons, in any such case to a greater extent
than is permitted on such effective date, the references in this Article to
"California law' shall to that extent be deemed to refer to California law as so
amended."
Section 29 of the registrant's By-Laws, as amended, provides as follows:
"29. Indemnification of Directors and Officers.
(a) Indemnification. To the fullest extent permissible under California
law, the corporation shall indemnify its directors and officers against all
expenses, judgment, fines settlement and other amounts actually and reasonably
incurred by them in connection with any proceeding, including an action by or in
the right of the corporation, by reason of the fact that such person is or was a
director or officer of the corporation, or is or was serving at the request of
the corporation as a director, officer, trustee, employee or agent of another
corporation, or of a partnership, joint venture, trust or other enterprise
(including service with respect to employee benefit plans). To the fullest
extent permissible under California law, expenses incurred by a director or
officer seeking indemnification under this By-law in defending any proceeding
shall be advanced by the corporation as they are incurred upon receipt by the
corporation of an undertaking by or on behalf of the director or officer to
repay such amount if it shall ultimately be determined that the director or
officer is not entitled to be indemnified by the corporation for those expenses.
If, after the effective date of this By-law, California law is amended in a
manner which permits the corporation to authorize indemnification of or
advancement of expense to its directors or officers, in any such case to a
greater extent than is permitted on such effective date, the references in this
By-law to "California law" shall to that extent be deemed to refer to California
law as so amended. The rights granted by this By-law are contractual in nature
and, as such, may not be altered with respect to any present or former director
or officer without the written consent of that person.
4
<PAGE> 5
(b) Procedure. Upon written request to the Board of Directors by a
person seeking indemnification under this By-law, the Board shall promptly
determine in accordance with Section 317(e) of the California Corporations Code
whether the applicable standard of conduct has been met and, if so, the Board
shall authorize indemnification. If the Board cannot authorize indemnification
because the number of directors who are parties to the proceeding with respect
to which indemnification is sought prevents the formation of a quorum of
directors who are not parties to the proceeding, then, upon written request by
the person seeking indemnification, independent legal counsel (by means of a
written opinion obtained at the corporation's expense) or the corporation's
shareholders shall determine whether the applicable standard of conduct has been
met and, if so, shall authorize indemnification.
(c) Definitions. The term "proceeding" means any threatened, pending or
completed action or proceeding, whether civil, criminal, administrative or
investigative. The term "expenses" includes, without limitation, attorney's fees
and any expenses of establishing a right to indemnification."
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
Not applicable.
ITEM 8. EXHIBITS
5 Opinion of Heller Ehrman White & McAuliffe
23.1 Independent Auditors' Consent
23.2 Consent of Heller, Ehrman, White & McAuliffe (filed as
part of Exhibit 5)
24 Power of Attorney (see pages 6 and 7)
99.1 1997 Stock Option Plan
99.2 1996 Nonemployee Directors Stock Option Plan
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;
5
<PAGE> 6
(i) To include any prospectus required by Section 10(a)(3)
of the Securities Act of 1933, as amended (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 the
registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this registration statement
or any material change to such information in this registration statement;
provided, however, that paragraphs A(1)(i) and A(1)(ii) shall 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 15(d) of the Exchange Act that are incorporated by reference in
the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold upon the
termination of the 1997 Stock Option Plan or the 1996 Nonemployee Directors
Stock Option Plan.
B. The undersigned registrant hereby undertakes that, for
purposes of determining 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 that is incorporated by reference into 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 provisions described in Item 6, 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 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
6
<PAGE> 7
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Pleasanton, State of California, on this 15th
day of June, 1999.
THORATEC LABORATORIES CORPORATION
By: /s/ D. Keith Grossman
------------------------------
D. Keith Grossman, President
7
<PAGE> 8
POWER OF ATTORNEY TO SIGN AMENDMENTS
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below does hereby constitute and appoint D. Keith Grossman and Cheryl D. Hess,
and each of them, with full power of substitution and full power to act without
the other, as such person's true and lawful attorney-in-fact and agent for such
person in such person's name, place and stead, in any and all capacities, to
sign any or all amendments (including post-effective amendments) to this
registration statement on Form S-8 and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully, to all intents and purposes, as they or such
person might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement on Form S-8 has been signed by the following persons in
the capacities and on the dates indicated.
8
<PAGE> 9
<TABLE>
<S> <C> <C>
/s/ D. Keith Grossman
- ---------------------------- ------ Chief Executive Officer,
D. Keith Grossman and Director (Principal Executive June 15, 1999
Officer)
/s/ J. Donald Hill
- ----------------------------------- Director and Chairman of the Board June 4, 1999
J. Donald Hill of Directors
/s/ Cheryl D. Hess
- ----------------------------------- Chief Financial Officer, Vice May 28, 1999
Cheryl D. Hess President - Finance and
Secretary (Principal Financial
and Accounting Officer)
/s/ Christy W. Bell
- ----------------------------------- Director June 8, 1999
Christy W. Bell
/s/ William W. Hitchcock
- ----------------------------------- Director June 15, 1999
William W. Hitchcock
/s/ Howard E. Chase
- ----------------------------------- Director June 7, 1999
Howard E. Chase
/s/ George W. Holbrook, Jr.
- ----------------------------------- Director June 4, 1999
George W. Holbrook, Jr.
/s/ Daniel M. Mulvena
- ----------------------------------- Director June 14, 1999
Daniel M. Mulvena
/s/ J. Daniel Cole
- ----------------------------------- Director June 4, 1999
J. Daniel Cole
</TABLE>
9
<PAGE> 10
Index to Exhibits
<TABLE>
Sequentially
Item No. Description of Item Numbered Page
- -------- ------------------- -------------
<S> <C> <C>
5 Opinion of Heller, Ehrman, White & McAuliffe
23.1 Independent Auditors' Consent
23.2 Consent of Heller, Ehrman, White & McAuliffe (See Exhibit 5)
24 Power of Attorney (See pages 8 and 9)
99.1 1997 Stock Option Plan
99.2 1996 Nonemployee Directors Stock Option Plan
</TABLE>
10
<PAGE> 1
EXHIBIT 5
[HELLER EHRMAN WHITE & MCAULIFFE LETTERHEAD]
June 15, 1999
Thoratec Laboratories Corporation
6035 Stoneridge Drive
Pleasanton, California 94588
Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel to Thoratec Laboratories Corporation, a
California corporation (the "Company"), in connection with the Registration
Statement on Form S-8 (the "Registration Statement") which the Company proposes
to file with the Securities Exchange Commission on June 16, 1999 for the
purposes of registering under the Securities Exchange Act of 1933, as amended,
2,000,000 shares of its Common Stock, no par value (the "Shares"). The Shares
are additional Shares issuable under the Company's 1997 Stock Option Plan and
1996 Nonemployee Directors Stock Option Plan (together the "Plans").
We have assumed the authenticity of all records, documents and
instruments submitted to us as originals, the genuineness of all signatures, the
legal capacity of natural persons and the conformity to the originals of all
records, documents and instruments submitted to us as copies.
In rendering our opinion, we have examined the following records,
documents and instruments:
(a) The Amended and Restated Articles of Incorporation of the Company,
certified by the California Secretary of State as of May 23, 1996,
and certified to us by an officer of the Company as being complete
and in full force as of the date of this opinion;
<PAGE> 2
Thoratec Laboratories Corporation
June 15, 1999
Page 2
(b) The Bylaws of the Company certified to us by an officer of the
Company as being complete and in full force and effect as of the
date of this opinion;
(c) A Certificate of an officer of the Company (i) attaching records
certified to us as constituting all records of proceedings and
actions of the Board of Directors, including any committee
thereof, and shareholders of the Company relating to the Shares,
and the Registration Statement, and (ii) certifying as to certain
factual matters;
(d) The Registration Statement;
(e) The Plans; and
(f) A letter from American Securities Transfer & Trust, Inc., the
Company's transfer agent, dated May 18, 1999, as to the number of
shares of the Company's common stock that were outstanding on May
17, 1999.
This opinion is limited to the federal law of the United States of
America and the law of the State of California, and we disclaim any opinion as
to the laws of any other jurisdiction. We further disclaim any opinion as to any
other statute, rule, regulation, ordinance, order or other promulgation of any
other jurisdiction or any regional or local governmental body or as to any
related judicial or administrative opinion.
Based on the foregoing and our examination of such questions of law as
we have deemed necessary or appropriate for the purpose of this opinion, and
assuming that (i) the Registration Statement becomes and remains effective
during the period when the Shares are offered and issued, (ii) the full
consideration stated in the Plan is paid for each Share and that such
consideration in respect of each Share includes payment of cash or other lawful
consideration, (iii) appropriate certificates evidencing the Shares are executed
and delivered by the Company, and (iv) all applicable securities laws are
complied with, it is our opinion that when issued and sold by the Company, after
payment therefore in the manner provided in the Plan and Registration Statement,
the Shares will be legally issued, fully paid and nonassessable.
This opinion is rendered to you in connection with the Registration
Statement and is solely for your benefit. This opinion may not be relied upon by
you for any other purpose, or relied upon by any other person, firm, corporation
or other entity for any purpose, without our prior written consent. We disclaim
any obligation to advise you of any change of law that occurs, or any facts of
which we may become aware, after the date of this opinion.
<PAGE> 3
Thoratec Laboratories Corporation
June 15, 1999
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Heller, Ehrman, White & McAuliffe
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration
Statement of Thoratec Laboratories Corporation on Form S-8 of our report dated
February 19, 1999, appearing in the Annual Report on Form 10-K of Thoratec
Laboratories Corporation for the year ended January 2, 1999.
/s/ Deloitte & Touche, LLP
San Francisco, California
June 15, 1999
<PAGE> 1
EXHIBIT 99.1
1997 STOCK OPTION PLAN
OF
THORATEC LABORATORIES CORPORATION
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. PURPOSES OF THE PLAN............................................................1
2. ELIGIBLE PERSONS................................................................1
3. STOCK SUBJECT TO THIS PLAN......................................................2
4. ADMINISTRATION..................................................................2
5. GRANTING OF OPTIONS; OPTION AGREEMENT...........................................3
6. TERMS AND CONDITIONS OF OPTIONS.................................................3
6.1 Terms and Conditions to Which All Options Are Subject......................3
6.2 Terms and Conditions to Which Only NQOs Are Subject........................8
6.3 Terms and Conditions to Which Only ISOs Are Subject........................8
7. MANNER OF EXERCISE..............................................................9
8. RELATIONSHIP OF PARTICIPANT.....................................................9
9. FINANCIAL INFORMATION..........................................................10
10. CONDITIONS UPON ISSUANCE OF SHARES............................................10
11. NONEXCLUSIVITY OF THE PLAN....................................................10
12. AMENDMENTS TO PLAN............................................................10
13. EFFECTIVE DATE OF PLAN........................................................11
</TABLE>
<PAGE> 3
1997 STOCK OPTION PLAN
OF
THORATEC LABORATORIES CORPORATION
1. PURPOSES OF THE PLAN
The purposes of the 1997 Stock Option Plan (the "Plan") of
Thoratec Laboratories Corporation, a California corporation (the "Company"), are
to:
(a) Encourage selected directors, employees and consultants
to improve operations and increase profits of the Company;
(b) Encourage selected directors, employees and consultants
to accept or continue employment or association with the Company or its
Affiliates; and
(c) Increase the interest of selected directors, employees
and consultants in the Company's welfare through participation in the growth in
value of the common stock of the Company (the "Common Stock").
Options granted under this Plan ("Options") may be
"incentive stock options" ("ISOs") intended to satisfy the requirements of
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), or
"nonqualified options" ("NQOs").
2. ELIGIBLE PERSONS
Every person who at the date of grant of an Option is a
full-time employee of the Company or of any Affiliate (as defined below) of the
Company is eligible to receive NQOs or ISOs under this Plan. Every person who at
the date of grant is a consultant or non-employee director to the Company or any
Affiliate (as defined below) of the Company is eligible to receive NQOs under
this Plan. The term "Affiliate" as used in the Plan means a parent or subsidiary
corporation as defined in the applicable provisions (currently Sections 424(e)
and (f), respectively) of the Code. The term "employee" includes an officer or
director who is an employee, of the Company. The term "consultant" includes
persons employed by, or otherwise affiliated with, a consultant.
-1-
<PAGE> 4
3. STOCK SUBJECT TO THIS PLAN
Subject to the provisions of Section 6.1.1 of the Plan, the
total number of shares of stock which may be issued under options granted
pursuant to this Plan shall not exceed 2,800,000 shares of Common Stock. The
shares covered by the portion of any grant under the Plan which expires
unexercised shall become available again for grants under the Plan.
4. ADMINISTRATION
(a) This Plan shall be administered by the Board of
Directors of the Company (the "Board") or, either in its entirety or only
insofar as required pursuant to Section 4(b) hereof, by a committee (the
"Committee") of at least two Board members to which administration of the Plan,
or of any portion of the Plan, is delegated (in either case, the
"Administrator").
(b) From and after such time as the Company registers a
class of equity securities under Section 12 of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), it is intended that this Plan shall be
administered in accordance with the requirements of Rule 16b-3 promulgated by
the Securities and Exchange Commission ("Rule 16b-3"), or any successor rule
thereto.
(c) Subject to the other provisions of this Plan, the
Administrator shall have the authority, in its discretion: (i) to grant Options;
(ii) to determine the fair market value of the Common Stock subject to Options;
(iii) to determine the exercise price of Options granted; (iv) to determine the
persons to whom, and the time or times at which, Options shall be granted, and
the number of shares subject to each Option; (v) to interpret this Plan; (vi) to
prescribe, amend, and rescind rules and regulations relating to this Plan; (vii)
to determine the terms and provisions of each Option granted (which need not be
identical), including but not limited to, the time or times at which Options
shall be exercisable; (viii) with the consent of the optionee, to modify or
amend any Option; (ix) to defer (with the consent of the optionee) the exercise
date of any Option; (x) to authorize any person to execute on behalf of the
Company any instrument evidencing the grant of an Option; and (xi) to make all
other determinations deemed necessary or advisable for the administration of
this Plan. The Administrator may delegate nondiscretionary administrative duties
to such employees of the Company as it deems proper.
(d) All questions of interpretation, implementation, and
application of this Plan shall be determined by the Administrator. Such
determinations shall be final and binding on all persons.
-2-
<PAGE> 5
(e) With respect to persons subject to Section 16 of the
Exchange Act, if any, transactions under this Plan are intended to comply with
the applicable conditions of Rule 16b-3, or any successor rule thereto. To the
extent any provision of this Plan or action by the Administrator fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Administrator. Notwithstanding the above, it shall be
the responsibility of such persons, not of the Company or the Administrator, to
comply with the requirements of Section 16 of the Exchange Act; and neither the
Company nor the Administrator shall be liable if this Plan or any transaction
under this Plan fails to comply with the applicable conditions of Rule 16b-3 or
any successor rule thereto, or if any such person incurs any liability under
Section 16 of the Exchange Act.
5. GRANTING OF OPTIONS; OPTION AGREEMENT
(a) No Options shall be granted under this Plan after ten
years from the date of adoption of this Plan by the Board.
(b) Each Option shall be evidenced by a written stock option
agreement, in form satisfactory to the Company, executed by the Company and the
person to whom such Option is granted; provided, however, that the failure by
the Company, the optionee, or both to execute such an agreement shall not
invalidate the granting of an Option, although the exercise of each option shall
be subject to Section 6.1.3.
(c) The stock option agreement shall specify whether each
Option it evidences is a NQO or an ISO.
(d) Subject to Section 6.3.3 with respect to ISOs, the
Administrator may approve the grant of Options under this Plan to persons who
are expected to become directors, employees or consultants of the Company, but
are not directors, employees or consultants at the date of approval.
6. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Plan shall be subject to the
terms and conditions set forth in Section 6.1. NQOs shall be also subject to the
terms and conditions set forth in Section 6.2, but not those set forth in
Section 6.3. ISOs shall also be subject to the terms and conditions set forth in
Section 6.3, but not those set forth in Section 6.2.
6.1 Terms and Conditions to Which All Options Are Subject. All
Options granted under this Plan shall be subject to the following terms and
conditions:
-3-
<PAGE> 6
6.1.1 Changes in Capital Structure. Subject to Section
6.1.2, if the stock of the Company is changed by reason of a stock split,
reverse stock split, stock dividend, or recapitalization, combination or
reclassification, appropriate adjustments shall be made by the Board in (a) the
number and class of shares of stock subject to this Plan and each Option
outstanding under this Plan, and (b) the exercise price of each outstanding
Option; provided, however, that the Company shall not be required to issue
fractional shares as a result of any such adjustments. Each such adjustment
shall be subject to approval by the Board in its sole discretion.
6.1.2 Corporate Transactions. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
optionee at least 30 days prior to such proposed action. To the extent not
previously exercised, all Options will terminate immediately prior to the
consummation of such proposed action. In the event of a merger or consolidation
of the Company with or into another corporation or entity in which the Company
does not survive, or in the event of a sale of all or substantially all of the
assets of the Company in which the shareholders of the Company receive
securities of the acquiring entity or an affiliate thereof, all Options shall be
assumed or equivalent options shall be substituted by the successor corporation
(or other entity) or a parent or subsidiary of such successor corporation (or
other entity). In the event that such successor does not agree to assume the
Options or to substitute equivalent options therefor, unless the Administrator
shall determine otherwise, the Options will expire upon such event.
6.1.3 Time of Option Exercise. Subject to Section 5, Options
granted under this Plan shall be exercisable (a) immediately as of the effective
date of the stock option agreement granting the Option, or (b) in accordance
with a schedule related to the date of the grant of the Option, the date of
first employment, or such other date as may be set by the Administrator (in any
case, the "Vesting Base Date") and specified in the written stock option
agreement relating to such Option; provided, however, that the right to exercise
an Option must vest at the rate of at least 20% per year over five years from
the date the option was granted. In any case, no Option shall be exercisable
until a written stock option agreement in form satisfactory to the Company is
executed by the Company and the optionee.
6.1.4 Option Grant Date. Except in the case of advance
approvals described in Section 5(d), the date of grant of an Option under this
Plan shall be the date as of which the Administrator approves the grant.
6.1.5 Nonassignability of Option Rights. No Option granted
under this Plan shall be assignable or otherwise transferable by the optionee
-4-
<PAGE> 7
except by will or by the laws of descent and distribution. During the life of
the optionee, an Option shall be exercisable only by the optionee.
6.1.6 Payment. Except as provided below, payment in full, in
cash, shall be made for all stock purchased at the time written notice of
exercise of an Option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. At the time an Option is granted or
exercised, the Administrator, in the exercise of its absolute discretion after
considering any tax or accounting consequences, may authorize any one or more of
the following additional methods of payment:
(a) Acceptance of the optionee's full recourse
promissory note for all or part of the Option price, payable on such terms and
bearing such interest rate as determined by the Administrator (but in no event
less than the minimum interest rate specified under the Code at which no
additional interest would be imputed), which promissory note may be either
secured or unsecured in such manner as the Administrator shall approve
(including, without limitation, by a security interest in the shares of the
Company); and
(b) Delivery by the optionee of Common Stock already
owned by the optionee for all or part of the Option price, provided the value
(determined as set forth in Section 6.1.11) of such Common Stock is equal on the
date of exercise to the Option price, or such portion thereof as the optionee is
authorized to pay by delivery of such stock; provided, however, that if an
optionee has exercised any portion of any Option granted by the Company by
delivery of Common Stock, the optionee may not, within six months following such
exercise, exercise any Option granted under this Plan by delivery of Common
Stock without the consent of the Administrator.
6.1.7 Termination of Employment. Except as otherwise
approved by the Administrator in its absolute discretion, if for any reason
other than death or permanent and total disability, an optionee ceases to be
employed by the Company or any of its Affiliates (such event being called a
"Termination"), Options held at the date of Termination (to the extent then
exercisable) may be exercised in whole or in part at any time within three
months of the date of such Termination, (but in no event after the Expiration
Date); provided, that if such exercise of the Option would result in liability
for the optionee under Section 16(b) of the Exchange Act, such Option shall
terminate at such later date as is fixed by the Administrator (but in no event
after the Expiration Date). If an optionee dies or becomes permanently and
totally disabled (within the meaning of Section 22(e)(3) of the Code) while
employed by the Company or an Affiliate or within the period that the Option
remains exercisable
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after Termination, Options then held (to the extent then exercisable) may be
exercised, in whole or in part, by the optionee, by the optionee's personal
representative or by the person to whom the Option is transferred by devise or
the laws of descent and distribution, at any time within six months after the
death or six months after the permanent and total disability of the optionee
(but in no event after the Expiration Date). For purposes of this Section 6.1.7,
"employment" includes service as a director or consultant. For purposes of this
Section 6.1.7, an optionee's employment shall not be deemed to terminate by
reason of sick leave, military leave or other leave of absence approved by the
Administrator, if the period of any such leave does not exceed 90 days or, if
longer, if the optionee's right to reemployment by the Company or any Affiliate
is guaranteed either contractually or by statute.
6.1.8 Repurchase of Stock. At the option of the
Administrator, the stock to be delivered pursuant to the exercise of any Option
granted to a director, employee or consultant under this Plan may be subject to
a right of repurchase in favor of the Company with respect to any director,
employee or consultant whose director, employment, or consulting relationship
with the Company is terminated. Such right of repurchase shall be at the Option
exercise price and (i) shall lapse at the rate of at least 20% per year over
five years from the date the Option is granted (without regard to the date it
becomes exercisable), and must be exercised for cash or cancellation of purchase
money indebtedness within 90 days of such termination and (ii) if the right is
assignable by the Company, the assignee must pay the Company upon assignment of
the right (unless the assignee is a 100% owned subsidiary of the Company or is
an Affiliate) cash equal to the difference between the Option exercise price and
the value (determined as set forth in Section 6.1.11) of the stock to be
purchased if the Option exercise price is less than such value. Shares
repurchased by the Company pursuant to the Company's right of repurchase are not
again available for grant under the Plan.
Determination of the number of shares subject to any such right of
repurchase shall be made as of the date the director's director relationship
with, employee's employment by, or consultant's consulting relationship with,
the Company terminates, not as of the date that any Option granted to such
director, employee or consultant is thereafter exercised.
6.1.9 Withholding and Employment Taxes. At the time of
exercise of an Option or at such other time as the amount of such obligations
becomes determinable (the "Tax Date"), the optionee shall remit to the Company
in cash all applicable federal and state withholding and employment taxes. If
authorized by the Administrator in its sole discretion after considering any tax
or accounting consequences, an optionee may elect to (i) deliver a promissory
note on such terms as
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the Administrator deems appropriate, (ii) tender to the Company previously owned
shares of Stock or other securities of the Company, or (iii) have shares of
Common Stock which are acquired upon exercise of the Option withheld by the
Company to pay some or all of the amount of tax that is required by law to be
withheld by the Company as a result of the exercise of such Option.
Any limitations may be waived (or additional limitations may be imposed)
by the Administrator, in its sole discretion, if the Administrator determines
that limitations are not required (or that such additional limitations are
required) in order that the transaction shall be exempt from Section 16(b) of
the Exchange Act pursuant to Rule 16b-3, or any successor rule thereto. In
addition, any limitations may be waived by the Administrator, in its sole
discretion, if the Administrator determines that Rule 16b-3, or any successor
rule thereto, is not applicable to the exercise of the Option by the optionee or
for any other reason.
Any securities tendered or withheld in accordance with this Section
6.1.9 shall be valued by the Company as of the Tax Date.
6.1.10 Other Provisions. Each Option granted under this Plan
may contain such other terms, provisions, and conditions not inconsistent with
this Plan as may be determined by the Administrator, and each ISO granted under
this Plan shall include such provisions and conditions as are necessary to
qualify the Option as an "incentive stock option" within the meaning of Section
422 of the Code.
6.1.11 Determination of Value. For purposes of the Plan, the
value of Common Stock or other securities of the Company shall be determined as
follows:
(a) If the stock of the Company is listed on any
established stock exchange or a national market system, including without
limitation the National Market System of the National Association of Securities
Dealers, Inc. Automated Quotation System, its fair market value shall be the
closing sales price for such stock or the closing bid if no sales were reported,
as quoted on such system or exchange (or the largest such exchange) for the date
the value is to be determined (or if there are no sales for such date, then for
the last preceding business day on which there were sales), as reported in The
Wall Street Journal or similar publication.
(b) If the stock of the Company is regularly quoted
by a recognized securities dealer but selling prices are not reported, its fair
market value shall be the mean between the high bid and low asked prices for the
stock
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on the date the value is to be determined (or if there are no quoted prices for
the date of grant, then for the last preceding business day on which there were
quoted prices).
(c) In the absence of an established market for the
stock, the fair market value thereof shall be determined in good faith by the
Administrator, with reference to the Company's net worth, prospective earning
power, dividend-paying capacity, and other relevant factors, including the
goodwill of the Company, the economic outlook in the Company's industry, the
Company's position in the industry and its management, and the values of stock
of other corporations in the same or a similar line of business.
6.1.12 Option Term. Subject to Section 6.3.4, no Option
shall be exercisable more than ten years after the date of grant, or such lesser
period of time as is set forth in the stock option agreement (the end of the
maximum exercise period stated in the stock option agreement is referred to in
this Plan as the "Expiration Date").
6.1.13 Exercise Price. The exercise price of any Option
granted to any person who owns, directly or by attribution under the Code
currently Section 424(d), stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or of any Affiliate
(a "Ten Percent Stockholder") shall in no event be less than 110% of the fair
market value (determined in accordance with Section 6.1.11) of the stock covered
by the Option at the time the Option is granted.
6.2 Terms and Conditions to Which Only NQOs Are Subject.
Options granted under this Plan which are designated as NQOs shall be subject to
the following terms and conditions:
6.2.1 Exercise Price. Except as set forth in Section 6.1.13,
the exercise price of a NQO shall be not less than 85% of the fair market
value (determined in accordance with Section 6.1.11) of the stock subject to the
Option on the date of grant.
6.3 Terms and Conditions to Which Only ISOs Are Subject.
Options granted under this Plan which are designated as ISOs shall be subject to
the following terms and conditions:
6.3.1 Exercise Price. Except as set forth in Section 6.1.13,
the exercise price of an ISO shall be determined in accordance with the
applicable provisions of the Code and shall in no event be less than the fair
market
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value (determined in accordance with Section 6.1.11) of the stock covered by the
Option at the time the Option is granted.
6.3.2 Disqualifying Dispositions. If stock acquired by
exercise of an ISO granted pursuant to this Plan is disposed of in a
"disqualifying disposition" within the meaning of Section 422 of the Code, the
holder of the stock immediately before the disposition shall promptly notify the
Company in writing of the date and terms of the disposition and shall provide
such other information regarding the Option as the Company may reasonably
require.
6.3.3 Grant Date. If an ISO is granted in anticipation of
employment as provided in Section 5(d), the Option shall be deemed granted,
without further approval, on the date the grantee assumes the director,
employment or consultancy relationship forming the basis for such grant, and, in
addition, satisfies all requirements of this Plan for Options granted on that
date.
6.3.4 Term. Notwithstanding Section 6.1.12, no ISO granted
to any Ten Percent Stockholder shall be exercisable more than five years after
the date of grant.
7. MANNER OF EXERCISE
(a) An optionee wishing to exercise an Option shall give
written notice to the Company at its principal executive office, to the
attention of the officer of the Company designated by the Administrator,
accompanied by payment of the exercise price as provided in Section 6.1.6. The
date the Company receives written notice of an exercise hereunder accompanied by
payment of the exercise price will be considered as the date such Option was
exercised.
(b) Promptly after receipt of written notice of exercise of
an Option, the Company shall, without stock issue or transfer taxes to the
optionee or other person entitled to exercise the Option, deliver to the
optionee or such other person a certificate or certificates for the requisite
number of shares of stock. An optionee or permitted transferee of an optionee
shall not have any privileges as a shareholder with respect to any shares of
stock covered by the Option until the date of issuance (as evidenced by the
appropriate entry on the books of the Company or a duly authorized transfer
agent) of such shares.
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8. RELATIONSHIP OF PARTICIPANT
Neither the adoption of this Plan nor the grant of any
Option hereunder shall (i) confer upon any employee any right to continued
employment nor shall it interfere in any way with the right of the Company or an
Affiliate to terminate the employment of any employee at any time; or (ii)
confer upon any consultant any right to a continued consultancy relationship nor
shall it interfere in any way with the right of the Company or an Affiliate to
terminate the consultancy relationship of any consultant at any time; or (ii)
confer upon any participant any right with respect to continuation of the
participant's membership on the Board or shall interfere in any way with
provisions in the Company's Articles of Incorporation and Bylaws relating to the
election, appointment, terms of office, and removal of members of the Board.
9. FINANCIAL INFORMATION
The Company shall provide to each optionee during the period
such optionee holds an outstanding Option, and to each holder of Common Stock
acquired upon exercise of Options granted under the Plan for so long as such
person is a holder of such Common Stock, a balance sheet and income statement of
the Company at least annually as prepared either by the Company or independent
certified public accountants of the Company. Such financial statements shall be
delivered as soon as practicable following the end of the Company's fiscal year.
10. CONDITIONS UPON ISSUANCE OF SHARES
Shares of Common Stock shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended (the "Securities Act").
11. NONEXCLUSIVITY OF THE PLAN
The adoption of the Plan shall not be construed as creating
any limitations on the power of the Company to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting of stock options other than under the Plan.
12. AMENDMENTS TO PLAN
The Board may at any time amend, alter, suspend or
discontinue this Plan or any Option. Without the consent of an optionee, no
amendment, alteration,
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suspension or discontinuance may adversely affect outstanding Options except to
conform this Plan and ISOs granted under this Plan to the requirements of
federal or other tax laws relating to incentive stock options. No amendment,
alteration, suspension or discontinuance shall require shareholder approval
unless (a) shareholder approval is required to preserve incentive stock option
treatment for federal income tax purposes, (b) for so long as the Company has a
class of equity securities registered under Section 12 of the Exchange Act,
shareholder approval is required to meet the exceptions provided by Rule 16b-3,
or any successor rule thereto, or (c) the Board otherwise concludes that
shareholder approval is advisable.
13. EFFECTIVE DATE OF PLAN
This Plan shall become effective upon adoption by the Board,
provided, however, that no Option shall be exercisable unless and until written
consent of the shareholders of the Company, or approval of shareholders of the
Company voting at a validly called shareholders' meeting, is obtained within 12
months after adoption by the Board. If such shareholder approval is not obtained
within such time, Options granted hereunder shall terminate and be of no force
and effect from and after expiration of such 12 month period. Options may be
granted and exercised under this Plan only after there has been compliance with
all applicable federal and state securities laws.
Plan adopted by the Board of Directors on March 12, 1997.
Plan approved by Shareholders on May 16, 1997.
Plan amended by the Board of Directors on May 13, 1999 to increase the
authorized shares under the Plan from 1,000,000 to 2,800,000. This Amendment was
approved by shareholders on May 14, 1999.
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EXHIBIT 99.2
EXHIBIT A
1996 NONEMPLOYEE DIRECTORS STOCK OPTION PLAN
OF
THORATEC LABORATORIES CORPORATION
1. PURPOSES OF THE PLAN
The purposes of the 1996 Nonemployee Directors Stock Option Plan
of Thoratec Laboratories Corporation, a California corporation, are to:
(a) Encourage Nonemployee Directors to improve operations and
increase profits of the Company;
(b) Encourage Nonemployee Directors to accept or continue their
association with the Company; and
(c) Increase the interest of Nonemployee Directors in the
Company's welfare through participation in the growth in value of the Common
Stock of the Company.
Options granted hereunder shall be "Nonstatutory Options", and
shall not include "incentive stock options" intended to satisfy the requirements
of Section 422 of the Internal Revenue Code of 1986, as amended.
2. DEFINITIONS
As used herein, the following definitions shall apply:
(a) "Administrator" shall mean the entity, either the Board or
the Committee, responsible for administering this Plan, as provided in Section
3.
(b) "Board" shall mean the Board of Directors of the Company, as
constituted from time to time.
(c) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(d) "Committee" shall mean the committee, if any, appointed by
the Board in accordance with Section 5(a) to administer this Plan.
(e) "Common Stock" shall mean the Common Stock of the Company.
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(f) "Company" shall mean Thoratec Laboratories Corporation, a
California corporation.
(g) "Director Fee" shall mean the cash amount, if any, a
Nonemployee Director shall be entitled to receive for serving as a director of
the Company in any fiscal year.
(h) "Fair Market Value" shall mean, as of the date in question,
the last transaction price quoted by the NASDAQ National Market System on the
date of grant; provided, however, that if the Common Stock is not traded on such
market system or the foregoing shall otherwise be inappropriate, then the Fair
Market Value shall be determined by the Administrator in good faith at its sole
discretion and on such basis as it shall deem appropriate. Such determination
shall be conclusive and binding on all persons.
(i) "Nonemployee Director" shall mean any person who is a member
of the Board but is not an employee of the Company or any Parent or Subsidiary
of the Company and has not been an employee of the Company or any Parent or
Subsidiary of the Company at any time during the preceding twelve (12) months.
Service as a director does not in itself constitute employment for purposes of
this definition.
(j) "Option" shall mean a stock option granted pursuant to this
Plan. Each Option shall be a nonstatutory option not intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(k) "Option Agreement" shall mean the written agreement described
in Section 6 evidencing the grant of an Option to a Nonemployee Director and
containing the terms, conditions and restrictions pertaining to such Option.
(l) "Option Shares" shall mean the Shares subject to an Option
granted under this Plan.
(m) "Optionee" shall mean a Nonemployee Director who holds an
Option.
(n) "Plan" shall mean this Thoratec Laboratories Corporation
Nonemployee Directors Stock Option Plan, as it may be amended from time to time.
(o) "Related Option" shall have the meaning set forth in Section
8.7.
(p) "Rule 16b-3" shall have the meaning set forth in Section
5(a).
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(q) "Section" unless the context clearly indicates otherwise,
shall refer to a Section of this Plan.
(r) "Share" shall mean a share of Common Stock, as adjusted in
accordance with Section 8.1.
(s) "Subsidiary" shall mean a "subsidiary corporation" of the
Company, whether now or hereafter existing, within the meaning of Section 424(f)
of the Code, but only for so long as it is a "subsidiary corporation".
3. ELIGIBLE PERSONS
Every person who at the date of grant of an Option is a
Nonemployee Director is eligible to receive Options under this Plan.
4. STOCK SUBJECT TO THIS PLAN
Subject to Section 8.1 of this Plan, the maximum aggregate number
of Shares which may be issued on exercise of Options granted pursuant to this
Plan is 350,000 Shares. The Shares covered by the portion of any grant under the
Plan which expires unexercised shall become available again for grants under the
Plan.
5. ADMINISTRATION
(a) This Plan shall be administered by the Board, or by a
committee (the "Committee") of at least two (2) Board members to which
administration of the Plan is delegated (in either case, the "Administrator"),
in accordance with the requirements of Rule 16b-3 promulgated by the Securities
and Exchange Commission ("Rule 16b-3"), or any successor rule thereto.
(b) Subject to the other provisions of this Plan, the
Administrator shall have the authority, in its sole discretion: (i) to determine
the Fair Market Value of the Shares subject to Option; (ii) to interpret this
Plan; (iii) to prescribe, amend and rescind rules and regulations relating to
this Plan; (iv) to defer (with the consent of the Optionee) or accelerate the
exercise date of any Option; (v) to authorize any person to execute on behalf of
the Company any instrument evidencing the grant of an Option; and (vi) to make
all other determinations deemed necessary or advisable for the administration of
this Plan. The Administrator may delegate nondiscretionary administrative duties
to such employees of the Company as it deems proper.
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(c) All questions of interpretation, implementation and
application of this Plan shall be determined by the Administrator. Such
determination shall be final and binding on all persons.
6. GRANT OF OPTIONS
(a) Grant for initial election or appointment to Board. Subject
to the terms and conditions of this Plan, if any person who is not an officer or
employee of the Company is first elected or appointed as a member of the Board,
then the Company shall grant to such Nonemployee Director Options to purchase
Shares as follows:
i) If such Nonemployee Director is first elected or appointed
as a member of the Board on or after the Company's annual meeting of
shareholders held in 1996 but before the annual meeting of shareholders held in
1997, then on the effective date of such appointment or election, the Company
shall grant to such Nonemployee Director an Option to purchase 3,333 Shares at
an exercise price equal to the Fair Market Value of such Shares on the date of
such Option grant.
ii) If such Nonemployee Director is first elected or
appointed as a member of the Board on or after the Company's annual meeting of
shareholders held in 1997 but before the annual meeting held in 1999, then on
the effective date of such appointment or election, the Company shall grant to
such Nonemployee Director an Option to purchase 10,000 Shares at an exercise
price equal to the Fair Market Value of such Shares on the date of such Option
grant.
iii) If such Nonemployee Director is first elected or
appointed as a member of the Board on or after the Company's annual meeting of
shareholders held in 1999, then on the effective date of such appointment or
election, the Company shall grant to such Nonemployee Director an Option to
purchase 3,750 Shares at an exercise price equal to the Fair Market Value of
such Shares on the date of such Option grant. In addition, on each of the
earlier of (1) the date of the three succeeding Board meetings after such
election or appointment and (2) August 31, November 30, February 28 or May 31 of
the relevant year following such election or appointment, the Company shall
grant to such Nonemployee Director an additional Option to purchase 3,750 Shares
at an exercise price equal to the Fair Market Value of such Shares on the date
of such Option grant, such that the total Options granted for the first full
year after such Nonemployee Director is first elected or appointed as a member
of the Board is for 15,000 Shares.
(b) Grant for re-election to Board. Subject to the terms and
conditions of this Plan, on the date of the first meeting of the Board
immediately following each annual meeting of shareholders of the Company (even
if held on the same day as the
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meeting of shareholders) the Company shall grant to each Nonemployee Director
then in office Options as follows; provided, however, that notwithstanding
anything in this subsection (b) to the contrary, a Director shall not receive an
Option pursuant to this subsection (b) if such Director has been first elected
or appointed as a member of the Board within six months before the date on which
an Option would be granted hereunder.
i) For meetings held prior to the Company's annual meeting of
shareholders held in 1997, the Company shall grant to each Nonemployee Director
then in office an Option to purchase 1,667 Shares at an exercise price equal to
the Fair Market Value of such Shares on the date of such Option grant.
ii) For meetings held on or after the Company's annual
meeting of shareholders held in 1997 but before the annual meeting of
shareholders held in 1999, the Company shall grant to each Nonemployee Director
then in office an Option to purchase 5,000 Shares at an exercise price equal to
the Fair Market Value of such Shares on the date of such Option grant. Provided,
however, that if in any relevant year an annual meeting of shareholders is not
held by June 15, then on June 15 of any such year the Company shall grant to
each Nonemployee Director then in office an Option to purchase 5,000 Shares at
an exercise price equal to the Fair Market Value of such Shares on June 15 and
the Company shall not thereafter grant any Options pursuant to this subsection
(b) in any such year.
iii) For meetings held on or after the Company's annual
meeting of shareholders held in 1999, the Company shall grant to each
Nonemployee Director then in office an Option to purchase 1,875 Shares at an
exercise price equal to the Fair Market Value of such Shares on the date of such
Option grant. Provided, however, that if in any relevant year an annual meeting
of shareholders is not held by June 15, then on June 15 of any such year the
Company shall grant to each Nonemployee Director then in office an Option to
purchase 1,875 Shares at an exercise price equal to the Fair Market Value of
such Shares on June 15. In addition, on each of the earlier of (1) the date of
the three succeeding Board meetings after such annual meeting and (2) August 31,
November 30, February 28 or May 31 of the relevant year following such annual
meeting, the Company shall grant to such Nonemployee Director an additional
Option to purchase 1,875 Shares at an exercise price equal to the Fair Market
Value of such Shares on the date of such Option grant, such that the total
Options granted for each full year of service is for 7,500 Shares.
(c) No Options shall be granted under this Plan after ten (10)
years from the date of adoption of this Plan by the Board. Each Option shall be
evidenced by a written Option Agreement, in form satisfactory to the Company,
executed by
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the Company and the Nonemployee Director to whom such Option is granted;
provided, however, that the failure by the Company, the Nonemployee Director or
both to execute such an agreement shall not invalidate the granting of an
Option.
7. DIRECTOR FEE ELECTION
Upon election by the Board, all or any part of the Director Fees
can be waived in any given year, and the Director Fees waived may be applied by
the Board to reduce the exercise price of Options granted to the Nonemployee
Directors pursuant to Sections 6(a) and 6(b). The amount of Director Fees waived
may vary from year to year. By way of example, if the Board elects pursuant to
this Section to waive an aggregate of $6,000 of Director Fees which would
otherwise be payable to three Nonemployee Directors ($2,000 of fees for each),
an amount of $6,000 ($2,000 each) shall be applied by the Board to reduce the
exercise price of Options granted pursuant to Section 6(b), so that if each of
the three Nonemployee Directors in this example are granted Options for 1,000
shares exercisable at $5.00 each, the $2,000 could be applied to reduce the
exercise price of these options to $3.00 per share ($2,000 1,000 shares/$2.00
per share reduction in exercise price).
8. TERMS AND CONDITIONS OF OPTIONS
Each Option granted under this Plan shall be subject to the terms
and conditions set forth in this Section 8.
8.1. Changes in Capital Structure. Subject to Section 8.2, if the
Common Stock is changed by reason of a stock split, reverse stock split, stock
dividend or recapitalization, or converted into or exchanged for other
securities as a result of a merger, consolidation or reorganization, appropriate
adjustments shall be made in: (a) the number and class of shares of Common Stock
subject to this Plan and each Option outstanding under this Plan; and (b) the
exercise price of each outstanding Option; provided, however, that the Company
shall not be required to issue fractional shares as a result of any such
adjustments. Each such adjustment shall be subject to approval by the
Administrator in its sole discretion.
8.2. Time of Option Exercise. Subject to the other provisions of
this Plan, each Option granted pursuant to this Plan prior to the Company's
annual meeting of shareholders held in 1999 shall be for a term of ten (10)
years and two (2) days and each Option granted pursuant to this Plan on or after
the Company's annual meeting of shareholders held in 1999 shall be for a term of
five (5) years. Each Option granted under Section 6 of this Plan prior to the
Company's annual meeting of shareholders held in 1999 shall be exercisable in
full six months after the date of grant. Each Option granted
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<PAGE> 7
under Section 6 of this Plan after the Company's annual meeting of shareholders
held in 1999 shall be exercisable in full on the date of grant. At the
discretion of the Administrator, the Company shall have a right of repurchase at
the option exercise price with respect to shares purchased upon exercise of
Options granted pursuant to Section 6. For Options granted before the Company's
annual meeting of shareholders held in 1999, such right of repurchase shall
expire with respect to 12-1/2% of the number of Shares covered by such Option
six months after the date such Option is granted and shall expire with respect
to 6-1/4% of the number of shares covered by such Option at the end of each
three-month period thereafter. For Options granted after the Company's annual
meeting of shareholders held in 1999, such right of repurchase shall expire at
the rate determined by the Administrator.
8.3. Corporate Transactions. In connection with an acquisition of
the Company affected by a merger, consolidation, sale of all or substantially
all of the Company's assets, acquisition of shares, or any like occurrence in
which the Company is involved, the right of repurchase specified in Section 8.2
shall lapse with respect to twice the number of shares then subject to such
right of repurchase. The Administrator shall have the authority, in its sole
discretion, to determine the time prior to consummation of such transaction when
such right of repurchase shall so lapse.
8.4. Limitation on Other Grants. The Administrator shall have no
discretion to grant Options under this Plan other than as set forth in Sections
6(a) and 6(b).
8.5. Nonassignability of Option Rights. No Option granted under
this Plan shall be assignable or otherwise transferable by the Optionee, except
by will or the laws of descent and distribution, or pursuant to a qualified
domestic relations order as defined by the Code. During the life of an Optionee,
an Option shall be exercisable only by the Optionee.
8.6. Payment. Except as provided below, payment in full, in cash,
shall be made for all Option Shares purchased at the time written notice of
exercise of an Option is given to the Company, and proceeds of any payment shall
constitute general funds of the Company. Payment may also be made pursuant to a
cashless exercise/sale procedure. At the time an Option is granted or exercised,
the Administrator, in the exercise of its absolute discretion, may authorize any
one or more of the following additional methods of payment: (a) acceptance of
the Optionee's full recourse promissory note for all or part of the Option
price, less any par value per share, which must be paid in cash, payable on such
terms and bearing such interest rate as determined by the Administrator (but in
no event less than the minimum interest rate specified under
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the Code at which no additional interest on debt instruments of such type would
be imputed), which promissory note may be either secured or unsecured in such
manner as the Administrator shall approve (including, without limitation, by a
security interest in the Shares); (b) delivery by the Optionee of Common Stock
already owned by the Optionee for all or part of the Option price, provided the
Fair Market Value of such Common Stock is equal on the date of exercise to the
Option price, or such portion thereof as the Optionee is authorized to pay by
delivery of such stock; provided, however, that if an Optionee has exercised any
portion of any option granted by the Company by delivery of Common Stock, the
Optionee may not, within six (6) months following such exercise, exercise any
Option granted under this Plan by delivery of Common Stock; and (c) any other
consideration and method of payment to the extent permitted under the California
Corporations Code.
8.7. Termination as Director. Unless determined otherwise by the
Administrator in its absolute discretion, to the extent not already expired or
exercised, an Option shall terminate at the earlier of: (a) the expiration of
the term of the Option; or (b) three (3) months after the last day served by the
Optionee as a director of the Company; provided, that an Option shall be
exercisable after the date of termination of service as a director only to the
extent exercisable on the date of termination; and provided further, that if
termination of service as a director is due to the Optionee's death or
"disability" (as determined in accordance with Section 22(e)(3) of the Code),
the Optionee, or the Optionee's personal representative (or any other person who
acquires the Option from the Optionee by will or the applicable laws of descent
and distribution), may at any time within twelve (12) months after the
termination of service as a director (or such lesser period as is specified in
the Option Agreement but in no event after the expiration of the term of the
Option), exercise the rights to the extent they were exercisable on the date of
the termination.
8.8. Withholding and Employment Taxes. At the time of exercise of
an Option (or at such later time(s) as the Company may prescribe), the Optionee
shall remit to the Company in cash all applicable federal and state withholding
and employment taxes. If authorized by the Administrator in its sole discretion,
an Optionee shall be permitted to elect, by means of a form of election to be
prescribed by the Administrator, to have shares of Common Stock which are
acquired upon exercise of the Option withheld by the Company or to tender to the
Company other shares of Common Stock or other securities of the Company owned by
the Optionee on the date of determination of the amount of tax to be withheld as
a result of the exercise of such Option (the "Tax Date") to pay the amount of
tax that is required by law to be withheld by the Company as a result of the
exercise of such Option. Any securities so withheld or tendered shall be valued
by the Company as of the Tax Date.
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8.9. Option Term. Each Option granted hereunder prior to the
Company's annual meeting of Shareholders held in 1999 shall expire ten (10)
years and two (2) days after the date of grant. Each Option granted hereunder
after the Company's annual meeting of Shareholders held in 1999 shall expire
five (5) years after the date of grant.
9. MANNER OF EXERCISE
(a) An Optionee wishing to exercise an Option shall give written
notice to the Company at its principal executive office, to the attention of the
officer of the Company designated by the Administrator, accompanied by payment
of the exercise price as provided in Section 8.6 and, if required, by payment of
any federal or state withholding or employment taxes required to be withheld by
virtue of exercise of the Option. The date the Company receives written notice
of an exercise hereunder accompanied by payment of the exercise price and any
required federal or state withholding or employment taxes will be considered as
the date such Option was exercised. Unless otherwise provided by the
Administrator, options may be exercised only twice in any calendar year.
(b) Promptly after the date an Option is exercised, the Company
shall, without stock issue or transfer taxes to the optionee or other person
entitled to exercise the Option, deliver to the Optionee or such other person a
certificate or certificates for the requisite number of shares of Common Stock.
An Optionee or transferee of an Optionee shall not have any privileges as a
stockholder with respect to any Common Stock covered by the Option until the
date of issuance of a stock certificate.
10. NO RIGHT TO DIRECTORSHIP
Neither this Plan nor any Option granted hereunder shall confer
upon any Optionee any right with respect to continuation of the Optionee's
membership on the Board or shall interfere in any way with provisions in the
Company's Articles of Incorporation and By-Laws relating to the election,
appointment, terms of office, and removal of members of the Board.
11. FINANCIAL INFORMATION
The Company shall provide to each Optionee during the period such
optionee holds an outstanding Option a copy of the financial statements of the
Company as prepared either by the Company or independent certified public
accountants of the Company. Such financial statements shall be delivered as soon
as practicable following the end of the Company's fiscal year during the period
Options are outstanding.
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12. LEGAL REQUIREMENTS
The Company shall not be obligated to offer or sell any Shares
upon exercise of any Option unless the Shares are at that time effectively
registered or exempt from registration under the federal securities laws and the
offer and sale of the Shares are otherwise in compliance with all applicable
securities laws and the regulations of any stock exchange on which the Company's
securities may then be listed. The Company shall have no obligation to register
the Shares covered by this Plan under the federal securities laws or take any
other steps as may be necessary to enable the Shares covered by this Plan to be
offered and sold under federal or other securities laws. Upon exercising all or
any portion of an Option, an Optionee may be required to furnish representations
or undertakings deemed appropriate by the Company to enable the offer and sale
of the Shares or subsequent transfers of any interest in the Shares to comply
with applicable securities laws. Certificates evidencing Shares acquired upon
exercise of Options shall bear any legend required by, or useful for purposes of
compliance with, applicable securities laws, this Plan or the Option Agreements.
13. AMENDMENTS TO PLAN
The Board may amend this Plan at any time. Without the consent of
an optionee, no amendment may adversely affect outstanding Options. No amendment
shall require shareholder approval unless:
(a) shareholder approval is required to meet the exemptions
provided by Rule 16b-3, or any successor rule thereto; or
(b) the Board otherwise concludes that shareholder approval is
advisable.
14. SHAREHOLDER APPROVAL; TERM
This Plan shall become effective upon adoption by the Board of
Directors; provided, however, that no Option shall be exercisable unless and
until written consent of holders of a majority of the outstanding shares of
capital stock of the Company, or approval by holders of a majority of shares of
capital stock of the Company present, or represented, and entitled to vote at a
validly called shareholders' meeting (or such greater number as may be required
by law or applicable governmental regulations or orders) is obtained within
twelve (12) months after adoption by the Board. This Plan shall terminate ten
(10) years after adoption by the Board unless terminated earlier by the Board.
The Board may terminate this Plan at any time without shareholder approval. No
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Options shall be granted after termination of this Plan, but termination shall
not affect rights and obligations under then outstanding Options.
Adopted by the Board of Directors: February 21, 1996
Approved by the Shareholders: June 3, 1996
Amended by the Board of Directors on November 20, 1996 so that
(1) the third sentence of section 8.2 reads: "The Company shall have a right of
repurchase at the option exercise price with respect to shares purchased upon
exercise of Options granted pursuant to Section 6 which shall expire with
respect to 12-1/2% of the number of Shares covered by such Option six months
after the date such Option is granted and shall expire with respect to 6-1/4% of
the number of shares covered by such Option at the end of each three-month
period thereafter, and (2) the following is added as the second sentence of
section 8.6: "Payment may also be made pursuant to a cashless exercise/sale
procedure."
Amended by the shareholders on May 16, 1997 and by the Board of
Directors on March 12, 1997 as follows: (1) beginning with the annual meeting of
shareholders held in 1997, increase the Option grant pursuant to Section 6(a) to
5,000 Shares and increase the annual Option grant pursuant to Section 6(b) to
10,000 Shares, (2) provide that if an annual meeting of shareholders is not held
by June 15 of any year then the annual Option grant pursuant to Section 6(b)
shall be made on June 15 of such year, and (3) in accordance with the 1996
amendments to Rule 16b-3, delete the reference in Section 5(a) to "disinterested
directors" and delete certain requirements in Section 8.8 related to elections
to have Common Stock withheld to pay taxes.
Amended by the shareholders on May 14, 1999 and by the Board of
Directors on May 13, 1999 as follows: (1) beginning with the annual meeting of
shareholders held in 1999, the Option grant for Nonemployee Directors first
elected or appointed to the Board was increased to 15,000 Shares, with one
fourth of the grant being made after the first Directors' meeting after the
annual shareholder meeting and the remaining three in the three succeeding
quarters after the meeting; (2) beginning with the annual meeting of
shareholders held in 1999, the Option grant for Nonemployee Directors who are
re-elected to the Board was increased to 7,500 Shares, with one fourth of the
grant being made after the first Directors' meeting after the annual shareholder
meeting and the remaining three in the three succeeding quarters after the
meeting; (3) the automatic repurchase provision in Section 8.2 was changed to be
at the discretion of the Administrator; (4) the exercise period for Options
granted after the annual meeting of shareholders held in 1999 was reduced to
five (5) years; (5) all Options granted after the
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meeting of shareholders held in 1999 shall be 100% exercisable on the date of
grant; and (6) the number of shares covered by the Plan was increased from
150,000 shares to 350,000 shares.
Total number of shares covered by the Plan: 350,000, as adjusted
to reflect the 1 for 3 reverse split of Common Stock effectuated on June 3, 1996
and as adjusted to reflect the increase of 200,000 shares approved by the
shareholders and Board of Directors on May 13, 1999.
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