<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 20, 1999
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
SUN MICROSYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 94-28905249
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
901 SAN ANTONIO ROAD
PALO ALTO, CA 94303
(650) 960-1300
(Address, including zip code, of
Registrant's principal executive offices)
FORTE SOFTWARE, INC. 1996 STOCK OPTION PLAN
FORTE SOFTWARE, INC. 1997 STOCK OPTION PLAN
(FULL TITLE OF THE PLAN)
SCOTT G. MCNEALY
CHIEF EXECUTIVE OFFICER
SUN MICROSYSTEMS, INC.
901 SAN ANTONIO ROAD
PALO ALTO, CA 94303
(650) 960-1300
(Name, address, including zip code and telephone number,
including area code, of agent for service)
COPY TO:
DAVID J. SEGRE, ESQ.
DANIEL R. MITZ, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
================================================================================
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CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
Proposed Proposed
Amount Maximum Maximum Amount of
to be Offering Price Aggregate Registration
Title of Securities to be Registered Registered Per Share Offering Price Fee
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, of the Company to be issued
upon exercise of options granted under the
Forte Software, Inc. 1996 Stock Option Plan 715,000 $92.1250 $65,915,438 $18,324
Forte Software, Inc. 1997 Stock Option Plan 645,187 $92.1250 $59,437,852 $16,524
--------- -------
TOTAL 1,360,687 $125,353,290 $34,848
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Calculated pursuant to Rule 457(h)(1) under the Securities Act of 1933, as
amended (the "Act"), based on an exercise price of $92.1250 per share.
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PART II:
INFORMATION REQUIRED IN REGISTRATION STATEMENT
ITEM 3. INFORMATION INCORPORATED BY REFERENCE.
There are hereby incorporated by reference in this Registration
Statement the following documents and information heretofore filed with the
Securities and Exchange Commission (the "Commission") by Sun Microsystems, Inc.
(the "Registrant"):
1. The Registrant's Annual Report on Form 10-K for the year ended June
30, 1999, filed pursuant to Section 13(a) of the Securities Exchange Act of 1934
(the "Exchange Act").
2. The Registrant's Registration Statement on Form 8-A relating to the
Registrant's Common Stock, filed pursuant to Section 12(b) of the Exchange Act
on October 24, 1986, as amended.
3. The Registrant's Registration Statement on Form 8-A relating to the
Registrant's Share Purchase Rights filed pursuant to Section 12(b) of the
Exchange Act on May 22, 1989.
All documents filed by the Registrant pursuant to Sections 13(a), 13(c),
14 and 15(d) of the Exchange Act after the date of this Registration Statement
and prior to the filing of a post-effective amendment which indicates that all
securities offered have been sold or which deregisters all securities then
remaining unsold, shall be deemed to be incorporated by reference in this
Registration Statement and to be part hereof from the date of filing of such
documents.
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
Not applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of the State of Delaware, as
amended, provides that under certain circumstances a corporation may indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding whether civil,
criminal, administrative or investigative, by reason of the fact that he or she
is or was a director, officer, employee or agent of the Company or is or was
serving at its request in such capacity in another corporation or business
association, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
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best interests of the Company and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his or her conduct was unlawful.
Section 11 of the Restated Certificate of Incorporation and Bylaws of
the Registrant provides in effect that, subject to certain limited exceptions,
the Registrant shall indemnify its directors and officers to the extent
authorized or permitted by the General Corporation Law of the State of Delaware.
The directors and officers of the Registrant are insured under policies of
insurance maintained by the Company, subject to the limits of the policies,
against certain losses arising from any claims made against them by reason of
being or having been such directors or officers. Like indemnification and
insurance is also provided to those employees of the Registrant who serve as
administrators of the Plan. In addition, the Company has entered into contracts
with certain of its directors providing for indemnification of such persons by
the Registrant to the full extent authorized or permitted by law, subject to
certain limited exceptions.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not applicable.
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
Number Document
- ------ --------
<S> <C>
4.1 Forte Software, Inc. 1996 Stock Option Plan.
4.2 Forte Software, Inc. 1997 Stock Option Plan.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, with respect to the legality of the securities
being registered.
23.1 Consent of Counsel (Contained in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (See page 5).
</TABLE>
ITEM 9. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purposes of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
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(b) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Sun Microsystems, Inc., a corporation organized and existing under
the laws of the State of Delaware, 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 Palo Alto, State of
California, on October 20, 1999.
SUN MICROSYSTEMS, INC.
By: /s/ Michael E. Lehman
-----------------------------------------
Michael E. Lehman, Vice President, Corporate
Resources and Chief Financial Officer
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POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Scott G. McNealy and Michael E. Lehman,
jointly and severally, his or her attorneys-in-fact, each with the power of
substitution, for him or her in any and all capacities, to sign any amendments
to this Registration Statement on Form S-8 and to file the same, with exhibits
thereto and other documents in connection therewith, with the Securities and
Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or his or her substitute or substitutes, may do or cause to
be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Scott G. McNealy Chairman of the Board of Directors, October 20, 1999
- ------------------------------------ and Chief Executive Officer
Scott G. McNealy (Principal Executive Officer)
/s/ Michael E. Lehman Vice President, Corporate Resources October 20, 1999
- ------------------------------------ and Chief Financial Officer
Michael E. Lehman (Principal Financial Officer)
/s/ Michael L. Popov Vice President, Corporate Controller October 20, 1999
- ------------------------------------ (Principal Accounting Officer)
Michael L. Popov
/s/ James L. Barksdale Director October 20, 1999
- ------------------------------------
James L. Barksdale
/s/ L. John Doerr Director October 20, 1999
- ------------------------------------
L. John Doerr
/s/ Judith L. Estrin Director October 20, 1999
- ------------------------------------
Judith L. Estrin
/s/ Robert J. Fisher Director October 20, 1999
- ------------------------------------
Robert J. Fisher
/s/ Robert L. Long Director October 20, 1999
- ------------------------------------
Robert L. Long
/s/ M. Kenneth Oshman Director October 20, 1999
- ------------------------------------
M. Kenneth Oshman
</TABLE>
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INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
4.1 Forte Software, Inc. 1996 Stock Option Plan.
4.2 Forte Software, Inc. 1997 Stock Option Plan.
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation, with respect to the legality of the securities
being registered.
23.1 Consent of Counsel (Contained in Exhibit 5.1).
23.2 Consent of Ernst & Young LLP, Independent Auditors.
24.1 Power of Attorney (See page 5).
</TABLE>
8
<PAGE> 1
FORTE SOFTWARE, INC.
1996 STOCK OPTION PLAN
I.
ARTICLE ONE
GENERAL PROVISIONS
A) PURPOSE OF THE PLAN
This 1996 Stock Option Plan is intended to promote the interests of
Forte Software, Inc., 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.
Capitalized terms shall have the meanings assigned to such terms in the
attached Appendix.
B) STRUCTURE OF THE PLAN
A) The Plan shall be divided into two separate equity programs:
(i) 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, and
(ii) the Automatic Option Grant Program under which Eligible
Directors shall automatically receive option grants at periodic
intervals to purchase shares of Common Stock.
B) The provisions of Articles One and Four shall apply to all equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
A) ADMINISTRATION OF THE PLAN
A) The Primary Committee shall have sole and exclusive authority to
administer the Discretionary Option Grant Program with respect to Section 16
Insiders. No non-employee Board member shall be eligible to serve on the Primary
Committee if such individual has, during the twelve (12)-month period
immediately preceding the date of his or her appointment to the Committee or (if
shorter) the period commencing with the Section 12(g) Registration Date and
ending with the date of his or her appointment to the Primary Committee,
received an option grant or direct stock issuance under the Plan or any other
stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary), other than pursuant to the Automatic
Option Grant Program.
B) Administration of the Discretionary Option Grant Program with respect
to all other persons eligible to participate in those programs may, at the
Board's discretion, be
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vested in the Primary Committee or a Secondary Committee, or the Board may
retain the power to administer those programs with respect to all such persons.
The members of the Secondary Committee may be Board members who are Employees
eligible to receive discretionary option grants or direct stock issuances under
the Plan or any stock option, stock appreciation, stock bonus or other stock
plan of the Corporation (or any Parent or Subsidiary).
C) Members of the Primary Committee or any Secondary Committee shall
serve for such period of time as the Board may determine and shall be subject to
removal 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.
D) The Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority to establish such rules
and regulations as it may deem appropriate for proper administration of the
Discretionary Option Grant Program and to make such determinations under, and
issue such interpretations of, the provisions of such program and any
outstanding options 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 Program under its jurisdiction or any option
thereunder.
E) 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 made under the Plan.
F) Administration of the Automatic Option Grant Program shall be
self-executing in accordance with the terms of that program, and no Plan
Administrator shall exercise any discretionary functions with respect to option
grants made thereunder.
B) ELIGIBILITY
A) The persons eligible to participate in the Discretionary Option Grant
Program are as follows:
(i) Employees,
(ii) non-employee members of the board of directors of any
Parent or Subsidiary, and
(iii) consultants and other independent advisors who provide
services to the Corporation (or any Parent or Subsidiary).
B) The Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority (subject to the provisions of
the Plan) to determine, with respect to the option grants under the
Discretionary Option Grant Program, which eligible
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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-Statutory
Option, the time or times at which each option is to become exercisable and the
vesting schedule (if any) applicable to the option shares and the maximum term
for which the option is to remain outstanding.
C) The individuals eligible to receive option grants under the Automatic
Option Grant Program shall be (i) those individuals who are serving as
non-employee Board members on the Automatic Option Grant Program Effective Date
or who are first elected or appointed as non-employee Board members after such
date, whether through appointment by the Board or election by the Corporation's
stockholders, and (ii) those individuals who continue to serve as non-employee
Board members after one or more Annual Stockholders Meetings held after the
Automatic Option Grant Program Effective Date. 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 on the Automatic Option Grant Program Effective Date or at
the time he or she first becomes a non-employee Board member, but such
individual shall be eligible to receive periodic option grants under the
Automatic Option Grant Program upon his or her continued service as a
non-employee Board member following one or more Annual Stockholders Meetings.
C) 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 initially not exceed
4,654,162 shares. Such authorized share reserve is comprised of (i) the number
of shares which remained available for issuance, as of the Plan Effective Date,
under the Predecessor Plan as last approved by the Corporation's stockholders
prior to such date, including the shares subject to the outstanding options
incorporated into the Plan and any other shares which would have been available
for future option grants under the Predecessor Plan (estimated to be 3,454,162
shares as of March 5, 1996), plus (ii) an additional increase of 1,200,000
shares authorized by the Board under the Plan, subject to stockholder approval.
B) No one person participating in the Plan may receive options and
separately exercisable stock appreciation rights for more than fifty percent
(50%) of the shares of Common Stock available in the aggregate over the term of
the Plan and in any event not more than 2,000,000 shares.
C) Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
(including any options incorporated from the Predecessor Plan) expire or
terminate for any reason prior to exercise in full or (ii) the options are
canceled in accordance with the cancellation-regrant provisions of Article Two.
All shares issued under the Plan (including shares issued upon exercise of
options incorporated from the Predecessor Plan), whether or not those shares are
subsequently
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repurchased by the Corporation pursuant to its repurchase rights under the Plan,
shall reduce on a share-for-share basis the number of shares of Common Stock
available for subsequent issuance under the Plan. In addition, should the
exercise price of an option under the Plan (including any option incorporated
from the Predecessor 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 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, and not by the net number of shares of
Common Stock issued to the holder of such option.
D) 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 maximum number and/or class of securities issuable under the
Plan, (ii) the maximum number and/or class of securities for which the share
reserve is to increase automatically each year, (iii) the number and/or class of
securities for which any one person may be granted options and separately
exercisable stock appreciation rights over the term of the Plan, (iv) the number
and/or class of securities for which automatic option grants are to be
subsequently made per Eligible Director under the Automatic Option Grant Program
and (v) the number and/or class of securities and the exercise price per share
in effect under each outstanding option (including any option incorporated from
the Predecessor Plan) in order to prevent the dilution or enlargement of
benefits thereunder. The adjustments determined by the Plan Administrator shall
be final, binding and conclusive.
II.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
A) 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 eighty-five percent (85%) 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 Four
and the documents evidencing the option, be payable in one or more of the forms
specified below:
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(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.
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) 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.
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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 it is not exercisable for vested shares on the date of
such cessation of Service.
(iv) 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.
(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.
2) The Plan Administrator shall have the 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 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 under the option 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, the option shall be exercisable only by the Optionee and shall not be
assignable or transferable
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other than by will or by the laws of descent and distribution following the
Optionee's death. However, a Non-Statutory Option may be assigned in accordance
with the terms of a Qualified Domestic Relations Order. The assigned option may
only be exercised by the person or persons who acquire a proprietary interest in
the option pursuant to such Qualified Domestic Relations Order. The terms
applicable to the assigned option (or portion thereof) 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.
B) 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 Four shall be applicable to Incentive Options. Options
which are specifically designated as Non-Statutory 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) EXERCISE PRICE. The exercise price per share shall not be less than
one hundred percent (100%) of the Fair Market Value per share of Common Stock on
the option grant date.
C) 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 (1) 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.
D) 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.
C) 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 for
all of the 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
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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.
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) The Plan Administrator shall have the discretion, exercisable either
at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Corporate Transaction, whether
or not those options are to be assumed or replaced (or those repurchase rights
are to be assigned) in the Corporate Transaction.
D) The Plan Administrator also shall have the discretion, exercisable
either at the time the option is granted or at any time while the option remains
outstanding to provide that if the option is assumed or replaced in the
Corporate Transaction and does not otherwise accelerate at that time, the option
shall automatically accelerate in whole or in part (and any of the Corporation's
outstanding repurchase rights which do not otherwise terminate at the time of
the Corporate Transaction shall automatically terminate and the shares of Common
Stock subject to those terminated rights shall immediately vest in full or in
part) in the event the Optionee's Service should subsequently terminate by
reason of an Involuntary Termination within twelve (12) months following the
effective date of such Corporate Transaction. 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.
E) 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).
F) 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
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to such Corporate Transaction. Appropriate adjustments shall also be made to (i)
the number and class of securities available for issuance under the Plan on both
an aggregate and per Optionee basis following the consummation of such Corporate
Transaction and (ii) the exercise price payable per share under each outstanding
option, provided the aggregate exercise price payable for such securities shall
remain the same.
G) The Plan Administrator shall have the discretion, exercisable either
at the time the option is granted or at any time while the option remains
outstanding, to (i) provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Change in Control or (ii)
condition any such option acceleration (and the termination of any outstanding
repurchase rights) upon the subsequent Involuntary Termination of the Optionee's
Service within a specified period following the effective date of such Change in
Control. Any options accelerated in connection with a Change in Control shall
remain fully exercisable until the expiration or sooner termination of the
option term.
H) 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-Statutory
Option under the Federal tax laws.
I) The grant of options under the Discretionary 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.
D) CANCELLATION AND REGRANT OF OPTIONS
The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Discretionary Option
Grant Program (including outstanding options incorporated from the Predecessor
Plan) and to grant in substitution new options covering the same or different
number of shares of Common Stock but with an exercise price per share based on
the Fair Market Value per share of Common Stock on the new option grant date.
E) STOCK APPRECIATION RIGHTS
A) The Plan Administrator shall have full power and authority to grant
to selected Optionees tandem stock appreciation rights and/or limited stock
appreciation rights.
B) The following terms shall govern the grant and exercise of tandem
stock appreciation rights:
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(i) One or more Optionees may be granted the right,
exercisable upon such terms as the Plan Administrator may establish, to
elect between the exercise of the underlying option for shares of Common
Stock and the surrender of that option in exchange for a distribution
from the Corporation in an amount equal to the excess of (A) the Fair
Market Value (on the option surrender date) of the number of shares in
which the Optionee is at the time vested under the surrendered option
(or surrendered portion thereof) over (B) the aggregate exercise price
payable for such shares.
(ii) No such option surrender shall be effective unless
it is approved by the Plan Administrator. If the surrender is so
approved, then the distribution to which the Optionee shall be entitled
may be made in shares of Common Stock valued at Fair Market Value on the
option surrender date, in cash, or partly in shares and partly in cash,
as the Plan Administrator shall in its sole discretion deem appropriate.
(iii) If the surrender of an option is rejected by the
Plan Administrator, then the Optionee shall retain whatever rights the
Optionee had under the surrendered option (or surrendered portion
thereof) on the option surrender date and may exercise such rights at
any time prior to the later of (A) five (5) business days after the
receipt of the rejection notice or (B) the last day on which the option
is otherwise exercisable in accordance with the terms of the documents
evidencing such option, but in no event may such rights be exercised
more than ten (10) years after the option grant date.
C) The following terms shall govern the grant and exercise of limited
stock appreciation rights:
(i) One or more Section 16 Insiders may be granted
limited stock appreciation rights with respect to their outstanding
options.
(ii) Upon the occurrence of a Hostile Take-Over, each
such individual holding one or more options with such a limited stock
appreciation right in effect for at least six (6) months shall have the
unconditional right (exercisable for a thirty (30)-day period following
such Hostile Take-Over) to surrender each such option to the
Corporation, to the extent the option is at the time exercisable for
vested shares of Common Stock. In return for the surrendered option, the
Optionee shall receive a cash distribution from the Corporation in an
amount equal to the excess of (A) the Take-Over Price of the shares of
Common Stock which are at the time vested under each surrendered option
(or surrendered portion thereof) over (B) the aggregate exercise price
payable for such shares. Such cash distribution shall be paid within
five (5) days following the option surrender date.
(iii) Neither the approval of the Plan Administrator nor
the consent of the Board shall be required in connection with such
option surrender and cash distribution.
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(iv) The balance of the option (if any) shall continue
in full force and effect in accordance with the documents evidencing
such option.
III.
ARTICLE THREE
AUTOMATIC OPTION GRANT PROGRAM
A) OPTION TERMS
A) GRANT DATES. Option grants shall be made on the dates specified
below:
1) Each Eligible Director who is first elected or appointed as a
non-employee Board member after the Automatic Option Grant Program Effective
Date shall automatically be granted on the date of such initial election or
appointment, a Non-Statutory Option to purchase 15,000 shares of Common Stock.
2) On the date of each Annual Stockholders Meeting, beginning
with the first Annual Meeting occurring after the Corporation's initial public
offering, each individual who is to continue to serve as an Eligible Director
after such meeting, shall automatically be granted, whether or not such
individual is standing for re-election as a Board member at that Annual Meeting,
a Non-Statutory Option to purchase 3,000 shares of Common Stock, provided such
individual has served as a non-employee Board member for at least six (6) months
prior to the date of such Annual Meeting. There shall be no limit on the number
of such 3,000-share option grants any one Eligible Director may receive over his
or her period of Board service.
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.
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 initial grant shall vest, and the
Corporation's repurchase right shall lapse, in a series of forty-eight (48)
equal and successive monthly installments over the Optionee's period of
continued service as a Board member, with the first such installment to vest
upon the Optionee's
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completion of one (1) month of Board service measured from the option grant
date. Each annual grant shall vest, and the Corporation's repurchase right shall
lapse, in a series of twenty-four (24) equal and successive monthly 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) month
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 options held by the Optionee 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.
(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 of Common Stock for which the option is exercisable at the
time of the Optionee's cessation of Board service.
(iii) 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 of Common Stock.
(iv) In no event shall the option remain exercisable
after the expiration of the option term. Upon the expiration of the
twelve (12)-month 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
Board service, terminate and cease to be outstanding to the extent it is
not exercisable for vested shares on the date of such cessation of Board
service.
B) CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
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 effective date of the Corporate Transaction, become fully exercisable for
all of the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of such shares as fully-vested shares of Common
Stock. Immediately following the consummation of the Corporate Transaction, each
automatic option grant shall terminate and cease to be
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outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
B) In connection with any Change in Control, 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 effective date of the Change in Control, become fully exercisable for all of
the shares of Common Stock at the time subject to such option and may be
exercised for all or any portion of such 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 or the
surrender of the option in connection with a Hostile Take-Over.
C) Upon the occurrence of a Hostile Take-Over, each automatic option
held by the Optionee for a period of at least six (6) months shall be
automatically canceled. The Optionee shall in return be entitled to a cash
distribution from the Corporation in an amount equal to the excess of (i) the
Take-Over Price of the shares of Common Stock at the time subject to the
canceled option (whether or not the Optionee is otherwise at the time vested in
those shares) over (ii) the aggregate exercise price payable for such shares.
Such cash distribution shall be paid within five (5) days following the
cancellation of the option by the Corporation. No approval or consent of the
Board shall be required in connection with such option cancellation and cash
distribution.
D) The grant of options under the Automatic 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.
C) AMENDMENT OF THE AUTOMATIC OPTION GRANT PROGRAM
The provisions of this Automatic Option Grant Program, together with the
option grants outstanding thereunder, may not be amended at intervals more
frequently than once every six (6) months, other than to the extent necessary to
comply with applicable Federal income tax laws and regulations.
D) 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.
IV
ARTICLE FOUR
MISCELLANEOUS
A) FINANCING
A) The Plan Administrator may permit any Optionee to pay the option
exercise
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price under the Discretionary Option Grant 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 may not exceed the sum of (i) the aggregate
option exercise price payable for the purchased shares plus (ii) any Federal,
state and local income and employment tax liability incurred by the Optionee in
connection with the option exercise.
B) The Plan Administrator may, in its discretion, determine that one or
more such promissory notes shall be subject to forgiveness by the Corporation in
whole or in part upon such terms as the Plan Administrator may deem appropriate.
B) TAX WITHHOLDING
A) The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options or stock appreciation rights under the Plan shall be
subject to the satisfaction of all applicable Federal, state and local income
and employment tax withholding requirements.
B) The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options under the Plan (other than the options granted
under the Automatic Option Grant Program) with the right to use shares of Common
Stock in satisfaction of all or part of the Taxes incurred by such holders in
connection with the exercise of their options. Such right may be provided to any
such holder in either or both of the following formats:
(i) Stock Withholding: The election to have the
Corporation withhold, from the shares of Common Stock otherwise issuable
upon the exercise of such Non-Statutory Option, a portion of those
shares with an aggregate Fair Market Value equal to the percentage of
the Taxes (not to exceed one hundred percent (100%)) designated by the
holder.
(ii) Stock Delivery: The election to deliver to the
Corporation, at the time the Non-Statutory Option is exercised, one or
more shares of Common Stock previously acquired by such holder (other
than in connection with the option exercise triggering the Taxes) with
an aggregate Fair Market Value equal to the percentage of the Taxes (not
to exceed one hundred percent (100%)) designated by the holder.
C) EFFECTIVE DATE AND TERM OF THE PLAN
A) The Discretionary Option Grant Program shall become effective on the
Plan Effective Date and options may be granted under the Discretionary Option
Grant Program from and after the Plan Effective Date. The Automatic Option Grant
Program shall become effective on the Automatic Option Grant Program Effective
Date and the initial option grants under the Automatic Option Grant Program
shall be made to the Eligible Directors at that time. However, no options
granted under the Plan may be exercised until the Plan is
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<PAGE> 15
approved by the Corporation's stockholders. If such stockholder approval is not
obtained within twelve (12) months after the Plan Effective Date, then all
options previously granted under this Plan shall terminate and cease to be
outstanding, and no further options shall be granted and no shares shall be
issued under the Plan.
B) The Plan shall serve as the successor to the Predecessor Plan, and no
further option grants shall be made under the Predecessor Plan after the Plan
Effective Date. All options outstanding under the Predecessor Plan as of such
date shall, immediately upon approval of the Plan by the Corporation's
stockholders, be incorporated into the Plan and treated as outstanding options
under the Plan. However, each outstanding option so incorporated shall continue
to be governed solely by the terms of the documents evidencing such option, and
no provision of the 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 Common Stock.
C) The option/vesting acceleration provisions of Article Two relating to
Corporate Transactions and Changes in Control may, in the Plan Administrator's
discretion, be extended to one or more options incorporated from the Predecessor
Plan which do not otherwise provide for such acceleration.
D) The Plan shall terminate upon the earliest of (i) January 31, 2006,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise of the options under the Plan or (iii)
the termination of all outstanding options in connection with a Corporate
Transaction. Upon such Plan termination, all options outstanding on such date
shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such options.
D) 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, (i) no such amendment
or modification shall adversely affect the rights and obligations with respect
to options or stock appreciation rights at the time outstanding under the Plan
unless the Optionee consents to such amendment or modification, and (ii) any
amendment made to the Automatic Option Grant Program (or any options outstanding
thereunder) shall be in compliance with the limitations of that program.
Notwithstanding clause (i) above, the Plan Administrator may amend an
outstanding option to reduce the number of option shares previously granted to
an optionee provided the reduction applies solely unvested shares or shares
which have not yet become exercisable as of the date of the amendment. In
addition, the Board shall not, without the approval of the Corporation's
stockholders, (i) materially increase the maximum number of shares issuable
under the Plan, the number of shares for which options may be granted under the
Automatic Option Grant Program or the maximum number of shares for which any one
person may be granted options or separately exercisable stock appreciation
rights in the aggregate over the term of the Plan, except for permissible
adjustments in the event of certain changes in the Corporation's capitalization,
(ii) materially modify the eligibility requirements for Plan participation or
(iii) materially increase the benefits accruing to Plan participants.
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B) Options to purchase shares of Common Stock may be granted under the
Discretionary Option Grant Program that are in excess of the number of shares
then available for issuance under the Plan, provided any excess shares actually
issued under those programs are 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 the
exercise 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 canceled and cease to be outstanding.
E) 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.
F) REGULATORY APPROVALS
A) The implementation of the Plan, the granting of any option or stock
appreciation right under the Plan and the issuance of any shares of Common Stock
upon the exercise of any option or stock appreciation right shall be subject to
the Corporation's procurement of all approvals and permits required by
regulatory authorities having jurisdiction over the Plan, the options and stock
appreciation rights 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.
G) NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee 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, which rights are hereby
expressly reserved by each, to terminate such person's Service at any time for
any reason, with or without cause.
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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) AUTOMATIC OPTION GRANT PROGRAM EFFECTIVE DATE shall mean the date on
which the Underwriting Agreement is executed and the initial public offering
price of the Common Stock is established.
C) BOARD shall mean the Corporation's Board of Directors.
D) 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 which
the Board does not recommend such stockholders to accept, 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.
E) CODE shall mean the Internal Revenue Code of 1986, as amended.
F) COMMON STOCK shall mean the Corporation's common stock.
G) 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
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the Corporation's assets in complete liquidation or dissolution of the
Corporation.
H) CORPORATION shall mean Forte Software, Inc., a Delaware corporation.
I) DISCRETIONARY OPTION GRANT PROGRAM shall mean the discretionary
option grant program in effect under the Plan.
J) DOMESTIC RELATIONS ORDER shall mean any judgment, decree or order
(including approval of a property settlement agreement) which provides or
otherwise conveys, pursuant to applicable State domestic relations laws
(including community property laws), marital property rights to any spouse or
former spouse of the Optionee.
K) ELIGIBLE DIRECTOR shall mean a non-employee Board member eligible to
participate in the Automatic Option Grant Program in accordance with the
eligibility provisions of Article One.
L) 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.
M) EXERCISE DATE shall mean the date on which the Corporation shall have
received written notice of the option exercise.
N) 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 closing
selling price per share of Common Stock on the date in question, as such
price is reported by the National Association of Securities Dealers on
the Nasdaq National Market or any successor system. If there is no
closing selling price for the Common Stock on the date in question, then
the Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(ii) If the Common Stock is at the time listed on any
Stock Exchange, then the Fair Market Value shall be the closing selling
price per share of Common Stock on the date in question on the Stock
Exchange determined by the Plan Administrator to be the primary market
for the Common Stock, as such price is officially quoted in the
composite tape of transactions on such exchange. If there is no closing
selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last
preceding date for which such quotation exists.
(iii) For purposes of option grants made on the date the
Underwriting Agreement is executed and the initial public offering price
of the Common Stock is established, the Fair Market Value shall be
deemed to be equal to the established initial offering price per share.
For purposes of option grants made prior to such date,
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the Fair Market Value shall be determined by the Plan Administrator
after taking into account such factors as the Plan Administrator shall
deem appropriate.
O) HOSTILE TAKE-OVER shall mean a change in ownership of the Corporation
effected through the following transaction:
(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 which
the Board does not recommend such stockholders to accept, and
(ii) more than fifty percent (50%) of the securities so
acquired are accepted from persons other than Section 16 Insiders.
P) INCENTIVE OPTION shall mean an option which satisfies the
requirements of Code Section 422.
Q) 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 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.
R) MISCONDUCT shall mean the commission of any act of fraud,
embezzlement or dishonesty by the Optionee, 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 or other person in the Service of the Corporation (or any Parent
or Subsidiary).
S) 1934 ACT shall mean the Securities Exchange Act of 1934, as amended.
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T) NON-STATUTORY OPTION shall mean an option not intended to satisfy the
requirements of Code Section 422.
U) OPTIONEE shall mean any person to whom an option is granted under the
Discretionary Option Grant or Automatic Option Grant Program.
V) 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.
W) PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
of the Optionee 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.
X) PLAN shall mean the Corporation's 1996 Stock Option Plan, as set
forth in this document.
Y) 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 Program 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.
Z) PLAN EFFECTIVE DATE shall mean the Section 12(g) Registration Date.
AA) PREDECESSOR PLAN shall mean the Corporation's existing 1991 Equity
Incentive Plan.
BB) 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 Program with respect to Section 16 Insiders.
CC) QUALIFIED DOMESTIC RELATIONS ORDER shall mean a Domestic Relations
Order which substantially complies with the requirements of Code Section 414(p).
The Plan Administrator shall have the sole discretion to determine whether a
Domestic Relations Order is a Qualified Domestic Relations Order.
DD) SECONDARY COMMITTEE shall mean a committee of two (2) or more Board
members appointed by the Board to administer the Discretionary Option Grant
Program with respect to eligible persons other than Section 16 Insiders.
EE) 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.
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FF) SECTION 12(g) REGISTRATION DATE shall mean the first date on which
the Common Stock is registered under Section 12(g) of the 1934 Act.
GG) SERVICE shall mean the provision of services to 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.
HH) STOCK EXCHANGE shall mean either the American Stock Exchange or the
New York Stock Exchange.
II) 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.
JJ) TAKE-OVER PRICE shall mean the greater of (i) the Fair Market Value
per share of Common Stock on the date the option is surrendered to the
Corporation in connection with a Hostile Take-Over or (ii) the highest reported
price per share of Common Stock paid by the tender offeror in effecting such
Hostile Take-Over. However, if the surrendered option is an Incentive Option,
the Take-Over Price shall not exceed the clause (i) price per share.
KK) TAXES shall mean the Federal, state and local income and employment
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.
LL) STOCKHOLDER shall mean the owner of stock (as determined under Code
Section 424(d)) possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation (or any Parent or
Subsidiary).
MM) UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.
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EXHIBIT 4.2
FORTE SOFTWARE, INC.
1997 STOCK OPTION PLAN
<PAGE> 2
0.5 ADDITIONAL SHARES. If Options are forfeited or terminate for any other
reason before being exercised, then the corresponding Common Shares shall again
become available for the grant of Options or Restricted Shares under the Plan.
If Restricted Shares or Common Shares issued upon the exercise of Options are
forfeited, then such Common Shares shall again become available for the grant of
NSOs and Restricted Shares under the Plan. The aggregate number of Common Shares
that may be issued under the Plan upon the exercise of ISOs shall not be
increased when Restricted Shares or other Common Shares are forfeited.
ARTICLE 4. ELIGIBILITY.
0.6 NONSTATUTORY STOCK OPTIONS AND RESTRICTED SHARES. Only Employees and
Consultants shall be eligible for the grant of NSOs and Restricted Shares.
0.7 INCENTIVE STOCK OPTIONS. Only Employees who are common-law employees of the
Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. In
addition, an Employee who owns more than 10% of the total combined voting power
of all classes of outstanding stock of the Company or any of its Parents or
Subsidiaries shall not be eligible for the grant of an ISO unless the
requirements set forth in section 422(c)(6) of the Code are satisfied.
0.8 OFFICERS. Individuals who are considered officers of the Company under the
rules of the National Association of Securities Dealers shall not be eligible
for the grant of any Award.
ARTICLE 5. OPTIONS.
0.9 STOCK OPTION AGREEMENT. Each grant of an Option under the Plan shall be
evidenced by a Stock Option Agreement between the Optionee and the Company. Such
Option shall be subject to all applicable terms of the Plan and may be subject
to any other terms that are not inconsistent with the Plan. The provisions of
the various Stock Option Agreements entered into under the Plan need not be
identical. The Stock Option Agreement shall specify whether the Option is an ISO
or an NSO. Options may be granted in consideration of a cash payment or in
consideration of a reduction in the Optionee's other compensation. A Stock
Option Agreement may provide that a new Option will be granted automatically to
the Optionee when he or she exercises a prior Option and pays the Exercise Price
in the form described in Section 6.2.
0.10 NUMBER OF SHARES. Each Stock Option Agreement shall specify the number of
Common Shares subject to the Option and shall provide for the adjustment of such
number in accordance with Article 8.
0.11 EXERCISE PRICE. Each Stock Option Agreement shall specify the Exercise
Price; provided that the Exercise Price under an ISO shall in no event be less
than 100% of the Fair Market Value of a Common Share on the date of grant and
the Exercise Price under an NSO
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shall in no event be less than 85% of the Fair Market Value of a Common Share on
the date of grant. In the case of an NSO, a Stock Option Agreement may specify
an Exercise Price that varies in accordance with a predetermined formula while
the NSO is outstanding.
0.12 EXERCISABILITY AND TERM. Each Stock Option Agreement shall specify the date
or event when all or any installment of the Option is to become exercisable. The
Stock Option Agreement shall also specify the term of the Option; provided that
the term of an ISO shall in no event exceed 10 years from the date of grant. A
Stock Option Agreement may provide for accelerated exercisability in the event
of the Optionee's death, disability or retirement or other events and may
provide for expiration prior to the end of its term in the event of the
termination of the Optionee's service.
0.13 EFFECT OF CHANGE IN CONTROL. The Committee may determine, at the time of
granting an Option or thereafter, that such Option shall become exercisable as
to all or part of the Common Shares subject to such Option in the event that a
Change in Control occurs with respect to the Company. In the case of an ISO, no
acceleration of exercisability shall occur without the Optionee's written
consent.
0.14 MODIFICATION OR ASSUMPTION OF OPTIONS. Within the limitations of the Plan,
the Committee may modify, extend or assume outstanding options or may accept the
cancellation of outstanding options (whether granted by the Company or by
another issuer) in return for the grant of new options for the same or a
different number of shares and at the same or a different exercise price. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, alter or impair his or her rights or obligations under
such Option.
0.15 BUYOUT PROVISIONS. The Committee may at any time (a) offer to buy out for a
payment in cash or cash equivalents an Option previously granted or (b)
authorize an Optionee to elect to cash out an Option previously granted, in
either case at such time and based upon such terms and conditions as the
Committee shall establish.
ARTICLE 6. PAYMENT FOR OPTION SHARES.
0.16 GENERAL RULE. The entire Exercise Price of Common Shares issued upon
exercise of Options shall be payable in cash or cash equivalents when such
Common Shares are purchased, except as follows:
0.16(a) In the case of an ISO granted under the Plan, payment shall be
made only pursuant to the express provisions of the applicable Stock
Option Agreement. The Stock Option Agreement may specify that payment
may be made in any form(s) described in this Article 6.
0.16(b) In the case of an NSO, the Committee may at any time accept
payment in any form(s) described in this Article 6.
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0.17 SURRENDER OF STOCK. To the extent that this Section 6.2 is applicable, all
or any part of the Exercise Price may be paid by surrendering, or attesting to
the ownership of, Common Shares that are already owned by the Optionee. Such
Common Shares shall be valued at their Fair Market Value on the date when the
new Common Shares are purchased under the Plan. The Optionee shall not
surrender, or attest to the ownership of, Common Shares in payment of the
Exercise Price if such action would cause the Company to recognize compensation
expense (or additional compensation expense) with respect to the Option for
financial reporting purposes.
0.18 EXERCISE/SALE. To the extent that this Section 6.3 is applicable, all or
any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) an irrevocable direction to a
securities broker approved by the Company to sell all or part of the Common
Shares being purchased under the Plan and to deliver all or part of the sales
proceeds to the Company.
0.19 EXERCISE/PLEDGE. To the extent that this Section 6.4 is applicable, all or
any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) an irrevocable direction to
pledge all or part of the Common Shares being purchased under the Plan to a
securities broker or lender approved by the Company, as security for a loan, and
to deliver all or part of the loan proceeds to the Company.
0.20 PROMISSORY NOTE. To the extent that this Section 6.5 is applicable, all or
any part of the Exercise Price and any withholding taxes may be paid by
delivering (on a form prescribed by the Company) a full-recourse promissory
note; provided that the par value of the Common Shares being purchased under the
Plan shall be paid in cash or cash equivalents.
0.21 OTHER FORMS OF PAYMENT. To the extent that this Section 6.6 is applicable,
all or any part of the Exercise Price and any withholding taxes may be paid in
any other form that is consistent with applicable laws, regulations and rules.
ARTICLE 7. RESTRICTED SHARES.
0.22 RESTRICTED STOCK AGREEMENT. Each grant of Restricted Shares under the Plan
shall be evidenced by a Restricted Stock Agreement between the recipient and the
Company. Such Restricted Shares shall be subject to all applicable terms of the
Plan and may be subject to any other terms that are not inconsistent with the
Plan. The provisions of the various Restricted Stock Agreements entered into
under the Plan need not be identical. Restricted Shares may be granted in
consideration of a reduction in the recipient's other compensation.
0.23 PAYMENT FOR AWARDS. To the extent that an Award is granted in the form of
newly issued Restricted Shares, the Award recipient, as a condition to the grant
of such Award, shall be required to pay the Company in cash or cash equivalents
an amount equal to the par value of such Restricted Shares. To the extent that
an Award is granted in the form of Restricted Shares from the Company's
treasury, no cash consideration shall be required of the Award
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recipients. At the Committee's discretion, any amount not paid in cash may be
paid with a full-recourse promissory note.
0.24 VESTING CONDITIONS. Each Award of Restricted Shares may or may not be
subject to vesting. Vesting shall occur, in full or in installments, upon
satisfaction of the conditions specified in the Restricted Stock Agreement. A
Restricted Stock Agreement may provide for accelerated vesting in the event of
the Participant's death, disability or retirement or other events. The Committee
may determine, at the time of granting Restricted Shares or thereafter, that all
or part of such Restricted Shares shall become vested in the event that a Change
in Control occurs with respect to the Company.
0.25 VOTING AND DIVIDEND RIGHTS. The holders of Restricted Shares awarded under
the Plan shall have the same voting, dividend and other rights as the Company's
other stockholders. A Restricted Stock Agreement, however, may require that the
holders of Restricted Shares invest any cash dividends received in additional
Restricted Shares. Such additional Restricted Shares shall be subject to the
same conditions and restrictions as the Award with respect to which the
dividends were paid.
ARTICLE 8. PROTECTION AGAINST DILUTION.
0.26 ADJUSTMENTS. In the event of a subdivision of the outstanding Common
Shares, a declaration of a dividend payable in Common Shares, a declaration of a
dividend payable in a form other than Common Shares in an amount that has a
material effect on the price of Common Shares, a combination or consolidation of
the outstanding Common Shares (by reclassification or otherwise) into a lesser
number of Common Shares, a recapitalization, a spin-off or a similar occurrence,
the Committee shall make such adjustments as it, in its sole discretion, deems
appropriate in one or more of (a) the number of Options and Restricted Shares
available for future Awards under Article 3, (b) the number of Common Shares
covered by each outstanding Option or (c) the Exercise Price under each
outstanding Option. Except as provided in this Article 8, a Participant shall
have no rights by reason of any issue by the Company of stock of any class or
securities convertible into stock of any class, any subdivision or consolidation
of shares of stock of any class, the payment of any stock dividend or any other
increase or decrease in the number of shares of stock of any class.
0.27 DISSOLUTION OR LIQUIDATION. To the extent not previously exercised, Options
shall terminate immediately prior to the dissolution or liquidation of the
Company.
0.28 REORGANIZATIONS. In the event that the Company is a party to a merger or
other reorganization, outstanding Options and Restricted Shares shall be subject
to the agreement of merger or reorganization. Such agreement shall provide for
(a) the continuation of the outstanding Awards by the Company, if the Company is
a surviving corporation, (b) the assumption of the outstanding Awards by the
surviving corporation or its parent or subsidiary, (c) the substitution by the
surviving corporation or its parent or subsidiary of its own awards for the
outstanding Awards, (d) full exercisability or vesting and accelerated
expiration of the outstanding Awards or (e) settlement of the full value of the
outstanding Awards in cash or
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cash equivalents followed by cancellation of such Awards.
ARTICLE 9. AWARDS UNDER OTHER PLANS.
The Company may grant awards under other plans or programs. Such awards may be
settled in the form of Common Shares issued under this Plan. Such Common Shares
shall be treated for all purposes under the Plan like Restricted Shares and
shall, when issued, reduce the number of Common Shares available for the grant
of Restricted Shares under Article 3.
ARTICLE 10. LIMITATION ON RIGHTS.
0.29 RETENTION RIGHTS. Neither the Plan nor any Award granted under the Plan
shall be deemed to give any individual a right to remain an Employee or
Consultant. The Company and its Parents, Subsidiaries and Affiliates reserve the
right to terminate the service of any Employee or Consultant at any time, with
or without cause, subject to applicable laws.
0.30 STOCKHOLDERS' RIGHTS. A Participant shall have no dividend rights, voting
rights or other rights as a stockholder with respect to any Common Shares
covered by his or her Award prior to the time when a stock certificate for such
Common Shares is issued or, in the case of an Option, the time when he or she
becomes entitled to receive such Common Shares by filing a notice of exercise
and paying the Exercise Price. No adjustment shall be made for cash dividends or
other rights for which the record date is prior to such time, except as
expressly provided in the Plan.
0.31 REGULATORY REQUIREMENTS. Any other provision of the Plan notwithstanding,
the obligation of the Company to issue Common Shares under the Plan shall be
subject to all applicable laws, rules and regulations and such approval by any
regulatory body as may be required. The Company reserves the right to restrict,
in whole or in part, the delivery of Common Shares pursuant to any Award prior
to the satisfaction of all legal requirements relating to the issuance of such
Common Shares, to their registration, qualification or listing or to an
exemption from registration, qualification or listing.
ARTICLE 11. WITHHOLDING TAXES.
0.32 GENERAL. To the extent required by applicable federal, state, local or
foreign law, a Participant or his or her successor shall make arrangements
satisfactory to the Company for the satisfaction of any withholding tax
obligations that arise in connection with the Plan. The Company shall not be
required to issue any Common Shares or make any cash payment under the Plan
until such obligations are satisfied.
0.33 SHARE WITHHOLDING. The Committee may permit a Participant to satisfy all or
part of his or her withholding or income tax obligations by having the Company
withhold all or a portion of any Common Shares that otherwise would be issued to
him or her or by surrendering all or a portion of any Common Shares that he or
she previously acquired. Such Common Shares shall be valued at their Fair Market
Value on the date when taxes otherwise
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would be withheld in cash.
ARTICLE 12. FUTURE OF THE PLAN.
0.34 TERM OF THE PLAN. The Plan, as set forth herein, shall become effective on
April 25, 1997. The Plan shall remain in effect until it is terminated under
Section 12.2, except that no ISOs shall be granted on or after the 10th
anniversary of the later of (a) the date when the Board adopted the Plan or (b)
the date when the Board adopted the most recent increase in the number of Common
Shares available under Article 3 which was approved by the Company's
stockholders.
0.35 AMENDMENT OR TERMINATION. The Board may, at any time and for any reason,
amend or terminate the Plan. An amendment of the Plan shall be subject to the
approval of the Companys stockholders only to the extent required by applicable
laws, regulations or rules. No Awards shall be granted under the Plan after the
termination thereof. The termination of the Plan, or any amendment thereof,
shall not affect any Award previously granted under the Plan.
ARTICLE 13. DEFINITIONS.
0.36 "AFFILIATE" means any entity other than a Subsidiary, if the Company and/or
one or more Subsidiaries own not less than 50% of such entity.
0.37 "AWARD" means any award of an Option or a Restricted Share under the Plan.
0.38 "BOARD" means the Companys Board of Directors, as constituted from time to
time.
0.39 "CHANGE IN CONTROL" shall mean:
0.39(a) The consummation of a merger or consolidation of the Company
with or into another entity or any other corporate reorganization, if
more than 50% of the combined voting power of the continuing or
surviving entitys securities outstanding immediately after such merger,
consolidation or other reorganization is owned by persons who were not
stockholders of the Company immediately prior to such merger,
consolidation or other reorganization;
0.39(b) The sale, transfer or other disposition of all or substantially
all of the Companys assets;
0.39(c) A change in the composition of the Board, as a result of which
fewer than a majority of the incumbent directors are directors who
either (i) had been directors of the Company on the date 24 months prior
to the date of the event that may constitute a Change in Control (the
"original directors") or (ii) were elected, or nominated for election,
to the Board with the affirmative votes of at least a majority of the
aggregate of the original directors who were still in office at the time
of the election or nomination and the
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directors whose election or nomination was previously so approved; or
0.39(d) Any transaction as a result of which any person is the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of the Company representing at
least 50% of the total voting power represented by the Companys then
outstanding voting securities. For purposes of this Subsection (d), the
term "person" shall have the same meaning as when used in sections 13(d)
and 14(d) of the Exchange Act but shall exclude (i) a trustee or other
fiduciary holding securities under an employee benefit plan of the
Company or of a Parent or Subsidiary and (ii) a corporation owned
directly or indirectly by the stockholders of the Company in
substantially the same proportions as their ownership of the common
stock of the Company.
A transaction shall not constitute a Change in Control if its sole purpose is to
change the state of the Companys incorporation or to create a holding company
that will be owned in substantially the same proportions by the persons who held
the Company's securities immediately before such transaction.
0.40 "CODE" means the Internal Revenue Code of 1986, as amended.
0.41 "COMMITTEE" means a committee of the Board, as described in
Article 2.
0.42 "COMMON SHARE" means one share of the common stock of the Company.
0.43 "COMPANY" means Forte Software, Inc., a Delaware corporation.
0.44 "CONSULTANT" means a consultant or adviser who provides bona fide
services to the Company, a Parent, a Subsidiary or an Affiliate as an
independent contractor. Service as a Consultant shall be considered employment
for all purposes of the Plan, except as provided in Section 4.2.
0.45 "EMPLOYEE" means a common-law employee of the Company, a Parent, a
Subsidiary or an Affiliate.
0.46 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
0.47 "EXERCISE PRICE" means the amount for which one Common Share may be
purchased upon exercise of such Option, as specified in the applicable Stock
Option Agreement.
0.48 "FAIR MARKET VALUE" means the market price of Common Shares,
determined by the Committee in good faith on such basis as it deems appropriate.
Whenever possible, the determination of Fair Market Value by the Committee shall
be based on the prices reported in the Western Edition of The Wall Street
Journal. Such determination shall be conclusive and binding on all persons.
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0.49 "ISO" means an incentive stock option described in section 422(b)
of the Code.
0.50 "NSO" means a stock option not described in sections 422 or 423 of
the Code.
0.51 "OPTION" means an ISO or NSO granted under the Plan and entitling
the holder to purchase Common Shares.
0.52 "OPTIONEE" means an individual or estate who holds an Option.
0.53 "PARENT" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company, if each of the
corporations other than the Company 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. A corporation that attains the status of a Parent on
a date after the adoption of the Plan shall be considered a Parent commencing as
of such date.
0.54 "PARTICIPANT" means an individual or estate who holds an Award.
0.55 "PLAN" means this Forte Software, Inc. 1997 Stock Option Plan, as
amended from time to time.
0.56 "RESTRICTED SHARE" means a Common Share awarded under the Plan.
0.57 "RESTRICTED STOCK AGREEMENT" means the agreement between the
Company and the recipient of a Restricted Share that contains the terms,
conditions and restrictions pertaining to such Restricted Share.
0.58 "STOCK OPTION AGREEMENT" means the agreement between the Company
and an Optionee that contains the terms, conditions and restrictions pertaining
to his or her Option.
0.59 "SUBSIDIARY" means any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company, if 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. A corporation that attains
the status of a Subsidiary on a date after the adoption of the Plan shall be
considered a Subsidiary commencing as of such date.
ARTICLE 14. EXECUTION.
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EXHIBIT 5.1
WILSON SONSINI GOODRICH & ROSATI
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
October 20, 1999
Sun Microsystems, Inc.
901 San Antonio Road
Palo Alto, CA 94303
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have acted as counsel to Sun Microsystems, Inc., a Delaware
corporation (the "Company" or "you") and have examined the Registration
Statement on Form S-8 (the "Registration Statement") to be filed by the Company
with the Securities and Exchange Commission on or about October 20, 1999 in
connection with the registration under the Securities Act of 1933, as amended,
of 1,356,255 shares of the Company's Common Stock, par value $0.00067 per share
(the "Shares"), reserved for issuance under the Forte Software, Inc. 1996 Stock
Option Plan and 1997 Stock Option Plan (collectively the "Plans").
As your legal counsel, we have examined the Restated Certificate of
Incorporation and Bylaws of the Company, the Plans and such other documents of
the Company as we have deemed necessary or appropriate for the purposes of the
opinion expressed herein, and are familiar with the proceedings proposed to be
taken by you in connection with the operation and administration of the Plans
and the sale and issuance of the Shares pursuant to the Plans.
In our opinion, the Shares, when issued and sold in the manner referred
to in the Plans and pursuant to the agreements which accompany the Plans, will
be legally and validly issued, fully paid and nonassessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name wherever appearing in the
Registration Statement and any subsequent amendment thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/ WILSON SONSINI GOODRICH & ROSATI
<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement on Form S-8 pertaining to the Forte Software, Inc. 1996 and 1997 Stock
Option Plans, of our reports dated July 21, 1999, with respect to the
consolidated financial statements of Sun Microsystems, Inc., incorporated by
reference in its Annual Report (Form 10-K) for the year ended June 30, 1999 and
the related financial statement schedule included therein, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP
October 19, 1999
Palo Alto, California
