As filed with the Securities and Exchange Commission on August 20, 1997
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
The Securities Act of 1933
FILENET CORPORATION
(Exact name of Registrant as specified in its charter)
Delaware 95-3757924
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
3565 Harbor Boulevard
Costa Mesa, California 92626
(Address of principal executive offices) (Zip code)
---------------------------------
1995 STOCK OPTION PLAN
1988 EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
CERTAIN OPTION GRANT TO MR. ROBERTS PURSUANT
TO WRITTEN COMPENSATION AGREEMENT
CERTAIN OPTION GRANT TO MR. ERCANBRACK PURSUANT
TO WRITTEN COMPENSATION AGREEMENT
(Full title of the Plans)
---------------------------------
Theodore J. Smith
Chairman of the Board and Chief Executive Officer
FILENET CORPORATION
3565 Harbor Boulevard, Costa Mesa, California 92626
(714) 966-3400
(Telephone number, including area code, of agent for service)
---------------------------------
CALCULATION OF REGISTRATION FEE
================================================================================
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share Price Fee
<S> <C> <C> <C> <C>
1995 STOCK OPTION PLAN
Common Stock,
$0.01 par value 600,000 shares $18.8125(2) $11,287,500(2) $3,420
1988 EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
Common Stock,
$0.01 par value 150,000 shares $18.8125(2) $2,821875(2) $855
OPTION GRANT TO MR. ROBERTS
Common Stock,
$0.01 par value 300,000 shares $14.3125(3) $4,293,750(3) $1,302
OPTION GRANT TO MR. ERCANBRACK
Common Stock,
$0.01 par value 80,000 shares $15.06(4) $1,204,800(4) $365
</TABLE>
Aggregate Filing Fee $5,942
================================================================================
(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1995 Stock Option Plan, the
1988 Employee Qualified Stock Purchase Plan, the Option Grant to Mr.
Roberts or the Option Grant to Mr. Ercanbrack by reason of any stock
dividend, stock split, recapitalization or any other similar transaction
without receipt of consideration which results in an increase in the number
of outstanding shares of Common Stock of FileNet Corporation.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the high
and low selling prices per share of Common Stock of FileNet Corporation on
August 15, 1997, as reported on the Nasdaq National Market.
(3) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the exercise price in
effect for the Option Grant made to Mr. Roberts.
(4) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the exercise price in
effect for the Option Grant made to Mr. Ercanbrack.
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference
FileNet Corporation (the "Registrant") hereby incorporates by reference
into this Registration Statement the following documents previously filed with
the Securities and Exchange Commission (the "SEC"):
(a) The Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, filed with the SEC on April 4, 1997;
(b) The Registrant's Quarterly Report on Form 10-Q for the quarters ended
June 30, 1997, and March 31, 1997, filed with the SEC on August 145,
1997, and May 15, 1997, respectively; and
(c) The Registrant's Registration Statement No. 0-15997 on Form 8-A filed
with the SEC on June 24, 1987, in which there is described the terms,
rights and provisions applicable to the Registrant's Common Stock.
All reports and definitive proxy or information statements filed pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (the
"1934 Act") after the date of this Registration Statement and 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 into this Registration Statement
and to be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Registration Statement to the extent that a statement contained herein or in any
subsequently filed document which also is deemed to be incorporated by reference
herein modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Registration Statement.
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 the provisions of Section 145 of the General Corporation Law of
Delaware, the Registrant as a Delaware corporation has power to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding (other than an
action by or in the right of the Registrant) by reason of the fact that he or
she is or was a director, officer, employee or agent of the Registrant or of any
corporation, partnership, joint venture, trust or other enterprise for which he
or she is or was serving in such capacity at the request of the Registrant,
against any and all expenses, judgments, fines and amounts paid in settlement
which were reasonably incurred by him or her in connection with such action,
suit or proceeding. The power to indemnify applies only if such person acted in
<PAGE>
good faith and in a manner he or she reasonably believed to be in the best
interests, or not opposed to the best interests, of the Registrant and, with
respect to any criminal action or proceeding, if he or she had no reasonable
cause to believe his or her conduct was unlawful.
The power to indemnify also applies to actions brought by or in the right
of the Registrant, but only to the extent of defense and settlement expenses and
not to any satisfaction of a judgment or settlement of the claim itself. In such
actions, however, no indemnification will be made if there is any adjudication
of negligence or misconduct, unless the court, in its discretion, feels that in
the light of all the circumstances indemnification should apply.
To the extent any such person is successful in the defense of the actions
referred to above, such person is entitled pursuant to Section 145 of the
General Corporation Law of Delaware to indemnification as described above.
Section 145 also grants power to advance litigation expenses upon receipt of an
undertaking to repay such advances in the event no right to indemnification is
subsequently shown. The Registrant may also obtain insurance at its expense to
protect anyone who might be indemnified, or has a right to insist on
indemnification, under the statute.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
Exhibit
No. Exhibit
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 0-15997 on Form 8-A thereto, which
is incorporated herein by reference pursuant to Item 3(c) of this
Registration Statement.
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Accountants -- Deloitte & Touche LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this Registration
Statement.
99.1 1995 Stock Option Plan (as Amended and Restated March 20, 1997).
99.2 Form of Notice of Grant of Stock Option (incorporated by reference to
Exhibit No. 99.2 of Registration Statement No. 33-80899).
99.3 Form of Stock Option Agreement (incorporated by reference to Exhibit No.
99.3 of Registration Statement No. 33-80899).
99.4 Form of Addendum to Stock Option Agreement: Involuntary Termination
Following Corporate Transaction (incorporated by reference to Exhibit No.
99.4 of Registration Statement No. 33-80899).
99.5 Form of Addendum to Stock Option Agreement: Involuntary Termination
Following Change in Control (incorporated by reference to Exhibit No. 99.5
of Registration Statement No. 33-80899).
99.6 Form of Salary Reduction Option Grant Election (incorporated by reference
to Exhibit No. 99.6 of Registration Statement No. 33-80899).
99.7 Form of Notice of Grant under Salary Reduction Option Grant Program
(incorporated by reference to Exhibit No. 99.7 of Registration Statement
No. 33-80899).
99.8 Form of Salary Reduction Stock Option Agreement (incorporated by reference
to Exhibit No. 99.8 of Registration Statement No. 33-80899).
99.9 Form of Notice of Grant of Non-Employee Director Automatic Stock Option:
Initial Grant (incorporated by reference to Exhibit No. 99.9 of
Registration Statement No. 33-80899).
99.10Form of Notice of Grant of Non-Employee Director Automatic Stock Option:
Annual Grant (incorporated by reference to Exhibit No. 99.10 of
Registration Statement No. 33-80899).
II-2
<PAGE>
99.11Form of Automatic Stock Option Agreement.
99.12Form of Director Fee Election (incorporated by reference to Exhibit No.
99.12 of Registration Statement No. 33-80899).
99.13Form of Notice of Grant of Non-Employee Director Stock Option under
Director Fee Option Grant Program (incorporated by reference to Exhibit No.
99.13 of Registration Statement No. 33-80899).
99.14Form of Director Fee Stock Option Agreement (incorporated by reference to
Exhibit No. 99.14 of Registration Statement No. 33-80899).
99.151988 Employee Qualified Stock Purchase Plan (as Amended and Restated
through 3/20/97).
99.16Written Compensation Agreement between Registrant and Mr. Roberts.
99.17Non-Statutory Stock Option Agreement (with Notice of Grant of Stock Option
and Special Addendum) between Registrant and Mr. Roberts.
99.18Written Compensation Agreement between Registrant and Mr. Ercanbrack.
99.19Non-Statutory Stock Option Agreement (with Notice of Grant of Stock Option
and Special Addendum) between Registrant and Mr. Ercanbrack.
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes: (1) to file, during any
period in which offers or sales are being made, a post-effective amendment to
this Registration Statement (i) to include any prospectus required by Section
10(a)(3) of the Securities Act of 1933, as amended (the "1933 Act"), (ii) to
reflect in the prospectus any facts or events arising after the effective date
of this Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in this Registration Statement, and (iii) to
include any material information with respect to the plan of distribution not
previously disclosed in this Registration Statement or any material change to
such information in this Registration Statement; provided, however, that clauses
(1)(i) and (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 Section 15(d) of the 1934 Act
that are incorporated by reference into this Registration Statement; (2) that
for the purpose of determining any liability under the 1933 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; and
(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
Registrant's 1995 Stock Option Plan or the 1988 Employee Qualified Stock
Purchase Plan or upon the expiration of the Option Grant made to Mr. Roberts or
the Option Grant made to Mr. Ercanbrack.
B. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the 1933 Act, each filing of the Registrant's
annual report pursuant to Section 13(a) or Section 15(d) of the 1934 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 1933 Act
may be permitted to directors, officers or controlling persons of the Registrant
pursuant to the indemnity provisions summarized in Item 6 or otherwise, the
Registrant has been informed that in the opinion of the SEC such indemnification
is against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Costa Mesa, State of California on August 20, 1997.
FILENET CORPORATION
By: /s/ Theodore J. Smith
Theodore J. Smith
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned officers and directors of FileNet Corporation, a
Delaware corporation, do hereby constitute and appoint Theodore J. Smith and
Mark S. St. Clare, and each of them, the lawful attorneys-in-fact and agents,
with full power and authority to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, or either one of them,
determine may be necessary or advisable or required to enable said corporation
to comply with the Securities Act of 1933, as amended, and any rules or
regulation or requirements of the Securities and Exchange Commission in
connection with this Registration Statement. Without limiting the generality of
the foregoing power and authority, the powers granted include the power and
authority to sign the names of the undersigned officers and directors in the
capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement and to any and all instruments or documents filed as part
of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
all that said attorneys and agents, or either one of them, shall do or cause to
be done by virtue hereof. This Power of Attorney may be signed in several
counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
/s/ Theodore J. Smith Chairman of the Board and August 20, 1997
Theodore J. Smith Chief Executive Officer
(Principal Executive Officer)
II-4
<PAGE>
Signatures Title Date
/s/Lee David Roberts President and Chief Operating Officer August 20, 1997
Lee David Roberts
/s/ Mark S. St. Clare Senior Vice President, Finance, August 20, 1997
Mark S. St. Clare Chief Financial Officer & Secretary
(Principal Financial Officer)
(Principal Accounting Officer)
/s/ Frederick K. Fluegel Director July 16, 1997
Frederick K. Fluegel
/s/ John C. Savage Director August 20, 1997
John C. Savage
/s/ William P. Lyons Director August 20, 1997
William P. Lyons
II-5
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-8
UNDER
SECURITIES ACT OF 1933
FILENET CORPORATION
<PAGE>
EXHIBIT INDEX
Exhibit
No. Exhibit
4 Instruments Defining Rights of Stockholders. Reference is made to
Registrant's Registration Statement No. 0-15997 on Form 8-A thereto,
which is incorporated herein by reference pursuant to Item 3(c) of
this Registration Statement.
5 Opinion and Consent of Brobeck, Phleger & Harrison LLP.
23.1 Consent of Independent Accountants -- Deloitte & Touche LLP.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.
24 Power of Attorney. Reference is made to page II-4 of this Registration
Statement.
99.1 1995 Stock Option Plan (As Amended and Restated March 20, 1997).
99.2 Form of Notice of Grant of Stock Option (incorporated by reference to
Exhibit No. 99.2 of Registration Statement No. 33-80899).
99.3 Form of Stock Option Agreement (incorporated by reference to Exhibit
No. 99.3 of Registration Statement No. 33-80899).
99.4 Form of Addendum to Stock Option Agreement: Involuntary Termination
Following Corporate Transaction (incorporated by reference to Exhibit
No. 99.4 of Registration Statement No. 33-80899).
99.5 Form of Addendum to Stock Option Agreement: Involuntary Termination
Following Change in Control (incorporated by reference to Exhibit No.
99.5 of Registration Statement No. 33-80899).
99.6 Form of Salary Reduction Option Grant Election (incorporated by
reference to Exhibit No. 99.6 of Registration Statement No. 33-80899).
99.7 Form of Notice of Grant under Salary Reduction Option Grant Program.
(incorporated by reference to Exhibit No. 99.7 of Registration
Statement No. 33-80899).
99.8 Form of Salary Reduction Stock Option Agreement (incorporated by
reference to Exhibit No. 99.8 of Registration Statement No. 33-80899).
99.9 Form of Notice of Grant of Non-Employee Director Automatic Stock
Option: Initial Grant (incorporated by reference to Exhibit No. 99.9
of Registration Statement No. 33-80899).
99.10 Form of Notice of Grant of Non-Employee Director Automatic Stock
Option: Annual Grant (incorporated by reference to Exhibit No. 99.10
of Registration Statement No. 33-80899).
99.11 Form of Automatic Stock Option Agreement.
99.12 Form of Director Fee Election (incorporated by reference to Exhibit
No. 99.12 of Registration Statement No. 33-80899).
99.13 Form of Notice of Grant of Non-Employee Director Stock Option under
Director Fee Option Grant Program (incorporated by reference to
Exhibit No. 99.13 of Registration Statement No. 33-80899).
99.14 Form of Director Fee Stock Option Agreement (incorporated by
reference to Exhibit No. 99.14 of Registration Statement No.
33-80899).
99.15 1988 Employee Qualified Stock Purchase Plan (As Amended and Restated
through 3/20/97).
99.16 Written Compensation Agreement between Registrant and Mr. Roberts.
99.17 Non-Statutory Stock Option Agreement (with Notice of Grant of Stock
Option and Special Addendum) between Registrant and Mr. Roberts. 99.18
Written Compensation Agreement between Registrant and Mr. Ercanbrack.
99.19 Non-Statutory Stock Option Agreement (with Notice of Grant of Stock
Option and Special Addendum) between Registrant and Mr. Ercanbrack.
EXHIBIT 5
Opinion of Brobeck, Phleger & Harrison LLP
August 20, 1997
FileNet Corporation
3565 Harbor Boulevard
Costa Mesa, CA 92626
Re: FileNet Corporation (the "Company")
Registration Statement for Registration
of 1,130,000 Shares of Common Stock
Ladies and Gentlemen:
We refer to your registration on Form S-8 (the "Registration Statement")
under the Securities Act of 1933, as amended, of (i) an additional 600,000
shares of Common Stock for issuance under the Company's 1995 Stock Option Plan,
(ii) an additional 150,000 shares of Common Stock for issuance under the
Company's 1988 Employee Qualified Stock Purchase Plan, (iii) 300,000 shares of
Common Stock for issuance pursuant to a Written Compensation Agreement between
the Company and Mr. Lee D. Roberts and (iv) 80,000 shares of Common Stock for
issuance pursuant to a Written Compensation Agreement between the Company and
Mr. Ron L. Ercanbrack. We advise you that, in our opinion, when such shares have
been issued and sold pursuant to the applicable provisions of the Company's 1995
Stock Option Plan, the Company's 1988 Employee Qualified Stock Purchase Plan,
the Written Compensation Agreement with Mr. Roberts and the Written Compensation
Agreement with Mr. Ercanbrack and in accordance with the Registration Statement,
such shares will be validly issued, fully paid and non-assessable shares of the
Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ BROBECK, PHLEGER & HARRISON LLP
BROBECK, PHLEGER & HARRISON LLP
II-8
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement on
Form S-8 of FileNet Corporation pertaining to the 1995 Stock Option Plan, the
1988 Employee Qualified Stock Purchase Plan, the Certain Option Grant to Mr.
Roberts Pursuant to Written Compensation Agreement and the Certain Option Grant
to Mr. Ercanbrack Pursuant to Written Compensation Agreement of our report dated
February 10, 1997, incorporated by reference in the Annual Report on Form 10-K
of FileNet Corporation for the year ended December 31, 1996.
/s/ Deloitte & Touche LLP
Costa Mesa, California
August 20, 1997
EXHIBIT 99.1
1995 Stock Option Plan
(As Amended and Restated March 20, 1997)
FILENET CORPORATION
1995 STOCK OPTION PLAN
AS AMENDED AND RESTATED THROUGH MARCH 20, 1997
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option Plan is intended to promote the interests of FileNet
Corporation, a Delaware corporation, by providing eligible persons with the
opportunity to acquire a proprietary interest, or otherwise increase their
proprietary interest, in the Corporation as an incentive for them to remain in
the service of the Corporation.
This Plan shall serve as the successor to the Corporation's existing Second
Amended and Restated Stock Option Plan (the "Predecessor Plan"), and no further
option grants or share issuances shall be made under the Predecessor Plan from
and after the Effective Date of this Plan. All outstanding stock options under
the Predecessor Plan on the Effective Date shall be incorporated into this Plan
and shall accordingly be treated as outstanding stock options under this Plan.
However, each outstanding option grant so incorporated shall continue to be
governed solely by the express terms and conditions of the agreement evidencing
such grant, and no provision of this Plan shall be deemed to affect or otherwise
modify the rights or obligations of the holders of such incorporated options
with respect to their acquisition of shares of the Corporation's Common Stock
thereunder.
Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into five separate equity programs:
- the Discretionary Option Grant Program under which eligible persons
may, at the discretion of the Plan Administrator, be granted options to
purchase shares of Common Stock,
- the Salary Reduction Option Grant Program under which eligible
employees may elect to have a portion of their base salary reduced each
year in return for options to purchase shares of Common Stock,
<PAGE>
- the Stock Issuance Program under which eligible persons may, at the
discretion of the Plan Administrator, be issued shares of Common Stock
directly without any intervening option grant,
- the Automatic Option Grant Program under which eligible non-employee
Board members shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock, and
- the Director Fee Option Grant Program under which non-employee Board
members may elect to have all or any portion of their annual retainer fee
otherwise payable in cash applied to a special option grant.
B. The provisions of Articles One and Seven shall apply to all equity
programs under the Plan and shall govern the interests of all persons under
the Plan.
III. ADMINISTRATION OF THE PLAN
A. The Primary Committee shall have the sole and exclusive authority
to administer the Discretionary Option Grant and Stock Issuance Programs
with respect to Section 16 Insiders. Except to the extent the Primary
Committee is granted sole and exclusive authority under one or more
specific provisions of the Plan, administration of the Discretionary Option
Grant and Stock Issuance Programs with respect to all other persons
eligible to participate in these programs may, at the Board's discretion,
be vested in the Primary Committee or a Secondary Committee, or the Board
may retain the power to administer these programs with respect to such
persons. The members of the Secondary Committee may be individuals who are
Employees.
B. Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and may be removed
by the Board at any time. The Board may also at any time terminate the
functions of any Secondary Committee and reassume all powers and authority
previously delegated to such committee.
C. Each Plan Administrator shall, within the scope of its
administrative functions under the Plan, have full power and authority
(subject to the provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for proper administration of the
Discretionary Option Grant and Stock Issuance Programs and to make such
determinations under, and issue such interpretations of, the provisions of
such programs and any outstanding options or stock issuances thereunder as
it may deem necessary or advisable. Decisions of the Plan Administrator
within the scope of its administrative functions under the Plan shall be
final and binding on all parties who have an interest in the Discretionary
Option Grant or Stock Issuance Program under its jurisdiction or any option
or stock issuance thereunder.
2.
<PAGE>
D. Service on the Primary Committee or the Secondary Committee shall
constitute service as a Board member, and members of each such committee
shall accordingly be entitled to full indemnification and reimbursement as
Board members for their service on such committee. No member of the Primary
Committee or the Secondary Committee shall be liable for any act or
omission made in good faith with respect to the Plan or any option grants
or stock issuances under the Plan.
E. The Primary Committee shall have the sole and exclusive authority
to select the eligible individuals who are to participate in the Salary
Reduction Option Grant Program, but all option grants under the Salary
Reduction Option Grant Program shall be made in accordance with express
terms of that program and the Primary Committee shall exercise no
discretion with respect to the terms of those grants. Administration of the
Automatic Option Grant and Director Fee Option Grant Programs shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to
any option grants or stock issuances made under those programs.
IV. ELIGIBILITY
A. The persons eligible to participate in the Discretionary Option Grant
and Stock Issuance Programs are as follows:
(i) Employees,
(ii) non-employee Board members, and
(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B. Only the Company's executive officers and other highly-compensated
Employees shall be eligible to participate in the Salary Reduction Option Grant
Program.
C. Each Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority to determine, (i) with respect
to the option grants under the Discretionary Option Grant Program, which
eligible persons are to receive option grants, the time or times when such
option grants are to be made, the number of shares to be covered by each such
grant, the status of the granted option as either an Incentive Option or a
Non-Qualified Option, the time or times when each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares and
the maximum term for which the option is to remain outstanding and (ii) with
respect to stock issuances under the Stock Issuance Program, which eligible
persons are to receive stock issuances, the time or times when such issuances
are to be made, the number of shares to be issued to each Participant, the
vesting schedule (if any) applicable to the issued shares and the consideration
for such shares.
3.
<PAGE>
D. The Plan Administrator shall have the absolute discretion either to
grant options in accordance with the Discretionary Option Grant or to effect
stock issuances in accordance with the Stock Issuance Program.
E. The individuals who shall be eligible to participate in the Automatic
Option Grant Program shall be limited to (i) those individuals who first become
non-employee Board members on or after the Effective Date, whether through
appointment by the Board or election by the Corporation's stockholders, and (ii)
those individuals who are re-elected to serve as non-employee Board members at
one or more Annual Stockholders Meetings beginning with the 1996 Annual Meeting.
A non-employee Board member who has previously been in the employ of the
Corporation (or any Parent or Subsidiary) shall not be eligible to receive an
option grant under the Automatic Option Grant Program at the time he or she
first becomes a non-employee Board member, but shall be eligible to receive
periodic option grants under the Automatic Option Grant Program upon his or her
subsequent re-election to the Board.
F. All non-employee Board members shall be eligible to participate in the
Director Fee Option Grant Program.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed 3,712,415 shares.
Such share reserve is comprised of (i) the 2,112,415 shares of Common Stock
which remained available for issuance under the Predecessor Plan as of the
Effective Date, including the shares subject to the outstanding option grants
under the Predecessor Plan which have been incorporated into this Plan and the
additional shares of Common Stock available for future grant under the
Predecessor Plan, (ii) an additional increase of 350,000 shares of Common Stock
previously authorized by the Board and approved by the Corporation's
stockholders at the 1995 Annual Meeting, (iii) an additional increase of 650,000
shares of Common Stock authorized by the Board in March 1996, and approved by
the stockholders at the 1996 Annual Meeting, plus (iv) a further increase of
600,000 shares of Common Stock authorized by the Board on March 20, 1997,
subject to stockholder approval at the 1997 Annual Meeting. In no event,
however, shall any person participating in the Plan receive stock options and
direct stock issuances under this Plan for more than 200,000 shares of Common
Stock per calendar year, beginning with the 1995 calendar year.
B. Shares of Common Stock subject to outstanding options (including options
incorporated into this Plan from the Predecessor Plan) shall be available for
subsequent issuance under the Plan to the extent those options expire or
terminate for any reason prior to exercise in full. Unvested shares issued under
the Plan and subsequently cancelled or repurchased by the Corporation at the
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option exercise or direct issue price paid per share pursuant to the
Corporation's repurchase rights under the Plan shall also be available for
subsequent issuance under the Plan. However, should the exercise price of an
option under the Plan be paid with shares of Common Stock or should shares of
Common Stock otherwise issuable under the Plan be withheld by the Corporation in
satisfaction of the withholding taxes incurred in connection with the exercise
of an option or the vesting of a stock issuance under the Plan, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised or which vest
under the stock issuance, and not by the net number of shares of Common Stock
issued to the holder of such option or stock issuance.
C. If any change is made to the Common Stock by reason of any stock split,
stock dividend, recapitalization, combination of shares, exchange of shares or
other change affecting the outstanding Common Stock as a class without the
Corporation's receipt of consideration, appropriate adjustments shall be made to
(i) the maximum number and/or class of securities issuable under the Plan, (ii)
the number and/or class of securities for which any one person may be granted
stock options and direct stock issuances under this Plan per calendar year,
(iii) the number and/or class of securities for which grants are subsequently to
be made under the Automatic Option Grant Program to new and continuing
non-employee Board members, (iv) the number and/or class of securities and the
exercise price per share in effect under each outstanding option under the Plan
and (v) the number and/or class of securities and price per share in effect
under each outstanding option incorporated into this Plan from the Predecessor
Plan. Such adjustments to the outstanding options are to be effected in a manner
which shall preclude the enlargement or dilution of rights and benefits under
such options. The adjustments determined by the Plan Administrator shall be
final, binding and conclusive.
5.
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ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan Administrator
but shall not be less than one hundred percent (100%) of the Fair Market Value
per share of Common Stock on the option grant date.
2. The exercise price shall become immediately due upon exercise of the
option and shall, subject to the provisions of Section I of Article Six and the
documents evidencing the option, be payable in one or more of the forms
specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period necessary to
avoid a charge to the Corporation's earnings for financial reporting
purposes and valued at Fair Market Value on the Exercise Date, or
(iii) to the extent the option is exercised for vested shares, through
a special sale and remittance procedure pursuant to which the Optionee
shall concurrently provide irrevocable written instructions to (a) a
Corporation-designated brokerage firm to effect the immediate sale of the
purchased shares and remit to the Corporation, out of the sale proceeds
available on the settlement date, sufficient funds to cover the aggregate
exercise price payable for the purchased shares plus all applicable
Federal, state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the certificates for the purchased shares directly
to such brokerage firm in order to complete the sale.
Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
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B. Exercise and Term of Options. Each option shall be exercisable at such
time or times, during such period and for such number of shares as shall be
determined by the Plan Administrator and set forth in the documents evidencing
the option. However, no option shall have a term in excess of ten (10) years
measured from the option grant date.
C. Effect of Termination of Service.
1. The following provisions shall govern the exercise of any options held
by the Optionee at the time of cessation of Service or death:
(i) Any option outstanding at the time of the Optionee's cessation of
Service for any reason shall remain exercisable for such period of time
thereafter as shall be determined by the Plan Administrator and set forth
in the documents evidencing the option, but no such option shall be
exercisable after the expiration of the option term.
(ii) Any option exercisable in whole or in part by the Optionee at the
time of death may be subsequently exercised by the personal representative
of the Optionee's estate or by the person or persons to whom the option is
transferred pursuant to the Optionee's will or in accordance with the laws
of descent and distribution.
(iii) Should the Optionee's Service be terminated for Misconduct, then
all outstanding options held by the Optionee shall terminate immediately
and cease to be outstanding.
(iv) During the applicable post-Service exercise period, the option
may not be exercised in the aggregate for more than the number of vested
shares for which the option is exercisable on the date of the Optionee's
cessation of Service. Upon the expiration of the applicable exercise period
or (if earlier) upon the expiration of the option term, the option shall
terminate and cease to be outstanding for any vested shares for which the
option has not been exercised. However, the option shall, immediately upon
the Optionee's cessation of Service, terminate and cease to be outstanding
to the extent the option is not otherwise at that time exercisable for
vested shares.
(v) In the event of a Corporate Transaction, the provisions of Section
III of this Article Two shall govern the period for which the outstanding
options are to remain exercisable following the Optionee's cessation of
Service and shall supersede any provisions to the contrary in this section.
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2. The Plan Administrator shall have complete discretion, exercisable
either at the time an option is granted or at any time while the option remains
outstanding, to:
(i) extend the period of time for which the option is to remain
exercisable following the Optionee's cessation of Service from the limited
exercise period otherwise in effect for that option to such greater period
of time as the Plan Administrator shall deem appropriate, but in no event
beyond the expiration of the option term, and/or
(ii) permit the option to be exercised, during the applicable
post-Service exercise period, not only with respect to the number of vested
shares of Common Stock for which such option is exercisable at the time of
the Optionee's cessation of Service but also with respect to one or more
additional installments in which the Optionee would have vested had the
Optionee continued in Service.
D. Stockholder Rights. The holder of an option shall have no stockholder
rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of record
of the purchased shares.
E. Repurchase Rights. The Plan Administrator shall have the discretion to
grant options which are exercisable for unvested shares of Common Stock. Should
the Optionee cease Service while holding such unvested shares, the Corporation
shall have the right to repurchase, at the exercise price paid per share, any or
all of those unvested shares. The terms upon which such repurchase right shall
be exercisable (including the period and procedure for exercise and the
appropriate vesting schedule for the purchased shares) shall be established by
the Plan Administrator and set forth in the document evidencing such repurchase
right.
F. Limited Transferability of Options. During the lifetime of the Optionee,
Incentive Options shall be exercisable only by the Optionee and shall not be
assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Qualified Option
may, in connection with the Optionee's estate plan, be assigned in whole or in
part during the Optionee's lifetime to one or more members of the Optionee's
immediate family or to a trust established exclusively for one or more such
family members. The assigned portion may only be exercised by the person or
persons who acquire a proprietary interest in the option pursuant to the
assignment. The terms applicable to the assigned portion shall be the same as
those in effect for the option immediately prior to such assignment and shall be
set forth in such documents issued to the assignee as the Plan Administrator may
deem appropriate.
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II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive Options.
Except as modified by the provisions of this Section II, all the provisions of
Articles One, Two and Seven shall be applicable to Incentive Options. Options
which are specifically designated as Non-Qualified Options when issued under the
Plan shall not be subject to the terms of this Section II.
A. Eligibility. Incentive Options may only be granted to Employees.
B. Dollar Limitation. The aggregate Fair Market Value of the shares of
Common Stock (determined as of the respective date or dates of grant) for which
one or more options granted to any Employee under the Plan (or any other option
plan of the Corporation or any Parent or Subsidiary) may for the first time
become exercisable as Incentive Options during any one calendar year shall not
exceed the sum of One Hundred Thousand Dollars ($100,000). To the extent the
Employee holds two (2) or more such options which become exercisable for the
first time in the same calendar year, the foregoing limitation on the
exercisability of such options as Incentive Options shall be applied on the
basis of the order in which such options are granted.
C. 10% Stockholder. If any Employee to whom an Incentive Option is granted
is a 10% Stockholder, then the exercise price per share shall not be less than
one hundred ten percent (110%) of the Fair Market Value per share of Common
Stock on the option grant date, and the option term shall not exceed five (5)
years measured from the option grant date.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction, each outstanding option shall
automatically accelerate so that each such option shall, immediately prior to
the effective date of the Corporate Transaction, become fully exercisable with
respect to the total number of shares of Common Stock at the time subject to
such option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall not so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such option
is to be replaced with a cash incentive program of the successor corporation
which preserves the spread existing on the unvested option shares at the time of
the Corporate Transaction and provides for subsequent payout in accordance with
the same vesting schedule applicable to such option or (iii) the acceleration of
such option is subject to other limitations imposed by the Plan Administrator at
the time of the option grant. The determination of option comparability under
clause (i) above shall be made by the Plan Administrator, and its determination
shall be final, binding and conclusive.
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B. All outstanding repurchase rights shall also terminate automatically,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be assigned to the successor
corporation (or parent thereof) in connection with such Corporate Transaction or
(ii) such accelerated vesting is precluded by other limitations imposed by the
Plan Administrator at the time the repurchase right is issued.
C. Immediately following the consummation of the Corporate Transaction, all
outstanding options shall terminate and cease to be outstanding, except to the
extent assumed by the successor corporation (or parent thereof).
D. Each option which is assumed in connection with a Corporate Transaction
shall be appropriately adjusted, immediately after such Corporate Transaction,
to apply to the number and class of securities which would have been issuable to
the Optionee in consummation of such Corporate Transaction had the option been
exercised immediately prior to such Corporate Transaction. Appropriate
adjustments to reflect such Corporate Transaction shall also be made to (i) the
exercise price payable per share under each outstanding option, provided the
aggregate exercise price payable for such securities shall remain the same, (ii)
the maximum number and/or class of securities available for issuance over the
remaining term of the Plan, (iii) the maximum number and/or class of securities
for which any one person may be granted stock options and direct stock issuances
under the Plan per calendar year and (iv) the maximum number and/or class of
securities which may be issued pursuant to Incentive Options granted under the
Plan following the consummation of the Corporate Transaction.
E. The Plan Administrator shall have full power and authority to grant
options under the Discretionary Option Grant Program which will automatically
accelerate in the event the Optionee's Service subsequently terminates by reason
of an Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of any Corporate Transaction in which
those options are assumed or replaced and do not otherwise accelerate. Any
options so accelerated shall remain exercisable for fully-vested shares until
the earlier of (i) the expiration of the option term or (ii) the expiration of
the one (1)-year period measured from the effective date of the Involuntary
Termination. In addition, the Plan Administrator may provide that one or more of
the Corporation's outstanding repurchase rights with respect to shares held by
the Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
F. The Plan Administrator shall have full power and authority to grant
options under the Discretionary Option Grant Program which will automatically
accelerate in the event the Optionee's Service subsequently terminates by reason
of an Involuntary Termination within a designated period (not to exceed eighteen
(18) months) following the effective date of any Change in Control. Each option
so accelerated shall remain exercisable or fully-vested shares until the earlier
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of (i) the expiration of the option term or (ii) the expiration of the one
(1)-year period measured from the effective date of the Involuntary Termination.
In addition, the Plan Administrator may provide that one or more of the
Corporation's outstanding repurchase rights with respect to shares held by the
Optionee at the time of such Involuntary Termination shall immediately
terminate, and the shares subject to those terminated repurchase rights shall
accordingly vest in full.
G. The portion of any Incentive Option accelerated in connection with a
Corporate Transaction or Change in Control shall remain exercisable as an
Incentive Option only to the extent the applicable One Hundred Thousand Dollar
limitation is not exceeded. To the extent such dollar limitation is exceeded,
the accelerated portion of such option shall be exercisable as a Non-Qualified
Option under the Federal tax laws.
H. The outstanding options shall in no way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or
transfer all or any part of its business or assets.
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ARTICLE THREE
SALARY REDUCTION OPTION GRANT PROGRAM
I. OPTION GRANTS
The Primary Committee shall have the sole and exclusive authority to
determine the calendar year or years (if any) for which the Salary Reduction
Option Grant Program is to be in effect and to select the Employees eligible to
participate in the Salary Reduction Option Grant Program for those calendar year
or years. Each selected Employee who elects to participate in the Salary
Reduction Option Grant Program must, prior to the start of each calendar year of
participation, file with the Plan Administrator (or its designate) an
irrevocable authorization directing the Corporation to reduce his or her base
salary for that calendar year by a designated multiple of one percent (1%).
However, the minimum amount of such salary reduction must be not less than the
greater of (i) five percent (5%) of his or her rate of base salary for that
calendar year or (ii) Ten Thousand Dollars ($10,000.00) and must not be more
than the lesser of (i) twenty five percent (25%) of his or her rate of base
salary for the calendar year or (ii) Seventy Five Thousand Dollars ($75,000.00).
Each individual who files a proper salary reduction authorization shall
automatically be granted an option under this Salary Reduction Option Grant
Program on the first trading day in January of the calendar year for which that
salary reduction is to be in effect. Stockholder approval of this 1997
Restatement at the 1997 Annual Stockholders Meeting will constitute pre-approval
of each option subsequently granted pursuant to the express terms of this Salary
Reduction Option Grant Program and the subsequent exercise of that option in
accordance with its terms.
II. OPTION TERMS
Each option shall be a Non-Qualified Option evidenced by one or more
documents in the form approved by the Plan Administrator; provided, however,
that each such document shall comply with the terms specified below.
A. Exercise Price.
1. The exercise price per share shall be thirty-three and one-third percent
(33-1/3%) of the Fair Market Value per share of Common Stock on the option grant
date.
2. The exercise price shall become immediately due upon exercise of the
option and shall be payable in one or more of the alternative forms authorized
under the Discretionary Option Grant Program. Except to the extent the sale and
remittance procedure specified thereunder is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.
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B. Number of Option Shares. The number of shares of Common Stock subject to
the option shall be determined pursuant to the following formula (rounded down
to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
A is the dollar amount by which the Optionee's base
salary is to be reduced for the calendar year, and
B is the Fair Market Value per share of Common Stock
on the option grant date.
C. Exercise and Term of Options. The option shall become exercisable in a
series of twelve (12) successive equal monthly installments upon the Optionee's
completion of each calendar month of Service in the calendar year for which the
salary reduction is in effect. Each option shall have a maximum term of ten (10)
years measured from the option grant date.
D. Effect of Termination of Service. Should the Optionee cease Service for
any reason while holding one or more options under this Article Three, then each
such option shall remain exercisable, for any or all of the shares for which the
option is exercisable at the time of such cessation of Service, until the
earlier of (i) the expiration of the ten (10)-year option term or (ii) the
expiration of the three (3)-year period measured from the date of such cessation
of Service. Should the Optionee die while holding one or more options under this
Article Three, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the Optionee's
cessation of Service (less any shares subsequently purchased by Optionee prior
to death), by the personal representative of the Optionee's estate or by the
person or persons to whom the option is transferred pursuant to the Optionee's
will or in accordance with the laws of descent and distribution. Such right of
exercise shall lapse, and the option shall terminate, upon the earlier of (i)
the expiration of the ten (10)-year option term or (ii) the three (3)-year
period measured from the date of the Optionee's cessation of Service. However,
the option shall, immediately upon the Optionee's cessation of Service for any
reason, terminate and cease to remain outstanding with respect to any and all
shares of Common Stock for which the option is not otherwise at that time
exercisable.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Reduction Option Grant Program shall automatically accelerate so that each such
option shall, immediately prior to the effective date of the Corporate
Transaction, become fully exercisable with respect to the total number of shares
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of Common Stock at the time subject to such option and may be exercised for any
or all of those shares as fully-vested shares of Common Stock. Each such
outstanding option shall be assumed by the successor corporation (or parent
thereof) in the Corporate Transaction and shall remain exercisable for the
fully-vested shares until the earlier of (i) the expiration of the ten (10)-year
option term or (ii) the expiration of the three (3)-year period measured from
the date of the Optionee's cessation of Service.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Salary
Reduction Option Grant Program shall automatically accelerate so that each such
option shall immediately become fully exercisable with respect to the total
number of shares of Common Stock at the time subject to such option and may be
exercised for any or all of those shares as fully-vested shares of Common Stock.
The option shall remain so exercisable until the earlier or (i) the expiration
of the ten (10)-year option term or (ii) the expiration of the three (3)-year
period measured from the date of the Optionee's cessation of Service.
C. The grant of options under the Salary Reduction Option Grant Program
shall in no way affect the right of the Corporation to adjust, reclassify,
reorganize or otherwise change its capital or business structure or to merge,
consolidate, dissolve, liquidate or sell or transfer all or any part of its
business or assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Salary Reduction
Option Grant Program shall be the same as the terms in effect for option grants
made under the Discretionary Option Grant Program.
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ARTICLE FOUR
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance Program
directly without any intervening option grants. Each such stock issuance shall
be evidenced by a Stock Issuance Agreement which complies with the terms
specified below.
A. Issue Price. The shares shall be issued for such valid consideration
under the Delaware General Corporation Law as the Plan Administrator may deem
appropriate, but the value of such consideration as determined by the Plan
Administrator shall not be less than one hundred percent (100%) of the Fair
Market Value of the issued shares of Common Stock on the issuance date.
B. Vesting Provisions.
1. The Primary Committee shall have the sole and exclusive authority to
issue shares of Common Stock under the Stock Issuance Program as a bonus for
past services rendered to the Corporation (or any Parent or Subsidiary). All
such bonus shares shall be fully and immediately vested upon issuance.
2. All other shares of Common Stock authorized for issuance under the Stock
Issuance Program by the applicable Plan Administrator shall have a minimum
vesting schedule determined in accordance with the following requirements:
(i) For any shares which are to vest solely by reason of Service to be
performed by the Participant, the Plan Administrator shall impose a minimum
Service period of at least three (3) years measured from the issue date of
such shares.
(ii) For any shares which are to vest upon the Participant's
completion of a designated Service requirement and the Corporation's
attainment of one or more prescribed performance milestones, the Plan
Administrator shall impose a minimum Service period of at least one (1)
year measured from the issue date of such shares.
3. Any new, substituted or additional securities or other property
(including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization, combination of shares, exchange of shares or other change
affecting the outstanding Common Stock as a class without the Corporation's
receipt of consideration shall be issued subject to (i) the same vesting
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requirements applicable to the Participant's unvested shares of Common Stock and
(ii) such escrow arrangements as the Plan Administrator shall deem appropriate.
4. The Participant shall have full stockholder rights with respect to any
shares of Common Stock issued to the Participant under the Stock Issuance
Program, whether or not the Participant's interest in those shares is vested.
Accordingly, the Participant shall have the right to vote such shares and to
receive any regular cash dividends paid on such shares.
5. Should the Participant cease to remain in Service while holding one or
more unvested shares of Common Stock issued under the Stock Issuance Program or
should the performance objectives not be attained with respect to one or more
such unvested shares of Common Stock, then those shares shall be immediately
surrendered to the Corporation for cancellation, and the Participant shall have
no further stockholder rights with respect to those shares. To the extent the
surrendered shares were previously issued to the Participant for consideration
paid in cash or cash equivalent (including the Participant's purchase-money
promissory note), the Corporation shall repay to the Participant the cash
consideration paid for the surrendered shares and shall cancel the unpaid
principal balance of any outstanding purchase-money note of the Participant
attributable to such surrendered shares.
6. The Primary Committee shall have the sole and exclusive authority,
exercisable upon a Participant's termination of Service, to waive the surrender
and cancellation of any or all unvested shares of Common Stock (or other assets
attributable thereto) at the time held by that Participant, if the Primary
Committee determines such waiver to be an appropriate severance benefit for the
Participant.
II. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. All of the Corporation's outstanding repurchase rights under the Stock
Issuance Program shall terminate automatically, and all the shares of Common
Stock subject to those terminated rights shall immediately vest in full, in the
event of any Corporate Transaction, except to the extent (i) those repurchase
rights are to be assigned to the successor corporation (or parent thereof) in
connection with such Corporate Transaction or (ii) such accelerated vesting is
precluded by other limitations imposed in the Stock Issuance Agreement.
B. The Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program in such manner that those repurchase rights shall automatically
terminate, and all the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within eighteen
(18) months following the effective date of any Corporate Transaction in which
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those repurchase rights are assigned to the successor corporation (or parent
thereof).
C. The Plan Administrator shall have the discretionary authority to
structure one or more of the Corporation's repurchase rights under the Stock
Issuance Program in such manner that those repurchase rights shall automatically
terminate, and all the shares of Common Stock subject to those terminated rights
shall immediately vest in full, in the event the Participant's Service should
subsequently terminate by reason of an Involuntary Termination within eighteen
(18) months following the effective date of any Change in Control.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held in
escrow by the Corporation until the Participant's interest in such shares vests
or may be issued directly to the Participant with restrictive legends on the
certificates evidencing those unvested shares.
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ARTICLE FIVE
AUTOMATIC OPTION GRANT PROGRAM
I. OPTION TERMS
A. Grant Dates. Option grants shall be made on the dates specified below:
1. Each individual who is first elected or appointed as a non-employee
Board member at any time after the Effective Date shall automatically be
granted, on the date of such initial election or appointment (as the case may
be), a Non-Qualified Option to purchase 10,000 shares of Common Stock, provided
that individual has not previously been in the employ of the Corporation or any
Parent or Subsidiary.
2. On the date of each Annual Stockholders Meeting, beginning with the 1996
Annual Meeting, each individual who is re-elected to serve as a non-employee
Board member at such meeting shall automatically be granted a Non-Qualified
Option to purchase an additional 3,500 shares of Common Stock, provided such
individual has served as a non-employee Board member for a period of at least
six (6) months. There shall be no limit on the number of such 3,500-share option
grants any one non-employee Board member may receive over his or her period of
Board service, and non-employee Board members who have previously been in the
employ of the Corporation or any Parent or Subsidiary shall be eligible to
receive such annual option grants upon their re-election as non-employee Board
members at one or more Annual Stockholders Meetings.
Stockholder approval of this 1997 Restatement at the 1997 Annual
Stockholders Meeting will constitute pre-approval of each option subsequently
granted pursuant to the express terms of this Automatic Option Grant Program and
the subsequent exercise of that option in accordance with its terms.
B. Exercise Price.
1. The exercise price per share shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the option grant
date.
2. The exercise price shall be payable in one or more of the alternative
forms authorized under the Discretionary Option Grant Program. Except to the
extent the sale and remittance procedure specified thereunder is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.
C. Option Term. Each option shall have a term of ten (10) years measured
from the option grant date.
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D. Exercise and Vesting of Options. Each option shall be immediately
exercisable for any or all of the option shares. However, any shares purchased
under the option shall be subject to repurchase by the Corporation, at the
exercise price paid per share, upon the Optionee's cessation of Board service
prior to vesting in those shares. Each option grant shall vest, and the
Corporation's repurchase right shall lapse, in a series of four (4) successive
equal annual installments over the Optionee's period of continued service as a
Board member, with the first such installment to vest upon the Optionee's
completion of one (1) year of Board service measured from the option grant date.
E. Effect of Termination of Board Service. The following provisions shall
govern the exercise of any outstanding options held by the Optionee under this
Automatic Option Grant Program at the time the Optionee ceases to serve as a
Board member:
(i) The Optionee (or, in the event of Optionee's death, the personal
representative of the Optionee's estate or the person or persons to whom
the option is transferred pursuant to the Optionee's will or in accordance
with the laws of descent and distribution) shall have a twelve (12)-month
period following the date of such cessation of Board service in which to
exercise each such option. However, each option shall, immediately upon the
Optionee's cessation of Board service, terminate and cease to remain
outstanding with respect to any option shares in which the Optionee is not
otherwise at that time vested.
(ii) During the twelve (12)-month exercise period, the option may not
be exercised in the aggregate for more than the number of vested shares for
which the option is exercisable at the time of the Optionee's cessation of
Board service. However, should the Optionee cease to serve as a Board
member by reason of death or Permanent Disability, then all shares at the
time subject to the option shall immediately vest so that such option may,
during the twelve (12)-month exercise period following such cessation of
Board service, be exercised for all or any portion of such shares as
fully-vested shares.
(iii) In no event shall the option remain exercisable after the
expiration of the option term.
II. SPECIAL ACCELERATION EVENTS
A. In the event of any Corporate Transaction, the shares of Common Stock at
the time subject to each outstanding option but not otherwise vested shall
automatically vest in full so that each such option shall, immediately prior to
the specified effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to that
option and may be exercised for all or any portion of such shares as
19.
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fully-vested shares of Common Stock. Immediately following the consummation of
the Corporate Transaction, each automatic option grant under the Plan shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation or its parent company.
B. In connection with any Change in Control of the Corporation, the shares
of Common Stock at the time subject to each outstanding option but not otherwise
vested shall automatically vest in full so that each such option shall,
immediately prior to the specified effective date for the Change in Control,
become fully exercisable for all of the shares of Common Stock at the time
subject to that option and may be exercised for all or any portion of those
shares as fully-vested shares of Common Stock. Each such option shall remain
exercisable for such fully-vested option shares until the expiration or sooner
termination of the option term.
C. The automatic option grants outstanding under the Plan shall in no way
affect the right of the Corporation to adjust, reclassify, reorganize or
otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
III. REMAINING TERMS
The remaining terms of each option granted under the Automatic Option Grant
Program shall be the same as the terms in effect for option grants made under
the Discretionary Option Grant Program.
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ARTICLE SIX
DIRECTOR FEE OPTION GRANT PROGRAM
I. OPTION GRANTS
Each non-employee Board member may elect to apply all or any portion of the
annual retainer fee otherwise payable in cash for his or her service on the
Board to the acquisition of a special option grant under this Director Fee
Option Grant Program. Such election must be filed with the Corporation's Chief
Financial Officer prior to first day of July in the calendar year immediately
preceding the calendar year for which the annual retainer fee which is the
subject of that election is otherwise payable. Each non-employee Board member
who files such a timely election shall automatically be granted an option under
this Director Fee Option Grant Program on the first trading day in January in
the calendar year for which the annual retainer fee which is the subject of that
election would otherwise be payable. Stockholder approval of this 1997
Restatement at the 1997 Annual Stockholders Meeting will constitute pre-approval
of each option subsequently granted pursuant to the express terms of this
Director Fee Option Grant Program and the subsequent exercise of that option in
accordance with its terms.
II. OPTION TERMS
Each option shall be a Non-Qualified Option governed by the terms and
conditions specified below.
A. Exercise Price.
1. The exercise price per share shall be thirty-three and one-third percent
(33-1/3%) of the Fair Market Value per share of Common Stock on the option grant
date.
2. The exercise price shall become immediately due upon exercise of the
option and shall be payable in one or more of the alternative forms authorized
under the Discretionary Option Grant Program. Except to the extent the sale and
remittance procedure specified thereunder is utilized, payment of the exercise
price for the purchased shares must be made on the Exercise Date.
B. Number of Option Shares. The number of shares of Common Stock subject to
the option shall be determined pursuant to the following formula (rounded down
to the nearest whole number):
X = A / (B x 66-2/3%), where
X is the number of option shares,
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A is the portion of the annual retainer fee subject
to the non-employee Board member's election, and
B is the Fair Market Value per share of Common Stock
on the option grant date.
C. Exercise and Term of Options. The option shall become exercisable in a
series of twelve (12) successive equal monthly installments upon the Optionee's
completion of each calendar month of Board service in the calendar year for
which the annual retainer fee which is the subject of his or her election under
this Article Six would otherwise be payable. Each option shall have a maximum
term of ten (10) years measured from the option grant date.
D. Effect of Termination of Service. Should the Optionee cease Board
service for any reason (other than death or Permanent Disability) while holding
one or more options under this Article Six, then each such option shall remain
exercisable, for any or all of the shares for which the option is exercisable at
the time of such cessation of Board service, until the earlier of (i) the
expiration of the ten (10)-year option term or (ii) the expiration of the three
(3)-year period measured from the date of such cessation of Board service.
However, each option held by the Optionee under this Article Six at the time of
his or her cessation of Board service shall immediately terminate and cease to
remain outstanding with respect to any and all shares of Common Stock for which
the option is not otherwise at that time exercisable.
E. Death or Permanent Disability. Should the Optionee's service as a Board
member cease by reason of death or Permanent Disability, then each option held
by such Optionee under this Article Six shall immediately become exercisable for
all the shares of Common Stock at the time subject to that option, and the
option may, during the three (3)-year period following such cessation of Board
service, be exercised for any or all of those shares as fully-vested shares.
Should the Optionee die while holding one or more options under this
Article Six, then each such option may be exercised, for any or all of the
shares for which the option is exercisable at the time of the Optionee's
cessation of Board service (less any shares subsequently purchased by Optionee
prior to death), by the personal representative of the Optionee's estate or by
the person or persons to whom the option is transferred pursuant to the
Optionee's will or in accordance with the laws of descent and distribution. Such
right of exercise shall lapse, and the option shall terminate, upon the earlier
of (i) the expiration of the ten (10)-year option term or (ii) the three
(3)-year period measured from the date of the Optionee's cessation of Board
service.
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III. CORPORATE TRANSACTION/CHANGE IN CONTROL
A. In the event of any Corporate Transaction while the Optionee remains a
Board member, each outstanding option held by such Optionee under this Director
Fee Option Grant Program shall automatically accelerate so that each such option
shall, immediately prior to the effective date of the Corporate Transaction,
become fully exercisable with respect to the total number of shares of Common
Stock at the time subject to such option and may be exercised for any or all of
those shares as fully-vested shares of Common Stock. Each such outstanding
option shall be assumed by the successor corporation (or parent thereof) in the
Corporate Transaction and shall remain exercisable for the fully-vested shares
until the earlier of (i) the expiration of the ten (10)-year option term or (ii)
the expiration of the three (3)-year period measured from the date of the
Optionee's cessation of Board service.
B. In the event of a Change in Control while the Optionee remains in
Service, each outstanding option held by such Optionee under this Director Fee
Option Grant Program shall automatically accelerate so that each such option
shall immediately become fully exercisable with respect to the total number of
shares of Common Stock at the time subject to such option and may be exercised
for any or all of those shares as fully-vested shares of Common Stock. The
option shall remain so exercisable until the earlier or (i) the expiration of
the ten (10)-year option term or (ii) the expiration of the three (3)-year
period measured from the date of the Optionee's cessation of Service.
C. The grant of options under the Director Fee Option Grant Program shall
in no way affect the right of the Corporation to adjust, reclassify, reorganize
or otherwise change its capital or business structure or to merge, consolidate,
dissolve, liquidate or sell or transfer all or any part of its business or
assets.
IV. REMAINING TERMS
The remaining terms of each option granted under this Director Fee Option
Grant Program shall be the same as the terms in effect for option grants made
under the Discretionary Option Grant Program.
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ARTICLE SEVEN
MISCELLANEOUS
I. FINANCING
The Plan Administrator may permit any Optionee or Participant to pay the
option exercise price under the Discretionary Option Grant Program or the
purchase price of shares issued under the Stock Issuance Program by delivering a
promissory note payable in one or more installments. The terms of any such
promissory note (including the interest rate and the terms of repayment) shall
be established by the Plan Administrator in its sole discretion. Promissory
notes may be authorized with or without security or collateral. In all events,
the maximum credit available to the Optionee or Participant may not exceed the
sum of (i) the aggregate option exercise price or purchase price payable for the
purchased shares plus (ii) any Federal, state and local income and employment
tax liability incurred by the Optionee or the Participant in connection with the
option exercise or share purchase.
II. TAX WITHHOLDING
The Corporation's obligation to deliver shares of Common Stock upon the
exercise of options or the issuance or vesting of such shares under the Plan
shall be subject to the satisfaction of all applicable Federal, state and local
income and employment tax withholding requirements.
III. EFFECTIVE DATE AND TERM OF PLAN
A. The Plan became effective upon approval by the Corporation's
stockholders at the 1995 Annual Stockholders Meeting.
B. The Plan was amended and restated by the Board in March 1996 (the "March
1996 Restatement") to effect the following revisions: (i) increase the maximum
number of shares of Common Stock authorized for issuance over the term of the
Plan by an additional 650,000 shares to 3,112,415 shares and (ii) increase the
limit on the maximum number of shares of Common Stock which may be issued under
the Plan prior to the required cessation of further Incentive Option grants by
an additional 650,000 shares to a total of 3,050,000 shares of Common Stock. The
March 1996 Restatement became effective immediately upon adoption by the Board
and was approved by the Corporation's stockholders at the 1996 Annual Meeting.
C. The Plan was again amended and restated on March 20, 1997 (the "1997
Amendment") to effect the following changes: (i) increase the number of shares
of Common Stock authorized for issuance over the term of the Plan by an
additional 600,000 shares, (ii) render the non-employee Board members eligible
to receive option grants and direct stock issuances under the Discretionary
Option Grant and Stock Issuance Programs, (iii) eliminate the plan limitation
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which precluded the grant of additional Incentive Options once the number of
shares of Common Stock issued under the Plan, whether as vested or unvested
shares, exceeded 3,050,000 shares, (iv) eliminate certain restrictions on the
eligibility of non-employee Board members to serve as Plan Administrator and (v)
effect a series of technical changes to the provisions of the Plan (including
the stockholder approval requirements) in order to take advantage of the recent
amendments to Rule 16b-3 of the Securities and Exchange Commission which exempts
certain officer and director transactions under the Plan from the short-swing
liability provisions of the Federal securities laws. The 1997 Amendment is
subject to stockholder approval at the 1997 Annual Meeting, and no option grants
made on the basis of the 600,000-share increase under the 1997 Amendment shall
become exercisable in whole or in part unless and until the 1997 Amendment is
approved by the stockholders. Should such stockholder approval not be obtained
at the 1997 Annual Meeting, then each option grant made pursuant to such
600,000-share increase shall terminate and cease to remain outstanding, and no
further option grants shall be made on the basis of that share increase.
However, the provisions of the Plan as in effect immediately prior to the 1997
Amendment shall automatically be reinstated, and option grants may thereafter
continue to be made pursuant to the reinstated provisions of the Plan. All
option grants made prior to the 1997 Amendment shall remain outstanding in
accordance with the terms and conditions of the respective instruments
evidencing those options or issuances, and nothing in the 1997 Amendment shall
be deemed to modify or in any way affect those outstanding options or issuances.
Subject to the foregoing limitations, the Plan Administrator may make option
grants under the Plan at any time before the date fixed herein for the
termination of the Plan.
D. The Plan Administrator shall have full power and authority, exercisable
in its sole discretion, to extend one or more provisions of the Discretionary
Option Grant Program, including (without limitation) the vesting acceleration
provisions of Section III of Article Two relating to Corporate Transactions and
Changes in Control, to one or more outstanding stock options under the
Predecessor Plan which are incorporated into this Plan on the Effective Date but
which do not otherwise contain such provisions.
E. The Plan shall terminate upon the earliest of (i) May 24, 2005, (ii) the
date on which all shares available for issuance under the Plan shall have been
issued as fully-vested shares or (iii) the termination of all outstanding
options in connection with a Corporate Transaction. Upon a clause (i) plan
termination, all outstanding option grants and unvested stock issuances shall
thereafter continue to have force and effect in accordance with the provisions
of the documents evidencing such grants or issuances.
IV. AMENDMENT OF THE PLAN
A. The Board shall have complete and exclusive power and authority to amend
or modify the Plan in any or all respects. However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
stock options or unvested stock issuances at the time outstanding under the Plan
unless the Optionee or the Participant consents to such amendment or
25.
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modification. In addition, certain amendments may require stockholder approval
pursuant to applicable laws or regulations.
B. Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant and Salary Reduction Option Grant Programs and shares
of Common Stock may be issued under the Stock Issuance Program that are in each
instance in excess of the number of shares then available for issuance under the
Plan, provided any excess shares actually issued under those programs shall be
held in escrow until there is obtained stockholder approval of an amendment
sufficiently increasing the number of shares of Common Stock available for
issuance under the Plan. If such stockholder approval is not obtained within
twelve (12) months after the date the first such excess issuances are made, then
(i) any unexercised options granted on the basis of such excess shares shall
terminate and cease to be outstanding and (ii) the Corporation shall promptly
refund to the Optionees and the Participants the exercise or purchase price paid
for any excess shares issued under the Plan and held in escrow, together with
interest (at the applicable Short Term Federal Rate) for the period the shares
were held in escrow, and such shares shall thereupon be automatically cancelled
and cease to be outstanding.
V. USE OF PROCEEDS
Any cash proceeds received by the Corporation from the sale of shares of
Common Stock under the Plan shall be used for general corporate purposes.
VI. REGULATORY APPROVALS
A. The implementation of the Plan, the granting of any stock option under
the Plan and the issuance of any shares of Common Stock (i) upon the exercise of
any granted option or (ii) under the Stock Issuance Program shall be subject to
the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the stock options
granted under it and the shares of Common Stock issued pursuant to it.
B. No shares of Common Stock or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing requirements
of any stock exchange (or the Nasdaq National Market, if applicable) on which
Common Stock is then listed for trading.
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VII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the Participant any
right to continue in Service for any period of specific duration or interfere
with or otherwise restrict in any way the rights of the Corporation (or any
Parent or Subsidiary employing or retaining such person) or of the Optionee or
the Participant, which rights are hereby expressly reserved by each, to
terminate such person's Service at any time for any reason, with or without
cause.
27.
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APPENDIX
The following definitions shall be in effect under the Plan:
A. Automatic Option Grant Program shall mean the automatic option grant
program in effect under the Plan.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation), of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (A) who
were still in office at the time the Board approved such election or
nomination.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Common Stock shall mean the Corporation's common stock.
F. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
transaction, or
A-1.
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(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
G. Corporation shall mean FileNet Corporation, a Delaware corporation.
H. Director Fee Option Grant Program shall mean the special stock option
grant in effect for non-employee Board members under Article Six of the Plan.
I. Discretionary Option Grant Program shall mean the discretionary option
grant program in effect under the Plan.
J. Effective Date shall mean the date of the 1995 Annual Stockholders
Meeting, provided the Plan is approved by the stockholders at that meeting.
K. Employee shall mean an individual who is in the employ of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
L. Exercise Date shall mean the date on which the Corporation shall have
received written notice of the option exercise.
M. Fair Market Value per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the average of the high and low
selling prices per share of Common Stock on the date in question, as such
prices are reported by the National Association of Securities Dealers on
the Nasdaq National Market or any successor system. If there are no high or
low selling prices for the Common Stock on the date in question, then the
Fair Market Value shall be the average of the high and low selling prices
on the last preceding date for which such quotations exist.
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the average of the high and low selling
prices per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market for
the Common Stock, as such prices are officially quoted in the composite
tape of transactions on such exchange. If there are no high and low selling
prices for the Common Stock on the date in question, then the Fair Market
Value shall be the average of the high and low selling prices on the last
preceding date for which such quotations exist.
A-2.
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N. Incentive Option shall mean an option which satisfies the requirements
of Code Section 422.
O. Involuntary Termination shall mean the termination of the Service of any
individual which occurs by reason of:
(i) such individual's involuntary dismissal or discharge by the
Corporation for reasons other than Misconduct, or
(ii) such individual's voluntary resignation following (A) a change in
his or her position with the Corporation which materially reduces his or
her level of responsibility, (B) a reduction in his or her level of
compensation (including base salary, fringe benefits and participation in
any corporate-performance based bonus or incentive programs) by more than
fifteen percent (15%) or (C) a relocation of such individual's place of
employment by more than fifty (50) miles, provided and only if such change,
reduction or relocation is effected by the Corporation without the
individual's consent.
P. Misconduct shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
Q. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
R. Non-Qualified Option shall mean an option not intended to satisfy the
requirements of Code Section 422.
S. Optionee shall mean any person to whom an option is granted under the
Discretionary Option Grant, Salary Reduction Option Grant, Automatic Option
Grant or Director Fee Option Grant Program.
T. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
A-3.
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U. Participant shall mean any person who is issued shares of Common Stock
under the Stock Issuance Program.
V. Permanent Disability or Permanently Disabled shall mean the inability of
the Optionee or the Participant to engage in any substantial gainful activity by
reason of any medically determinable physical or mental impairment expected to
result in death or to be of continuous duration of twelve (12) months or more.
However, solely for purposes of the Automatic Option Grant and Director Fee
Option Grant Programs, Permanent Disability or Permanently Disabled shall mean
the inability of the non-employee Board member to perform his or her usual
duties as a Board member by reason of any medically determinable physical or
mental impairment expected to result in death or to be of continuous duration of
twelve (12) months or more.
W. Plan shall mean the Corporation's 1995 Stock Option Plan, as set forth
in this document.
X. Plan Administrator shall mean the particular entity, whether the Primary
Committee, the Board or the Secondary Committee, which is authorized to
administer the Discretionary Option Grant and Stock Issuance Programs with
respect to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.
Y. Predecessor Plan shall mean the Corporation's Second Amended and
Restated Stock Option Plan, pursuant to which 3,250,000 shares of Common Stock
have been authorized for issuance.
Z. Primary Committee shall mean the committee of two (2) or more
non-employee Board members appointed by the Board to administer the
Discretionary Option Grant and Stock Issuance Programs with respect to Section
16 Insiders.
AA. Salary Reduction Option Grant Program shall mean the salary reduction
grant program in effect under the Plan.
AB. Secondary Committee shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant and
Stock Issuance Programs with respect to eligible persons other than Section 16
Insiders.
AC. Section 16 Insider shall mean an officer or director of the Corporation
subject to the short-swing profit liabilities of Section 16 of the 1934 Act.
A-4.
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AD. Service shall mean the performance of services for the Corporation (or
any Parent or Subsidiary) by a person in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor, except to the extent otherwise specifically provided in the documents
evidencing the option grant or stock issuance.
AE. Stock Exchange shall mean either the American Stock Exchange or the New
York Stock Exchange.
AF. Stock Issuance Agreement shall mean the agreement entered into by the
Corporation and the Participant at the time of issuance of shares of Common
Stock under the Stock Issuance Program.
AG. Stock Issuance Program shall mean the stock issuance program in effect
under the Plan.
AH. Subsidiary shall mean any corporation (other than the Corporation) in
an unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
AI. 10% Stockholder shall mean the owner of stock (as determined under Code
Section 424(d)) possessing ten percent (10%) or more of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).
A-5.
EXHIBIT 99.11
Form of Automatic Stock Option Agreement
FILENET CORPORATION
AUTOMATIC STOCK OPTION AGREEMENT
RECITALS
A. The Corporation has implemented an automatic option grant program under
the Plan pursuant to which eligible non-employee members of the Board will
automatically receive special option grants at periodic intervals over their
period of Board service in order to provide such individuals with a meaningful
incentive to continue to serve as members of the Board.
B. Optionee is an eligible non-employee Board member, and this Agreement is
executed pursuant to, and is intended to carry out the purposes of, the Plan in
connection with the automatic option grant to purchase shares of Common Stock
under the Plan.
C. All capitalized terms in this Agreement shall have the meaning assigned
to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of the
Grant Date, a Non-Qualified Option to purchase up to the number of Option Shares
specified in the Grant Notice. The Option Shares shall be purchasable from time
to time during the option term specified in Paragraph 2 at the Exercise Price.
2. Option Term. This option shall have a term of ten (10) years measured
from the Grant Date and shall accordingly expire at the close of business on the
Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 6.
3. Limited Transferability. This option may, in connection with the
Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established exclusively for one or more such family members. The assigned
portion shall be exercisable only by the person or persons who acquire a
proprietary interest in this option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for the
option immediately prior to such assignment. Should Optionee die while holding
this option, then the option shall be transferred in accordance with Optionee's
will or the laws of inheritance.
<PAGE>
4. Exercisability/Vesting.
(a) This option shall be immediately exercisable for any or all of the
Option Shares, whether or not the Option Shares are vested in accordance
with the Vesting Schedule, and shall remain so exercisable until the
Expiration Date or sooner termination of the option term under Paragraph 5
or 6.
(b) Optionee shall, in accordance with the Vesting Schedule, vest in
the Option Shares in a series of successive annual installments over his or
her period of Board service. Vesting in the Option Shares may be
accelerated pursuant to the provisions of Paragraph 5, 6 or 7. In no event,
however, shall any additional Option Shares vest following Optionee's
cessation of service as a Board member.
5. Cessation of Board Service. Should Optionee's service as a Board member
cease while this option remains outstanding, then the option term specified in
Paragraph 2 shall terminate (and this option shall cease to be outstanding)
prior to the Expiration Date in accordance with the following provisions:
(i) Should Optionee cease to serve as a Board member for any reason
(other than death or Permanent Disability) while holding this option, then
the period for exercising this option shall be reduced to a twelve
(12)-month period (commencing with the date of such cessation of Board
service), but in no event shall this option be exercisable at any time
after the Expiration Date. During such limited period of exercisability,
this option may not be exercised in the aggregate for more than the number
of Option Shares (if any) in which the Optionee is vested on the date
Optionee ceases service as a Board member. Upon the earlier of (A) the
expiration of such twelve (12)-month period or (B) the specified Expiration
Date, the option shall terminate and cease to be exercisable with respect
to any vested Option Shares for which the option has not been exercised.
(ii) Should Optionee cease service as a Board member by reason of
death or Permanent Disability, then all Option Shares at the time subject
to this option but not otherwise vested shall immediately vest in full so
that Optionee (or the personal representative of Optionee's estate or the
person or persons to whom the option is transferred upon Optionee's death)
shall have the right to exercise this option for any or all of the Option
Shares as fully-vested shares of Common Stock at any time prior to the
earlier of (A) the expiration of the twelve (12)-month period measured from
the date of Optionee's death or Permanent Disability or (B) the specified
Expiration Date.
(iii) Upon Optionee's cessation of Board service for any reason other
than death or Permanent Disability, this option shall immediately terminate
and cease to be outstanding with respect to any and all Option Shares in
which Optionee is not otherwise at that time vested in accordance with the
normal Vesting Schedule or the special vesting acceleration provisions of
Paragraph 6 or 7 below.
2.
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6. Corporate Transaction.
(a) In the event of a Corporate Transaction, all Option Shares at the
time subject to this option but not otherwise vested shall automatically
vest so that this option shall, immediately prior to the effective date of
such Corporate Transaction, become exercisable for any or all of those
Option Shares as fully-vested shares of Common Stock. Immediately following
the Corporate Transaction, this option shall terminate and cease to be
exercisable except to the extent assumed by the successor corporation (or
parent thereof) in connection with such Corporate Transaction.
(b) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately
after such Corporate Transaction, to apply to the number and class of
securities which would have been issuable to Optionee in consummation of
such Corporate Transaction had the option been exercised immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be
made to the Exercise Price, provided the aggregate Exercise Price shall
remain the same.
(c) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
7. Change in Control. All Option Shares subject to this option at the time
of a Change in Control but not otherwise vested shall automatically vest so that
this option shall, immediately prior to the effective date of such Change in
Control, become exercisable for any or all of those Option Shares as
fully-vested shares of Common Stock. This option shall remain exercisable for
such fully-vested Option Shares until the earlier of (i) the Expiration Date or
(ii) the sooner termination of this option in accordance with Paragraph 5 or 6.
8. Adjustment in Option Shares. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the number and/or
class of securities subject to this option and (ii) the Exercise Price in order
to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
9. Stockholder Rights. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
3.
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10. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or any part of the
Option Shares for which this option is at the time exercisable, Optionee (or any
other person or persons exercising the option) must take the following actions:
(i) To the extent the option is exercised for vested Option Shares,
execute and deliver to the Corporation a Notice of Exercise for the vested
Option Shares for which the option is exercised. To the extent this option
is exercised for unvested Option Shares, execute and deliver to the
Corporation a Purchase Agreement for the unvested Option Shares for which
the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased shares in one
or more of the following forms:
(A) cash or check made payable to the Corporation,
(B) shares of Common Stock held by Optionee (or any other person
or persons exercising the option) for the requisite period necessary
to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the Exercise
Date, or
(C) to the extent the option is exercised for vested Option
Shares, through a special sale and remittance procedure pursuant to
which Optionee (or any other person or persons exercising the option)
shall concurrently provide irrevocable instructions (I) to a
Corporation-designated brokerage firm to effect the immediate sale of
the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover
the aggregate Exercise Price payable for the purchased shares plus all
applicable Federal, state and local income taxes required to be
withheld by the Corporation by reason of such exercise and (II) to the
Corporation to deliver the certificates for the purchased shares
directly to such brokerage firm in order to complete the sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise (or the Purchase
Agreement) delivered to the Corporation in connection with the option
exercise.
(iii) Furnish to the Corporation appropriate documentation
that the person or persons exercising the option (if other than
Optionee) have the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation for
the satisfaction of all Federal, state and local income tax
withholding requirements applicable to the option exercise.
(b) As soon after the Exercise Date as practical, the Corporation
shall issue to or on behalf of Optionee (or any other person or
persons exercising this option) a certificate for the purchased Option
Shares, with the appropriate legends affixed thereto. To the extent
any such Option Shares are unvested, the certificates for those Option
Shares shall be endorsed with an appropriate legend evidencing the
Corporation's repurchase rights and may be held by the Corporation in
escrow until such shares vest.
(c) In no event may this option be exercised for any fractional
shares.
11. Compliance with Laws and Regulations.
(a) The exercise of this option and the issuance of the Option Shares upon
such exercise shall be subject to compliance by the Corporation and Optionee
with all applicable requirements of law relating thereto and with all applicable
regulations of any stock exchange (or the Nasdaq National Market, if applicable)
on which the Common Stock may be listed for trading at the time of such exercise
and issuance.
(b) The inability of the Corporation to obtain approval from any regulatory
body having authority deemed by the Corporation to be necessary to the lawful
issuance and sale of any Common Stock pursuant to this option shall relieve the
Corporation of any liability with respect to the non-issuance or sale of the
Common Stock as to which such approval shall not have been obtained. The
Corporation, however, shall use its best efforts to obtain all such approvals.
12. Successors and Assigns. Except to the extent otherwise provided in
Paragraph 3 or 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.
13. Notices. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
5.
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U.S. mail, postage prepaid and properly addressed to the party to be notified.
14. Construction. This Agreement and the option evidenced hereby are made
and granted pursuant to the automatic option grant program in effect under the
Plan and are in all respects limited by and subject to the terms of such
program.
15. Governing Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
6.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Automatic Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Change in Control shall mean a change in ownership or control of the
Corporation effected through either of the following transactions:
(i) the acquisition, directly or indirectly, by any person or related
group of persons (other than the Corporation or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Corporation) of beneficial ownership (within the meaning of Rule 13d-3 of
the 1934 Act) of securities possessing more than fifty percent (50%) of the
total combined voting power of the Corporation's outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation's
stockholders, or
(ii) a change in the composition of the Board over a period of
thirty-six (36) consecutive months or less such that a majority of the
Board members ceases, by reason of one or more contested elections for
Board membership, to be comprised of individuals who either (a) have been
Board members continuously since the beginning of such period or (b) have
been elected or nominated for election as Board members during such period
by at least a majority of the Board members described in clause (a) who
were still in office at the time the Board approved such election or
nomination.
D. Code shall mean the Internal Revenue Code of 1986, as amended.
E. Common Stock shall mean the Corporation's common stock.
F. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
transaction, or
A-1.
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(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
G. Corporation shall mean FileNet Corporation, a Delaware corporation.
H. Exercise Date shall mean the date on which the option shall have been
exercised in accordance with Paragraph 10 of the Agreement.
I. Exercise Price shall mean the exercise price per share as specified in
the Grant Notice.
J. Expiration Date shall mean the date on which the option expires as
specified in the Grant Notice.
K. Fair Market Value per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the average of the high and low
selling prices per share of Common Stock on the date in question, as such
prices are reported by the National Association of Securities Dealers on
the Nasdaq National Market or any successor system. If there are no selling
prices quoted for the Common Stock on the date in question, then the Fair
Market Value shall be the average of the high and low selling prices on the
last preceding date for which such quotations exist.
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the average of the high and low selling
prices per share of Common Stock on the date in question on the Stock
Exchange serving as the primary market for the Common Stock, as such prices
are officially quoted in the composite tape of transactions on such
exchange. If there are no selling prices quoted for the Common Stock on the
date in question, then the Fair Market Value shall be the average of the
high and low selling prices on the last preceding date for which such
quotations exist.
L. Grant Date shall mean the date of grant of the option as specified in
the Grant Notice.
M. Grant Notice shall mean the Notice of Grant of Non-Employee Director
Automatic Stock Option accompanying the Agreement, pursuant to which Optionee
has been informed of the basic terms of the option evidenced hereby.
A-2.
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N. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.
O. Non-Qualified Option shall mean an option not intended to satisfy the
requirements of Code Section 422.
P. Notice of Exercise shall mean the written notice of the option exercise
on the form provided by the Corporation for such purpose.
Q. Option Shares shall mean the number of shares of Common Stock subject to
the option as specified in the Grant Notice.
R. Optionee shall mean the person to whom the option is granted as
specified in the Grant Notice.
S. Permanent Disability shall mean the inability of Optionee to perform his
or her usual duties as a Board member by reason of any medically determinable
physical or mental impairment expected to result in death or to be of continuous
duration of twelve (12) months or more.
T. Plan shall mean the Corporation's 1995 Stock Option Plan.
U. Purchase Agreement shall mean the stock purchase agreement (in form and
substance satisfactory to the Corporation) which must be executed at the time
the option is exercised for any unvested Option Shares and which will
accordingly (i) grant the Corporation the right to repurchase, at the Exercise
Price, any and all of those Option Shares in which the Optionee is not otherwise
vested at the time of his or her cessation of service as a Board member and (ii)
preclude the sale, transfer or other disposition of any of the Option Shares
purchased under such agreement while those Option Shares remain subject to the
repurchase right.
V. Stock Exchange shall mean the American Stock Exchange or the New York
Stock Exchange.
W. Vesting Schedule shall mean the vesting schedule specified in the Grant
Notice, pursuant to which Optionee will vest in the Option Shares in a series of
annual installments over his or her period of Board service, subject to
acceleration in accordance with the provisions of the Agreement.
A-3.
EXHIBIT 99.15
1988 Employee Qualified Stock Purchase Plan
(As Amended and Restated through March 20, 1997)
FILENET CORPORATION
1988 EMPLOYEE QUALIFIED STOCK PURCHASE PLAN
(As Amended and Restated through March 20, 1997)
FileNet Corporation, a Delaware corporation (the "Company"), hereby adopts
this 1988 Employee Qualified Stock Purchase Plan (the "Q.S.P. Plan").
1. Purpose. The purpose of the Q.S.P. Plan is to assist employees of the
Company in acquiring stock ownership interests in the Company, pursuant to a
plan which qualifies as an "employee stock purchase plan" under Code Section
423. The Q.S.P. Plan is intended to help employees provide for their future
security, and to encourage them to remain in the employ of the Company.
2. Definitions. Whenever one of the following terms is used in the Q.S.P.
Plan with the first letter or letters capitalized, it shall have the following
meaning unless the context clearly indicates to the contrary (such definitions
to be equally applicable to the singular and plural forms of the terms defined):
(a) "Administrator" shall mean the Company, acting through the Board of
Directors or its delegate.
(b) "Authorization Card" shall mean the form prescribed by the
Administrator, which shall include a form of stock purchase agreement pursuant
to which an Eligible Employee shall purchase shares of Stock under the Q.S.P.
Plan and a form of payroll deduction authorization pursuant to which such
Eligible Employee shall authorize the Company to deduct such Eligible Employee's
contributions under the Q.S.P. Plan.
(c) "Base Pay" shall mean the base pay payable to an Employee on each
Payday as cash compensation for services to the Company. "Base Pay" shall
exclude overtime payments, sales commissions, incentive compensation, bonuses,
and other special payments, except to the extent that the inclusion of any such
item is specifically designated by the Administrator.
(d) "Board of Directors" shall mean the Board of Directors of the Company.
(e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(f) "Company" shall mean FileNet Corporation, a Delaware corporation.
(g) "Eligible Employee" shall mean any Employee who satisfies the
requirements of Section 4.
<PAGE>
(h) "Employee" shall mean any person who renders services to the Company in
the status of an employee within the meaning of Code Section 3121(d). "Employee"
shall not include any director of the Company who does not render services to
the Company in the status of an employee within the meaning of Code Section
3121(d).
(i) "Enrollment Period" shall mean the two week period preceding each
Offering Period determined in accordance with Subsection 6(b).
(j) "Offering Period" shall mean each six month period as provided in
Section 5. Options shall be granted on the first day of an Offering Period and
exercised on the last day of Offering Period, as provided in Section 8.
(k) "Option" shall mean an option granted to an Eligible Employee to
purchase shares of Stock under the Q.S.P. Plan.
(l) "Option Price" shall mean the per share exercise price of shares of
Stock to be purchased pursuant to an Option, as provided in Section 9.
(m) "Parent Corporation" shall mean any corporation, other than the
Company, in an unbroken chain of corporations ending with the Company if, at the
time of the granting of the Option, each of the corporations other than the
Company own stock possessing 50% or more of the total combined voting power of
all classes of stock in one of the other corporations in such chain.
(n) "Payday" of an Employee shall mean the regular and recurring
established day for payment of cash compensation to Employees in the same
classification or position.
(o) "Q.S.P. Plan" shall mean the FileNet Corporation 1988 Employee
Qualified Stock Purchase Plan.
(p) "Subsidiary Corporation" shall mean any corporation, other than the
Company, in an unbroken chain of corporations beginning with the Company if, at
the time of the granting of the Option, each of the corporations other than the
last corporation in the unbroken chain owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
(q) "Stock" shall mean the shares of the Company's Common Stock, $.01 par
value.
2.
<PAGE>
3. Stock Subject to the Q.S.P. Plan.
(a) Subject to Section 14, the shares of Stock which may be sold pursuant
to Options granted under the Q.S.P. Plan shall not exceed 600,000 shares.
(b) The Company shall reserve for issuance under the Q.S.P. Plan 600,000
shares of either the Company's authorized but unissued Stock or Stock held in
the Company's treasury.
(c) Any adjustment to the number of shares of Stock received for issuance
under the Q.S.P. Plan shall be made only in accordance with Sections 14
(relating to recapitalization) and 17 (relating to amendments of the Q.S.P.
Plan).
4. Eligibility. Each Employee of the Company who on the first day of any
Enrollment Period:
(a) has been employed by the Company for not less than one (1) year,
(b) is customarily employed by the Company for more than twenty (20) hours
per week, and
(c) is customarily employed by the Company for more than five (5) months
per calendar year, shall become an Eligible Employee on such day.
5. Offering Periods. Options shall be granted under the Q.S.P. Plan in
successive six month Offering Periods until the earlier of the maximum number of
shares subject to sale pursuant to Options have been sold, or the Q.S.P. Plan is
terminated. The Administrator shall determine, in its discretion, the date of
commencement of the first and each Offering Period thereafter; provided, that no
Offering Period shall commence during any other Offering Period.
6. Participation in the Q.S.P. Plan.
(a) Each Eligible Employee may elect to participate in the Q.S.P. Plan for
an Offering Period by submitting to the Administrator a completed and executed
Authorization Card in accordance with subsection (b). An Eligible Employee who
elects to participate in the Q.S.P. Plan for an Offering Period shall elect on
such Authorization Card a whole percentage of Base Pay (such percentage to equal
1%, 2%, 3%, 4% or 5%) to be withheld by payroll deduction, which upon the
exercise of the Option granted to such Eligible Employee with respect to such
Offering Period, shall be contributed to the Company as payment for shares of
Stock purchased pursuant to the Option.
3.
<PAGE>
(b) The Authorization Card must be submitted to the Administrator during
(the "Enrollment Period") the two-week period commencing one month prior to the
first day of the Offering Period and ending two weeks prior to the first day of
the Offering Period in order to participate in the Q.S.P. Plan during such
Offering Period.
(c) Except as otherwise provided in subsection (b) and Section 11, an
Employee's Authorization Card shall operate with respect to each Offering Period
commencing after delivery of the Authorization Card to the Administrator for
which such Employee is an Eligible Employee.
7. Payroll Deductions.
(a) Cash compensation payable to an Eligible Employee who elects to
participate in the Q.S.P. Plan for an Offering Period shall be reduced each
Payday through payroll deductions by an amount equal to the whole percentage of
Base Pay payable on such Payday elected by the Eligible Employee under Section
6.
(b) The amount of each Eligible Employee's payroll deduction shall be held
by the Company and credited to an account established for such Eligible
Employee. The Company shall not pay any interest on the funds credited to an
Eligible Employee's account under the Q.S.P. Plan.
(c) An Eligible Employee participating in the Q.S.P. Plan may change his or
her payroll deduction percentage for any Offering Period by submitting a new
Authorization Card to the Administrator during the Enrollment Period. Such
change in payroll deduction percentage shall become effective on the first day
of the Offering Period.
(d) During a leave of absence from the Company which is approved by the
Company and which meets the requirements of Treasury Regulation Section
1.421-7(h)(2), an Eligible Employee's payroll deductions shall be suspended, and
at the election of such Eligible Employee, such Eligible Employee may make cash
payments to the Company in lieu of payroll deductions on each Payday equal to
the dollar amount of the payroll deduction made for such Eligible Employee for
the Payday next preceding the first day of such Eligible Employee's leave of
absence.
8. Grant of Options; Exercise of Options.
(a) Each Eligible Employee participating in the Q.S.P. Plan shall be
granted an Option for each Offering Period for which such Eligible Employee
elects to participate on the first day of the Offering Period. The term of each
Option shall end on the last day of the Offering Period for which the Option is
granted, and such Option shall expire immediately thereafter. The number of
shares of Stock subject to each Option shall be the quotient of the total
payroll deductions made for the Eligible Employee during the Offering Period,
divided by the Option Price, excluding fractional shares of Stock. However, the
4.
<PAGE>
maximum number of shares of Stock purchasable per Eligible Employee on the last
day of an Offering Period shall not exceed 1,000 shares, subject to periodic
adjustment in the event of certain changes in the Company's capitalization, as
provided in Section 14.
(b) Except as otherwise provided in subsection (c), each Eligible Employee
participating in the Q.S.P. Plan shall be deemed to have exercised his or her
Option on the last day of the Offering Period, to the extent that the balance of
payroll deductions credited to such Eligible Employee's account under the Q.S.P.
Plan is sufficient to purchase, at the Option Price, whole shares of Stock. No
fractional shares of Stock shall be purchased upon the exercise of the Option
and any funds credited to such Eligible Employee's account, remaining after the
purchase of whole shares of Stock upon exercise of an Option, shall remain
credited to such Eligible Employee's account and carried forward for purchase of
shares of Stock pursuant to the Option, if any, granted to such Eligible
Employee for the next following Offering Period. However, any payroll deductions
not applied to the purchase of Stock by reason of the limitation on the maximum
number of shares purchasable by the Eligible Employee on the last day of the
offering period shall be promptly refunded.
(c) An Eligible Employee's Option shall not be exercised on the last day of
the Offering Period if such Eligible Employee instructs the Administrator in
writing at least two weeks prior to the last day of the Offering Period that
such Option is not to be exercised. Within sixty (60) days after receipt of such
instruction, the Administrator shall pay to such Eligible Employee in cash in
one lump sum the balance of payroll deductions credited to such Eligible
Employee's account under the Q.S.P. Plan, without the payment of any interest
thereon. In accordance with subsection 11(c), such Eligible Employee shall not
be eligible to rejoin any Offering Period after his or her participation in that
Offering Period ceases in accordance with subsection 11(a).
(d) If the total number of shares of Stock for which Options are to be
exercised on any date exceeds the number of shares remaining unsold under the
Q.S.P. Plan (after deduction of all shares for which Options have theretofore
been exercised), the Administrator shall make a pro rata allocation of the
available remaining shares in as nearly a uniform manner as shall be practicable
and any balance of payroll deductions credited to the accounts of Eligible
Employees which have not been applied to the purchase of shares of Stock shall
be paid to such Eligible Employees in cash in one lump sum within sixty (60)
days after such pro rata allocation without payment of any interest thereon.
(e) Notwithstanding any provision in this Section to the contrary, an
Eligible Employee shall not be granted an Option:
(i) if, immediately after the Option is granted, such Employee would
own stock possessing 5% or more of the total combined voting power or value
of all classes of stock of the Company, any Parent Corporation or any
Subsidiary Corporation. For purposes of determining stock ownership under
this paragraph, the rules of Code Section 425(d) shall apply and stock
5.
<PAGE>
which an Eligible Employee may purchase under outstanding options held by
such Eligible Employee shall be treated as stock owned by such Eligible
Employee; or
(ii) which permits such Eligible Employee's rights to purchase stock
under all employee stock purchase plans of the Company, any Parent
Corporation or any Subsidiary Corporation, which qualify under Code Section
423, to accrue at a rate which exceeds $25,000 of the fair market value of
such stock (determined at the time such option is granted) for each
calendar year in which such option is outstanding at any time. For purpose
of the limitations imposed by this paragraph, the right to purchase stock
under an option accrues when the option (or any portion thereof) first
becomes exercisable during the calendar year, the right to purchase stock
under an option accrues at the rate provided in the option (but in no case
may such rate exceed $25,000 of the fair market value of such stock
determined at the time such option is granted for any one calendar year),
and a right to purchase stock which has accrued under the option may not be
carried over to any other option.
9. Option Price.
(a) The per share exercise price of each Option (the "Option Price") shall
be an amount equal to the lesser of:
(i) 85% of the fair market value of a share of Stock on the date the
Option is granted (the first day of the Offering Period); or
(ii) 85% of the fair market value of a share of the Stock on the date
such Option is exercised (the last day of the Offering Period).
(b) For purposes of subsection (a), the fair market value of a share of
Stock as of a given date shall be:
(i) the closing price of a share of Stock on the principal exchange on
which shares of Stock are then trading, if any, on the trading day next
preceding such date;
(ii) if such Stock is not traded on an exchange but is quoted on the
Nasdaq National Market or any successor quotation system, (1) the mean
between the high and low selling prices for the Stock on the trading day
next preceding such date, as such prices are reported on the Nasdaq
National Market or (2) the mean between the closing representative bid and
asked prices (in all other cases) for the Stock on the trading day next
preceding such date as reported by NASDAQ or such successor quotation
system;
6.
<PAGE>
(iii) if such Stock is not publicly traded on an exchange and not
quoted on NASDAQ or a successor quotation system, the mean between the
closing bid and asked prices for the Stock on the trading day next
preceding such date as determined in good faith by the Administrator; or
(iv) if the Stock is not publicly traded, the fair market value
established by the Administrator acting in good faith.
10. Issuance of Certificates.
(a) The Administrator shall, within sixty (60) days after the exercise of
any Option, deliver to the Eligible Employee exercising the Option a certificate
evidencing the whole shares of Stock purchased by such Eligible Employee under
the Q.S.P. Plan from funds credited to such Eligible Employee's account.
(b) In the event the Administrator is required to obtain authority to issue
certificates for any shares of Stock purchased by an Eligible Employee under the
Q.S.P. Plan from any commissioner or agency, the Administrator will seek to
obtain such authority. If the Administrator is unable, after reasonable efforts,
to obtain such authority, the Administrator and the Company shall be relieved
from all liability and shall pay to each such Eligible Employee the balance of
payroll deductions credited to each such Eligible Employee's account under the
Q.S.P. Plan in cash in one lump sum as soon as practicable, without the payment
of any interest thereon.
11. Cessation of Participation.
(a) An Eligible Employee shall cease to participate in the Q.S.P. Plan in
the event that:
(i) the Administrator receives written instructions from the eligible
Employee to terminate such Eligible Employee's participation in the Q.S.P.
Plan;
(ii) the Eligible Employee resigns or is discharged from employment by
the Company;
(iii) the Eligible Employee has a leave of absence from the Company
(other than a leave of absence which is approved by the Company and which
meets the requirements of Treasury Regulation Section 1.421-7(h)(2)); or
(iv) the Eligible Employee dies.
7.
<PAGE>
(b) Upon cessation of participation by an Eligible Employee, such Eligible
Employee's payroll deductions shall cease. If such cessation of participation
occurs during the last two weeks of an Offering Period (and is not as a result
of Eligible Employee's resignation or discharge from employment by the Company),
such Eligible Employee's Option shall be exercised on the last day of the
Offering Period in accordance with Section 8(b). Upon any other cessation of
participation, any balance of payroll deductions credited to such Eligible
Employee's account under the Q.S.P. Plan shall be paid to the Employee in cash
in one lump sum as soon as practicable after cessation of participation, without
payment of any interest thereon.
(c) An Eligible Employee shall not be eligible to rejoin an Offering Period
after his or her participation in that Offering Period ceases under subsection
11(a).
12. Transfer of Option. Options granted pursuant to the Q.S.P. Plan shall
not be transferable by an Eligible Employee, other than by will or the laws of
descent and distribution, and shall be exercisable during the Eligible
Employee's lifetime only by such Eligible Employee.
13. Beneficiary. Each Eligible Employee shall designate on his or her
Authorization Card a beneficiary or beneficiaries and may, without such
beneficiaries' consent, change such designation. Any designation shall be
effective only after it is received by the Administrator and shall be
controlling over any disposition by will or otherwise. Upon the death of an
Eligible Employee, the balance of payroll deductions credited to such Eligible
Employee's account shall be paid or distributed to the designated beneficiary or
beneficiaries, or in the absence of such designation, to the executor or
administrator of the Eligible Employee's estate, and in either event the
Administrator and the Company shall not be under any further liability to
anyone.
14. Recapitalization. If there shall be any change in the Stock subject to
the Q.S.P. Plan or the Stock subject to any Option, through merger,
consolidation, reorganization, recapitalization, reincorporation, stock split,
stock dividend (in excess of 2% of the fair market value of the Stock) or other
change in the corporate structure of the Company, appropriate adjustments shall
be made by the Administrator to (i) the aggregate number of shares subject to
the Q.S.P. Plan, (ii) the maximum number of shares which any one individual may
purchase per Offering Period and (iii) the number of shares and the price per
share subject to outstanding Options in order to preserve, but not to increase,
the benefits of the Eligible Employees hereunder; provided, however, that
subject to any required action by the stockholders, if the Company shall not be
the surviving corporation in any such merger, consolidation or reorganization,
every Option outstanding shall terminate, unless the surviving corporation shall
(subject to applicable provisions of the Code) issue a new option therefor or
assume (with appropriate changes) the existing Option. If the Option shall
terminate by reason of such merger, consolidation, or reorganization, then any
provision herein to the contrary notwithstanding, any Option held by an Eligible
8.
<PAGE>
Employee may be exercised, in whole or in part, by such Eligible Employee at any
time prior to or concurrently with consummation of such merger, consolidation or
reorganization.
15. Rights as a Stockholder. An Eligible Employee shall have no rights as a
stockholder with respect to any shares of Stock covered by Options until the
date of the issuance of a certificate for such shares of Stock. No adjustments
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 certificate is issued, except as otherwise
expressly provided herein.
16. Costs; Indemnification.
(a) All costs and expenses incurred in administering the Q.S.P. Plan shall
be paid by the Company.
(b) In addition to such other rights of indemnification as the
Administrator may have as a director or officer of the Company, the Company
shall indemnify and hold the Administrator harmless against any and all
liability, loss, costs, damages, attorneys' fees and other expenses the
Administrator may sustain or incur in connection with administration of the
Q.S.P. Plan, except for liability, loss, costs, damages, attorneys' fees and
other expenses caused by the negligence of the Administrator or his agent;
provided, that within 60 days after the institution of any action, suit or
proceeding the Administrator shall in writing offer the Company the opportunity
to handle, prosecute or defend the same, at the Company's own expense. The
Administrator shall have the right, but not the obligation, to adjust, settle,
or compromise any claim, obligation, debt, demand, suit or judgment against the
Administrator, and if such settlement is approved by independent legal counsel
selected by the Company then the Company shall reimburse the Administrator for
all sums of money the Administrator may pay or become liable to pay against
which the Administrator is indemnified hereunder.
17. Amendment or Termination of the Q.S.P. Plan. The Board of Directors may
at any time, with respect to any shares of Stock not then subject to Options,
suspend or terminate the Q.S.P. Plan, and may amend the Q.S.P. Plan from time to
time as the Board of Directors may deem advisable; provided, however, that
except as provided in Section 14 hereof, the Board of Directors shall not amend
the Q.S.P. Plan in the following respect without the affirmative vote of
approval by a majority of the outstanding shares of Stock of the Company:
(a) To increase the maximum number of shares of Stock subject to the Q.S.P.
Plan;
(b) To change the designation or class of employees eligible to receive
Options under the Q.S.P. Plan; or
9.
<PAGE>
(c) In any manner which would cause the Q.S.P. Plan to no longer be an
employee stock purchase plan under Code Section 423.
18. Application of Funds. The proceeds received by the Company from the
sale of Stock pursuant to the exercise of Options shall be deposited in the
account of the general corporate funds of the Company.
19. Effective Date of Q.S.P. Plan. The Q.S.P. Plan was adopted by the Board
of Directors on March 2, 1988 and was approved by the stockholders of the
Company on April 25, 1988. On June 15, 1988, the Board approved the First
Amendment to the 1988 Plan, which amendment did not require stockholder
approval.
The Second Amendment to the Q.S.P. Plan, which increased the number of
shares of Stock available for issuance thereunder from 100,000 to 150,000
shares, was adopted by the Board of Directors on April 18, 1990 and approved by
the Company's Stockholders at the 1990 Annual Meeting.
The Third Amendment to the Q.S.P. Plan, which increased the number of
shares of Stock available for issuance thereunder from 150,000 to 350,000
shares, was adopted by the Board of Directors on April 11, 1991 and approved by
the stockholders of the Company on June 10, 1991.
On April 5, 1994, the Board of Directors authorized an additional increase
in the number of shares of Stock reserved for issuance under the Q.S.P. Plan
from 350,000 to 400,000 shares. The stockholders of the Company approved that
increase at the 1994 Annual Meeting held on June 14, 1994.
On March 31, 1995, the Board of Directors authorized another increase in
the number of shares of Stock reserved for issuance under the Q.S.P. Plan from
400,000 to 450,000 shares. The Company's stockholders approved that increase
proposal at the 1996 Annual Meeting held on May 8, 1996.
On March 20, 1997, the Board of Directors authorized a further increase in
the number of shares of Stock reserved for issuance under the Q.S.P. Plan from
450,000 to 600,000 shares, subject to approval by the stockholders at the 1997
Annual Meeting. No options shall be granted under the Q.S.P. Plan in reliance on
such 150,000-share increase, and no shares of Stock shall accordingly be issued
on the basis of such increase, unless and until that increase has been approved
by the Company's stockholders at the 1997 Annual Meeting.
20. No Rights as an Employee. Nothing in the Q.S.P. Plan shall be construed
to give any person the right to remain in the employ of the Company or to affect
the right of the Company to terminate the employment of any person at any time
with or without cause.
10.
<PAGE>
21. Titles. Titles are provided herein for convenience only and are not to
serve as a basis for interpretation or construction of the Q.S.P. Plan.
11.
EXHIBIT 99.16
Written Compensation Agreement between Registrant and Mr. Roberts
COMPENSATION AGREEMENT
Agreement dated as of the 22nd day of May 1997 by and between
Lee David Roberts ("Optionee") and FileNet Corporation, a Delaware corporation
("Company").
W I T N E S S E T H
WHEREAS, the Company deems it advisable to provide Optionee with a special
equity incentive to attract and retain his services as President and Chief
Operating Officer of the Company.
NOW, THEREFORE, the parties hereto agree as follows:
1. On May 22, 1997, Optionee was granted an option to purchase 300,000
shares of the Company's Common Stock (the "Option") upon the terms and
conditions set forth in the Stock Option Agreement (the "Option Agreement")
attached hereto as Exhibit A.
2. Company and Optionee acknowledge and agree that the Option is granted as
compensation for the services Optionee is to render as President and Chief
Operating Officer of the Company and not for any capital-raising purposes or in
connection with any capital-raising activities.
3. This agreement is intended to constitute a written compensation contract
for purposes of registering the shares of Common Stock issuable under the Option
on a Form S-8 registration statement to be filed with the Securities and
Exchange Commission.
4. Nothing in this agreement or in the attached Stock Option Agreement
shall confer upon Optionee any right to continue in the Company's service for
any period of specific duration or interfere with or otherwise restrict in any
way the rights of the Company or of Optionee, which rights are hereby expressly
reserved by each party, to terminate Optionee's service at any time for any
reason, with or without cause.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the date first above written.
OPTIONEE: FILENET CORPORATION
__________________________ By:___________________________________
Lee David Roberts
Title: ______________________________
EXHIBIT 99.17
Non-Statutory Stock Option Agreement
(with Notice of Grant of Stock Option and Special Addendum) between
Registrant and Mr. Roberts
FILENET CORPORATION
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the "Option") to
purchase shares of the Common Stock of Filenet Corporation (the "Corporation"):
Optionee: Lee David Roberts
Grant Date: May 22, 1997
Exercise Price: $ 14.31 per share
Number of Option Shares: 300,000 shares
Expiration Date: May 21, 2007
Type of Option: ___Incentive Stock Option
_X_ Non-Statutory Stock Option
Exercise Schedule: The Option shall become exercisable for the Option
Shares in a series of four (4) successive equal annual installments upon
Optionee's completion of each year of Service over the four (4)-year period
measured from the Grant Date.
Optionee hereby agrees to be bound by all the terms and conditions of the
Option as set forth in the Stock Option Agreement and Special Addendum attached
hereto as Exhibit A.
<PAGE>
All capitalized terms in this Notice shall have the meaning assigned to
them in this Notice or in the attached Stock Option Agreement.
DATED: MAY 22, 1997
FILENET CORPORATION
By:
Title:
OPTIONEE: LEE DAVID ROBERTS
Address:
ATTACHMENTS
Exhibit A - Stock Option Agreement and Special Addendum
2.
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
<PAGE>
FILENET CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
RECITALS
A. The Compensation Committee has approved a stock option grant to Optionee
in order to attract and retain Optionee to serve the Corporation in the capacity
of President and Chief Operating Officer.
B. The option evidenced by this Agreement is granted to Optionee in
consideration of the services Optionee is to render the Corporation and not for
any capital-raising purposes or in connection with any capital-raising
activities.
C. The granted option is intended to be a non-qualified stock option which
does not satisfy the requirements of Section 422 of the Code.
D. All capitalized terms in this Agreement shall have the meaning assigned
to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of the
Grant Date, an option to purchase up to the number of Option Shares specified in
the Grant Notice. The Option Shares shall be purchasable from time to time
during the option term specified in Paragraph 2 at the Exercise Price.
2. Option Term. This option shall have a term of ten (10) years measured
from the Grant Date and shall accordingly expire at the close of business on the
Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 6.
3. Limited Transferability. This option shall be neither transferable nor
assignable by Optionee other than by will or by the laws of descent and
distribution following Optionee's death and may be exercised, during Optionee's
lifetime, only by Optionee. However, this option may, in connection with the
Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of one or more such family members. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Compensation Committee may deem
appropriate.
<PAGE>
4. Dates of Exercise. This option shall become exercisable for the Option
Shares in a series of successive annual installments as specified in the Grant
Notice. As the option becomes exercisable for one or more of such installments,
those installments shall accumulate and the option shall remain exercisable for
the accumulated installments until the Expiration Date or sooner termination of
the option term under Paragraph 5 or 6.
5. Cessation of Service. The option term specified in Paragraph 2 shall
terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(i) Should Optionee cease to remain in Service for any reason (other
than death or Permanent Disability) while this option is outstanding, then
Optionee shall have a period of three (3) months (commencing with the date
of such cessation of Service) during which to exercise this option, but in
no event shall this option be exercisable at any time after the Expiration
Date.
(ii) Should Optionee die while holding this option, then the personal
representative of Optionee's estate or the person or persons to whom the
option is transferred pursuant to Optionee's will or in accordance with the
laws of descent and distribution shall have the right to exercise this
option. Such right shall lapse, and this option shall cease to be
outstanding, upon the earlier of (i) the expiration of the twelve (12)-
month period measured from the date of Optionee's death or (ii) the
Expiration Date.
(iii) Should Optionee cease Service by reason of Permanent Disability
while this option is outstanding, then Optionee shall have a period of
twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.
(iv) During the applicable post-Service exercise period, this option
may not be exercised in the aggregate for more than the number of Option
Shares for which the option is exercisable at the time of Optionee's
cessation of Service. Upon the expiration of such exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to
be outstanding for any exercisable Option Shares for which the option has
not otherwise been exercised. However, this option shall, immediately upon
Optionee's cessation of Service, terminate and cease to be outstanding with
respect to any Option Shares for which the option is not otherwise at that
time exercisable.
2.
<PAGE>
(v) Should this option, in connection with Optionee's cessation of
Service, become exercisable for one or more Option Shares on an accelerated
basis pursuant to the provisions of the attached Special Addendum, then the
period for which this option is to remain exercisable following such
cessation of Service shall be governed by the applicable provisions of that
Addendum, and those provisions shall supersede any provision to the
contrary in this Paragraph 5.
6. Special Acceleration of Option.
(a) This option, to the extent outstanding at the time of a Corporate
Transaction but not otherwise fully exercisable, shall automatically
accelerate so that this option shall, immediately prior to the effective
date of the Corporate Transaction, become exercisable for all of the Option
Shares at the time subject to this option and may be exercised for any or
all of those Option Shares as fully-vested shares of Common Stock. No such
acceleration of this option, however, shall occur if and to the extent:
(i) this option is, in connection with the Corporate Transaction, either to
be assumed by the successor corporation (or parent thereof) or to be
replaced with a comparable option to purchase shares of the capital stock
of the successor corporation (or parent thereof) or (ii) this option is to
be replaced with a cash incentive program of the successor corporation
which preserves the spread existing at the time of the Corporate
Transaction on any Option Shares for which the option is not otherwise at
that time exercisable (the excess of the Fair Market Value of those Option
Shares over the aggregate Exercise Price payable for such shares) and
provides for subsequent pay-out in accordance with the option exercise
schedule set forth in the Grant Notice. The determination of option
comparability under clause (i) shall be made by the Compensation Committee,
and such determination shall be final, binding and conclusive.
(b) Immediately following the Corporate Transaction, this option shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate
Transaction, then this option shall be appropriately adjusted, immediately
after such Corporate Transaction, to apply to the number and class of
securities which would have been issuable to Optionee in consummation of
such Corporate Transaction had the option been exercised immediately prior
to such Corporate Transaction, and appropriate adjustments shall also be
made to the Exercise Price, provided the aggregate Exercise Price shall
remain the same.
(d) This Agreement shall not in any way affect the right of the
Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate
or sell or transfer all or any part of its business or assets.
3.
<PAGE>
(e) This option may also become exercisable for one or more Option
Shares on an accelerated basis pursuant to the provisions of the attached
Special Addendum.
7. Adjustment in Option Shares. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the number and/or
class of securities subject to this option and (ii) the Exercise Price in order
to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. Stockholder Rights. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take
the following actions:
(i) Execute and deliver to the Corporation a Notice of Exercise
for the number of Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased shares in
one or more of the following forms:
(A) cash or check made payable to the Corporation;
(B) shares of Common Stock held by Optionee (or any other
person or persons exercising the option) for the requisite period
necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on
the Exercise Date; or
(C) through a special sale and remittance procedure pursuant
to which Optionee (or any other person or persons exercising the
option) shall concurrently provide irrevocable instructions (a)
to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
4.
<PAGE>
date, sufficient funds to cover the aggregate Exercise Price
payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) to
the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the
sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise.
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all Federal, state and local income and employment tax
withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Corporation shall
issue to or on behalf of Optionee (or any other person or persons exercising
this option) a certificate for the purchased Option Shares.
(c) In no event may this option be exercised for any fractional shares.
10. Compliance with Laws and Regulations. The exercise of this option and
the issuance of the Option Shares upon such exercise shall be subject to
compliance by the Corporation and Optionee with all applicable requirements of
law relating thereto and with all applicable regulations of any stock exchange
(or the Nasdaq National Market, if applicable) on which the Common Stock may be
listed for trading at the time of such exercise and issuance.
11. Successors and Assigns. Except to the extent otherwise provided in
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.
12. Governing Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
5.
<PAGE>
13. Notices. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
14. Leave of Absence. The following provisions shall apply upon the
Optionee's commencement of an authorized leave of absence:
(i) The exercise schedule in effect under the Grant Notice shall be
frozen as of the first day of the authorized leave, and the option shall
not become exercisable for any additional installments of the Option Shares
during the period Optionee remains on such leave.
(ii) Should Optionee resume active Employee status within sixty (60)
days after the start date of the authorized leave, Optionee shall, for
purposes of the exercise schedule set forth in the Grant Notice, receive
Service credit for the entire period of such leave. If Optionee does not
resume active Employee status within such sixty (60)-day period, then no
Service credit shall be given for the period of the leave.
(iii) In no event shall this option become exercisable for any
additional Option Shares or otherwise remain outstanding if Optionee does
not resume Employee status prior to the Expiration Date of the option term.
6.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Code shall mean the Internal Revenue Code of 1986, as amended.
D. Common Stock shall mean the Corporation's common stock.
E. Compensation Committee shall mean the Compensation Committee of the
Board.
F. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
G. Corporation shall mean FileNet Corporation, a Delaware corporation.
H. Employee shall mean the Optionee in his capacity as an employee of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
I. Exercise Date shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.
J. Exercise Price shall mean the exercise price per share as specified
in the Grant Notice.
<PAGE>
K. Expiration Date shall mean the date on which the option expires as
specified in the Grant Notice.
L. Fair Market Value per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the average of the high and low
selling prices per share of Common Stock on the date in question, as such
prices are reported by the National Association of Securities Dealers on
the Nasdaq National Market or any successor system. If there are no selling
prices quoted for the Common Stock on the date in question, then the Fair
Market Value shall be the average of the high and low selling prices on the
last preceding date for which such quotations exist.
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the average high and low selling prices
per share of Common Stock on the date in question on the Stock Exchange
determined by the Compensation Committee to be the primary market for the
Common Stock, as such prices are officially quoted in the composite tape of
transactions on such exchange. If there are no selling prices quoted for
the Common Stock on the date in question, then the Fair Market Value shall
be the average of the high and low selling prices on the last preceding
date for which such quotations exist.
M. Grant Date shall mean the date of grant of the option as specified in
the Grant Notice.
N. Grant Notice shall mean the Notice of Grant of Stock Option accompanying
the Agreement, pursuant to which Optionee has been informed of the basic terms
of the option evidenced hereby.
O. Non-Qualified Option shall mean an option not intended to satisfy the
requirements of Code Section 422.
P. Notice of Exercise shall mean the written notice of the option exercise
on the form provided by the Corporation for such purpose.
Q. Option Shares shall mean the number of shares of Common Stock subject to
the option as specified in the Grant Notice.
<PAGE>
R. Optionee shall mean the person to whom the option is granted as
specified in the Grant Notice.
S. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
T. Permanent Disability shall mean the inability of Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
U. Service shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.
V. Stock Exchange shall mean the American Stock Exchange or the New York
Stock Exchange.
W. Subsidiary shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
<PAGE>
EXHIBIT A (CONTINUED)
SPECIAL ADDENDUM
ADDENDUM
TO
NOTICE OF GRANT OF STOCK OPTION
The following provisions are hereby incorporated into, and are
hereby made a part of, that certain Stock Option Agreement dated May 22, 1997
(the "Option Agreement") by and between FileNet Corporation (the "Corporation")
and Lee David Roberts ("Optionee") evidencing the stock option (the "Option")
granted on such date to Optionee, and such provisions shall be effective
immediately. All capitalized terms in this Addendum, to the extent not otherwise
defined herein, shall have the meaning assigned to them in the Option Agreement.
SPECIAL VESTING PROVISIONS
IN CONNECTION WITH
CESSATION OF EMPLOYEE STATUS
1. Should Optionee cease Employee status prior to the first
anniversary of the Grant Date (i.e., May 22, 1998) by reason of (i) his
discharge or dismissal by the Corporation other than for Cause or (ii) his
resignation in connection with a Contract Breach, then the Option shall
immediately become exercisable for the first installment of the Option Shares
specified in the Grant Notice (i.e., twenty-five percent (25%) of the Option
Shares), and the Option shall remain exercisable for that installment until the
end of the one (1)-year period measured from the date of Optionee's cessation of
Employee status.
2. If, at any time prior to the second anniversary of the
Grant Date (i.e., May 22, 1999), either a Corporate Transaction in which the
Option does not accelerate pursuant to the provisions of Paragraph 6(a) of the
Option Agreement or other Change in Control occur and the Optionee cease
Employee status by reason of (i) his discharge or dismissal by the Corporation
other than for Cause or (ii) his resignation for Good Reason, then the Option
shall immediately become exercisable for the following number of Option Shares:
- the number of Option Shares determined by multiplying
2.0833% of the total Option Shares by the number of full months
which have elapsed between the Grant Date or (if later) the first
anniversary of the Grant Date and the date of Optionee's
cessation of Employee status, plus
- an additional twenty-five percent (25%) of the total
Option Shares.
<PAGE>
The Option shall remain exercisable for those Option Shares
(and any other Option Shares for which the Option has previously become
exercisable) until the end of the one (1)-year period measured from the date of
Optionee's cessation of Employee status.
3. Should Optionee not be appointed the Corporation's Chief
Executive Officer prior to the second anniversary of the Grant Date (i.e., May
22, 1999) and resign from Employee status within thirty (30) days thereafter,
then the Option shall immediately become exercisable for that number of Option
Shares determined by multiplying 2.0833% of the total Option Shares by the
number of full months which have elapsed between the most recent one-year
anniversary of the Grant Date and the date of Optionee's resignation. The Option
shall remain exercisable for those Option Shares (and any other Option Shares
for which the Option has previously become exercisable) until the end of the one
(1)-year period measured from the date of Optionee's resignation.
4. For purposes of this Addendum, the following definitions
shall be in effect:
- Cause shall mean (i) the willful failure or refusal by Optionee to
perform his duties under the Employment Agreement (other than any failure
attributable to Optionee's incapacity due to physical or mental illness) which
has not ceased within ten (10) business days after written demand for
substantial performance has been delivered to Optionee by the Corporation in
which there has been identified the manner in which the Corporation believes
that the Optionee has not performed those duties and the steps required to cure
such failure to perform; (ii) Optionee's intentional and willful misconduct
which is materially injurious to the Corporation, monetarily or otherwise; or
(iii) the conviction of Optionee of, or the entering of a plea of nolo
contendere by Optionee with respect to, a felony.
- Change in Control shall be deemed to occur if any person (as such term is
used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a trustee or fiduciary holding
securities of the Corporation under an employee benefit plan of the Corporation,
becomes, directly or indirectly, the "beneficial owner" (as defined in Rule
13d-3 of the Exchange Act) of securities of the Corporation representing fifty
percent (50%) or more of the outstanding shares of Common Stock or the combined
voting power of the Corporation's then outstanding securities entitled to vote
generally in the election of Board members.
- Contract Breach shall mean the failure of the Corporation to comply with
the material provisions of the Employment Agreement, if such failure is not
cured within thirty (30) days after Optionee's has given written notice of such
non-compliance to the Corporation.
2.
<PAGE>
- Employment Agreement shall mean that certain employment agreement between
the Corporation and Optionee dated May 20, 1997.
- Good Reason shall mean any of the following transactions or events
effected without Optionee's express written consent: (i) any failure by the
Corporation to comply with any material provision of the Employment Agreement
which has not been cured within thirty (30) business days after Optionee has
given written notice of such non-compliance to the Corporation or (ii) any
material reduction in Optionee's responsibilities from those responsibilities
which were in effect immediately prior to the Corporate Transaction or Change in
Control. Notwithstanding the foregoing, a change in title, authority or
reporting to a successor company shall not constitute Good Reason for Optionee's
resignation if Optionee has the same responsibilities operating the Corporation
as a separate entity or a division of the successor company.
IN WITNESS WHEREOF, FileNet Corporation has caused this
Addendum to be executed by its duly-authorized officer, and Optionee has
executed this Addendum, all as of the Effective Date specified below.
FILENET CORPORATION
By:
Title:
LEE DAVID ROBERTS, OPTIONEE
EFFECTIVE DATE: MAY 22, 1997
3.
EXHIBIT 99.18
Written Compensation Agreement between Registrant and Mr. Ercanbrack
COMPENSATION AGREEMENT
Agreement dated as of the 18th day of June 1997 by and between
Ron L. Ercanbrack ("Optionee") and FileNet Corporation, a Delaware corporation
("Corporation").
W I T N E S S E T H
WHEREAS, the Corporation deems it advisable to provide
Optionee with a special equity incentive to attract and retain his services as
Senior Vice President, International, of the Corporation.
NOW, THEREFORE, the parties hereto agree as follows:
1. On June 18, 1997, Optionee was granted an option to
purchase 80,000 shares of the Corporation's Common Stock (the "Option") upon the
terms and conditions set forth in the Stock Option Agreement (the "Option
Agreement") attached hereto as Exhibit A.
2. Corporation and Optionee acknowledge and agree that the
Option is granted as compensation for the services Optionee is to render as
Senior Vice President, International, of the Corporation and not for any
capital-raising purposes or in connection with any capital-raising activities.
3. This agreement is intended to constitute a written
compensation contract for purposes of registering the shares of Common Stock
issuable under the Option on a Form S-8 registration statement to be filed with
the Securities and Exchange Commission.
4. Nothing in this agreement or in the attached Stock Option
Agreement shall confer upon Optionee any right to continue in the Corporation's
service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Corporation or of Optionee, which rights
are hereby expressly reserved by each party, to terminate Optionee's service at
any time for any reason, with or without cause.
IN WITNESS WHEREOF, the parties hereto have executed this agreement as of
the date first above written.
OPTIONEE: FILENET CORPORATION
__________________________ By:___________________________________
Ron L. Ercanbrack
Title: _______________________________
EXHIBIT 99.19
Non-Statutory Stock Option Agreement
(with Notice of Grant of Stock Option and Special Addendum) between
Registrant and Mr. Ercanbrack
FILENET CORPORATION
NOTICE OF GRANT OF STOCK OPTION
Notice is hereby given of the following option grant (the
"Option") to purchase shares of the Common Stock of Filenet Corporation (the
"Corporation"):
Optionee: Ron L. Ercanbrack
Grant Date: June 18, 1997
Exercise Price: $ 15.06 per share
Number of Option Shares: 80,000 shares
Expiration Date: June 17, 2007
Type of Option: Incentive Stock Option
X Non-Statutory Stock Option
Exercise Schedule: The Option shall become exercisable for the
Option Shares in a series of four (4) successive equal annual
installments upon Optionee's completion of each year of
Service over the four (4)-year period measured from the Grant
Date.
Optionee hereby agrees to be bound by all the terms and
conditions of the Option as set forth in the Stock Option Agreement and Special
Addendum attached hereto as Exhibit A.
<PAGE>
All capitalized terms in this Notice shall have the meaning
assigned to them in this Notice or in the attached Stock Option Agreement.
DATED: JUNE 18, 1997
FILENET CORPORATION
By:
Title:
OPTIONEE: RON L. ERCANBRACK
Address:
ATTACHMENTS
Exhibit A - Stock Option Agreement and Special Addendum
2.
<PAGE>
EXHIBIT A
STOCK OPTION AGREEMENT
<PAGE>
BPHPA1\JM4\0228845.WP
FILENET CORPORATION
NON-QUALIFIED STOCK OPTION AGREEMENT
RECITALS
A. The Compensation Committee has approved a stock option grant to Optionee
in order to attract and retain Optionee to serve the Corporation in the capacity
of Senior Vice President, International.
B. The option evidenced by this Agreement is granted to Optionee in
consideration of the services Optionee is to render the Corporation and not for
any capital-raising purposes or in connection with any capital-raising
activities.
C. The granted option is intended to be a non-qualified stock option which
does not satisfy the requirements of Section 422 of the Code.
D All capitalized terms in this Agreement shall have the meaning assigned
to them in the attached Appendix.
NOW, THEREFORE, it is hereby agreed as follows:
1. Grant of Option. The Corporation hereby grants to Optionee, as of the
Grant Date, an option to purchase up to the number of Option Shares specified in
the Grant Notice. The Option Shares shall be purchasable from time to time
during the option term specified in Paragraph 2 at the Exercise Price.
2. Option Term. This option shall have a term of ten (10) years measured
from the Grant Date and shall accordingly expire at the close of business on the
Expiration Date, unless sooner terminated in accordance with Paragraph 5 or 6.
3. Limited Transferability. This option shall be neither transferable nor
assignable by Optionee other than by will or by the laws of descent and
distribution following Optionee's death and may be exercised, during Optionee's
lifetime, only by Optionee. However, this option may, in connection with the
Optionee's estate plan, be assigned in whole or in part during Optionee's
lifetime to one or more members of the Optionee's immediate family or to a trust
established for the exclusive benefit of one or more such family members. The
assigned portion shall be exercisable only by the person or persons who acquire
a proprietary interest in the option pursuant to such assignment. The terms
applicable to the assigned portion shall be the same as those in effect for this
option immediately prior to such assignment and shall be set forth in such
documents issued to the assignee as the Compensation Committee may deem
appropriate.
<PAGE>
4. Dates of Exercise. This option shall become exercisable for the Option
Shares in a series of successive annual installments as specified in the Grant
Notice. As the option becomes exercisable for one or more of such installments,
those installments shall accumulate and the option shall remain exercisable for
the accumulated installments until the Expiration Date or sooner termination of
the option term under Paragraph 5 or 6.
5. Cessation of Service. The option term specified in Paragraph 2 shall
terminate (and this option shall cease to be outstanding) prior to the
Expiration Date should any of the following provisions become applicable:
(i) Should Optionee cease to remain in Service for any reason (other
than death or Permanent Disability) while this option is outstanding, then
Optionee shall have a period of three (3) months (commencing with the date
of such cessation of Service) during which to exercise this option, but in
no event shall this option be exercisable at any time after the Expiration
Date.
(ii) Should Optionee die while holding this option, then the personal
representative of Optionee's estate or the person or persons to whom the
option is transferred pursuant to Optionee's will or in accordance with the
laws of descent and distribution shall have the right to exercise this
option. Such right shall lapse, and this option shall cease to be
outstanding, upon the earlier of (i) the expiration of the twelve (12)-
month period measured from the date of Optionee's death or (ii) the
Expiration Date.
(iii) Should Optionee cease Service by reason of Permanent Disability
while this option is outstanding, then Optionee shall have a period of
twelve (12) months (commencing with the date of such cessation of Service)
during which to exercise this option. In no event shall this option be
exercisable at any time after the Expiration Date.
(iv) During the applicable post-Service exercise period, this option
may not be exercised in the aggregate for more than the number of Option
Shares for which the option is exercisable at the time of Optionee's
cessation of Service. Upon the expiration of such exercise period or (if
earlier) upon the Expiration Date, this option shall terminate and cease to
be outstanding for any exercisable Option Shares for which the option has
not otherwise been exercised. However, this option shall, immediately upon
Optionee's cessation of Service, terminate and cease to be outstanding with
respect to any Option Shares for which the option is not otherwise at that
time exercisable.
2.
<PAGE>
(v) Should this option, in connection with Optionee's cessation of
Service, become exercisable for one or more Option Shares on an accelerated
basis pursuant to the provisions of the attached Special Addendum, then the
period for which this option is to remain exercisable following such
cessation of Service shall be governed by the applicable provisions of that
Addendum, and those provisions shall supersede any provision to the
contrary in this Paragraph 5.
6. Special Acceleration of Option.
(a) This option, to the extent outstanding at the time of a Corporate
Transaction but not otherwise fully exercisable, shall automatically accelerate
so that this option shall, immediately prior to the effective date of the
Corporate Transaction, become exercisable for all of the Option Shares at the
time subject to this option and may be exercised for any or all of those Option
Shares as fully-vested shares of Common Stock. No such acceleration of this
option, however, shall occur if and to the extent: (i) this option is, in
connection with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof) or (ii) this option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing at the time of the
Corporate Transaction on any Option Shares for which the option is not otherwise
at that time exercisable (the excess of the Fair Market Value of those Option
Shares over the aggregate Exercise Price payable for such shares) and provides
for subsequent pay-out in accordance with the option exercise schedule set forth
in the Grant Notice. The determination of option comparability under clause (i)
shall be made by the Compensation Committee, and such determination shall be
final, binding and conclusive.
(b) Immediately following the Corporate Transaction, this option shall
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof) in connection with the Corporate
Transaction.
(c) If this option is assumed in connection with a Corporate Transaction,
then this option shall be appropriately adjusted, immediately after such
Corporate Transaction, to apply to the number and class of securities which
would have been issuable to Optionee in consummation of such Corporate
Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise
Price, provided the aggregate Exercise Price shall remain the same.
(d) This Agreement shall not in any way affect the right of the Corporation
to adjust, reclassify, reorganize or otherwise change its capital or business
structure or to merge, consolidate, dissolve, liquidate or sell or transfer all
or any part of its business or assets.
3.
<PAGE>
(e) This option may also become exercisable for one or more Option Shares
on an accelerated basis pursuant to the provisions of the attached Special
Addendum.
7. Adjustment in Option Shares. Should any change be made to the Common
Stock by reason of any stock split, stock dividend, recapitalization,
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration, appropriate adjustments shall be made to (i) the number and/or
class of securities subject to this option and (ii) the Exercise Price in order
to reflect such change and thereby preclude a dilution or enlargement of
benefits hereunder.
8. Stockholder Rights. The holder of this option shall not have any
stockholder rights with respect to the Option Shares until such person shall
have exercised the option, paid the Exercise Price and become a holder of record
of the purchased shares.
9. Manner of Exercising Option.
(a) In order to exercise this option with respect to all or any part
of the Option Shares for which this option is at the time exercisable,
Optionee (or any other person or persons exercising the option) must take
the following actions:
(i) Execute and deliver to the Corporation a Notice of Exercise
for the number of Option Shares for which the option is exercised.
(ii) Pay the aggregate Exercise Price for the purchased shares in
one or more of the following forms:
(A) cash or check made payable to the Corporation;
(B) shares of Common Stock held by Optionee (or any other
person or persons exercising the option) for the requisite period
necessary to avoid a charge to the Corporation's earnings for
financial reporting purposes and valued at Fair Market Value on
the Exercise Date; or
(C) through a special sale and remittance procedure pursuant
to which Optionee (or any other person or persons exercising the
option) shall concurrently provide irrevocable instructions (a)
to a Corporation-designated brokerage firm to effect the
immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement
4.
<PAGE>
date,sufficient funds to cover the aggregate Exercise Price
payable for the purchased shares plus all applicable Federal,
state and local income and employment taxes required to be
withheld by the Corporation by reason of such exercise and (b) to
the Corporation to deliver the certificates for the purchased
shares directly to such brokerage firm in order to complete the
sale.
Except to the extent the sale and remittance procedure is
utilized in connection with the option exercise, payment of the
Exercise Price must accompany the Notice of Exercise.
(iii) Furnish to the Corporation appropriate documentation that
the person or persons exercising the option (if other than Optionee)
have the right to exercise this option.
(iv) Make appropriate arrangements with the Corporation (or
Parent or Subsidiary employing or retaining Optionee) for the
satisfaction of all Federal, state and local income and employment tax
withholding requirements applicable to the option exercise.
(b) As soon as practical after the Exercise Date, the Corporation
shall issue to or on behalf of Optionee (or any other person or persons
exercising this option) a certificate for the purchased Option Shares.
(c) In no event may this option be exercised for any fractional
shares.
10. Compliance with Laws and Regulations. The exercise of this option and
the issuance of the Option Shares upon such exercise shall be subject to
compliance by the Corporation and Optionee with all applicable requirements of
law relating thereto and with all applicable regulations of any stock exchange
(or the Nasdaq National Market, if applicable) on which the Common Stock may be
listed for trading at the time of such exercise and issuance.
11. Successors and Assigns. Except to the extent otherwise provided in
Paragraphs 3 and 6, the provisions of this Agreement shall inure to the benefit
of, and be binding upon, the Corporation and its successors and assigns and
Optionee, Optionee's assigns and the legal representatives, heirs and legatees
of Optionee's estate.
12. Governing Law. The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of California without
resort to that State's conflict-of-laws rules.
5.
<PAGE>
13. Notices. Any notice required to be given or delivered to the
Corporation under the terms of this Agreement shall be in writing and addressed
to the Corporation at its principal corporate offices. Any notice required to be
given or delivered to Optionee shall be in writing and addressed to Optionee at
the address indicated below Optionee's signature line on the Grant Notice. All
notices shall be deemed effective upon personal delivery or upon deposit in the
U.S. mail, postage prepaid and properly addressed to the party to be notified.
14. Leave of Absence. The following provisions shall apply upon the
Optionee's commencement of an authorized leave of absence:
(i) The exercise schedule in effect under the Grant Notice shall
be frozen as of the first day of the authorized leave, and the option
shall not become exercisable for any additional installments of the
Option Shares during the period Optionee remains on such leave.
(ii) Should Optionee resume active Employee status within sixty
(60) days after the start date of the authorized leave, Optionee
shall, for purposes of the exercise schedule set forth in the Grant
Notice, receive Service credit for the entire period of such leave. If
Optionee does not resume active Employee status within such sixty
(60)-day period, then no Service credit shall be given for the period
of the leave.
(iii) In no event shall this option become exercisable for any
additional Option Shares or otherwise remain outstanding if Optionee
does not resume Employee status prior to the Expiration Date of the
option term.
6.
<PAGE>
APPENDIX
The following definitions shall be in effect under the Agreement:
A. Agreement shall mean this Stock Option Agreement.
B. Board shall mean the Corporation's Board of Directors.
C. Code shall mean the Internal Revenue Code of 1986, as amended.
D. Common Stock shall mean the Corporation's common stock.
E. Compensation Committee shall mean the Compensation Committee of the
Board.
F. Corporate Transaction shall mean either of the following
stockholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which securities possessing more than
fifty percent (50%) of the total combined voting power of the Corporation's
outstanding securities are transferred to a person or persons different
from the persons holding those securities immediately prior to such
transaction, or
(ii) the sale, transfer or other disposition of all or substantially
all of the Corporation's assets in complete liquidation or dissolution of
the Corporation.
G. Corporation shall mean FileNet Corporation, a Delaware corporation.
H. Employee shall mean the Optionee in his capacity as an employee of the
Corporation (or any Parent or Subsidiary), subject to the control and direction
of the employer entity as to both the work to be performed and the manner and
method of performance.
I. Exercise Date shall mean the date on which the option shall have been
exercised in accordance with Paragraph 9 of the Agreement.
J. Exercise Price shall mean the exercise price per share as specified in
the Grant Notice.
<PAGE>
K. Expiration Date shall mean the date on which the option expires as
specified in the Grant Notice.
L. Fair Market Value per share of Common Stock on any relevant date shall
be determined in accordance with the following provisions:
(i) If the Common Stock is at the time traded on the Nasdaq National
Market, then the Fair Market Value shall be the average of the high and low
selling prices per share of Common Stock on the date in question, as such
prices are reported by the National Association of Securities Dealers on
the Nasdaq National Market or any successor system. If there are no selling
prices quoted for the Common Stock on the date in question, then the Fair
Market Value shall be the average of the high and low selling prices on the
last preceding date for which such quotations exist.
(ii) If the Common Stock is at the time listed on any Stock Exchange,
then the Fair Market Value shall be the average high and low selling prices
per share of Common Stock on the date in question on the Stock Exchange
determined by the Compensation Committee to be the primary market for the
Common Stock, as such prices are officially quoted in the composite tape of
transactions on such exchange. If there are no selling prices quoted for
the Common Stock on the date in question, then the Fair Market Value shall
be the average of the high and low selling prices on the last preceding
date for which such quotations exist.
M. Grant Date shall mean the date of grant of the option as specified in
the Grant Notice.
N. Grant Notice shall mean the Notice of Grant of Stock Option accompanying
the Agreement, pursuant to which Optionee has been informed of the basic terms
of the option evidenced hereby.
O. Non-Qualified Option shall mean an option not intended to satisfy the
requirements of Code Section 422.
P. Notice of Exercise shall mean the written notice of the option exercise
on the form provided by the Corporation for such purpose.
Q. Option Shares shall mean the number of shares of Common Stock subject to
the option as specified in the Grant Notice.
<PAGE>
R. Optionee shall mean the person to whom the option is granted as
specified in the Grant Notice.
S. Parent shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
T. Permanent Disability shall mean the inability of Optionee to engage in
any substantial gainful activity by reason of any medically determinable
physical or mental impairment which is expected to result in death or has lasted
or can be expected to last for a continuous period of twelve (12) months or
more.
U. Service shall mean the Optionee's performance of services for the
Corporation (or any Parent or Subsidiary) in the capacity of an Employee, a
non-employee member of the board of directors or a consultant or independent
advisor.
V. Stock Exchange shall mean the American Stock Exchange or the New York
Stock Exchange.
W. Subsidiary shall mean any corporation (other than the Corporation) in an
unbroken chain of corporations beginning with the Corporation, provided each
corporation (other than the last corporation) in the unbroken chain owns, at the
time of the determination, stock possessing fifty percent (50%) or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
<PAGE>
EXHIBIT A (CONTINUED)
SPECIAL ADDENDUM
ADDENDUM
TO
NOTICE OF GRANT OF STOCK OPTION
The following provisions are hereby incorporated into, and are hereby made
a part of, that certain Stock Option Agreement dated June 18, 1997 (the "Option
Agreement") by and between FileNet Corporation (the "Corporation") and Ron L.
Ercanbrack ("Optionee") evidencing the stock option (the "Option") granted on
such date to Optionee, and such provisions shall be effective immediately. All
capitalized terms in this Addendum, to the extent not otherwise defined herein,
shall have the meaning assigned to them in the Option Agreement.
SPECIAL VESTING PROVISIONS
IN CONNECTION WITH
CESSATION OF EMPLOYEE STATUS
1. If, at any time prior to the first anniversary of the Grant Date (i.e.,
June 18, 1998), should either a Corporate Transaction in which the Option does
not accelerate pursuant to the provisions of Paragraph 6(a) of the Option
Agreement or other Change in Control occur and the Optionee cease Employee
status by reason of (i) his discharge or dismissal by the Corporation other than
for Cause or (ii) his resignation for Good Reason, then the Option shall
immediately become exercisable for the following number of Option Shares:
- the number of Option Shares determined by multiplying 2.0833% of the
total Option Shares by the number of full months which have elapsed between
the Grant Date and the date of Optionee's cessation of Employee status,
plus
- an additional twenty-five percent of the Option Shares.
The Option shall remain exercisable for those accelerated Option Shares
until the end of the one (1)-year period measured from the date of Optionee's
cessation of Employee status.
2.
<PAGE>
2. For purposes of this Addendum, the following definitions shall be in
effect: - Cause shall mean (i) the willful failure or refusal by Optionee to
perform his duties under the Employment Agreement (other than any failure
attributable to Optionee's incapacity due to physical or mental illness) which
has not ceased within ten (10) business days after written demand for
substantial performance has been delivered to Optionee by the Corporation in
which there has been identified the manner in which the Corporation believes
that the Optionee has not performed those duties and the steps required to cure
such failure to perform; (ii) Optionee's intentional and willful misconduct
which is materially injurious to the Corporation, monetarily or otherwise; or
(iii) the conviction of Optionee of, or the entering of a plea of nolo
contendere by Optionee with respect to, a felony.
- Change in Control shall be deemed to occur if any person (as such
term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")), other than a trustee or fiduciary
holding securities of the Corporation under an employee benefit plan of the
Corporation, becomes, directly or indirectly, the "beneficial owner" (as
defined in Rule 13d-3 of the Exchange Act) of securities of the Corporation
representing fifty percent (50%) or more of the outstanding shares of
Common Stock or the combined voting power of the Corporation's then
outstanding securities entitled to vote generally in the election of Board
members.
- Employment Agreement shall mean that certain employment agreement
between the Corporation and Optionee dated June 10, 1997.
- Good Reason shall mean any of the following transactions or events
effected without Optionee's express written consent: (i) any failure by the
Corporation to comply with any material provision of the Employment
Agreement which has not been cured within thirty (30) business days after
Optionee has given written notice of such non-compliance to the Corporation
or (ii) any material reduction in Optionee's responsibilities from those
responsibilities which were in effect immediately prior to the Corporate
Transaction or Change in Control. Notwithstanding the foregoing, a change
in title, authority or reporting to a successor company shall not
constitute Good Reason for Optionee's resignation if Optionee has the same
responsibilities with the Corporation as a separate entity or a division of
the successor company.
2.
<PAGE>
IN WITNESS WHEREOF, FileNet Corporation has caused this Addendum to be
executed by its duly-authorized officer, and Optionee has executed this
Addendum, all as of the Effective Date specified below.
FILENET CORPORATION
By:
Title:
RON L. ERCANBRACK, OPTIONEE
EFFECTIVE DATE: JUNE 18, 1997
3.