<PAGE> 1
As filed with the Securities and Exchange Commission on November 25, 1997
Registration No. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
CARDIODYNAMICS INTERNATIONAL CORPORATION
(Exact name of issuer as specified in its charter)
CALIFORNIA 95-3533362
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
6175 NANCY RIDGE DRIVE, SUITE 300
SAN DIEGO, CALIFORNIA 92121
(Address of principal executive offices) (Zip Code)
---------------
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(as amended and restated through October 8, 1997)
(Full title of the plan)
---------------
RICHARD E. OTTO
Chief Executive Officer
CARDIODYNAMICS INTERNATIONAL CORPORATION
6175 NANCY RIDGE DRIVE, SUITE 300
SAN DIEGO, CALIFORNIA 92121
(Name and address of agent for service)
(619) 535-0202
(Telephone number, including area code, of agent for service)
---------------
Copies to:
HAYDEN J. TRUBITT, ESQ.
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, CA 92101
---------------
This Registration Statement shall become effective immediately upon filing with
the Securities and Exchange Commission, and sales of the registered securities
will begin as soon as reasonably practicable after such effective date.
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
Proposed Proposed
Title of Maximum Maximum
Securities Amount Offering Aggregate Amount of
to be to be Price Offering Registration
Registered Registered(1) per Share(2) Price (2) Fee
---------- ------------- ------------ ------------ --------
<S> <C> <C> <C> <C>
Options to Purchase Common Stock 1,000,000 N/A N/A N/A
Common Stock, no par value 1,000,000 $2.50 $2,500,000 $758
</TABLE>
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(1) This Registration Statement shall also cover any additional shares of
Common Stock which become issuable under the 1995 Stock Option/Stock
Issuance Plan by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the
receipt of consideration which results in an increase in the number of
the Registrant's outstanding shares of Common Stock.
(2) Calculated solely for purposes of this offering under Rule 457(h) of the
Securities Act of 1933, as amended, on the basis of the average of the
high and low selling prices per share of Common Stock of CardioDynamics
International Corporation on November 19, 1997 as reported by the Nasdaq
SmallCapMarket.
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
CardioDynamics International Corporation (the "Registrant") hereby files
this Registration Statement with the Securities and Exchange Commission (the
"Commission") on Form S-8 to register an additional 1,000,000 shares of the
Registrant's Common Stock for issuance pursuant to options and/or direct stock
issuances granted under the Registrant's 1995 Stock Option/Stock Issuance Plan,
as amended.
Item 3. Incorporation of Certain Documents by Reference
The Registrant hereby incorporates by reference into this
Registration Statement the following documents previously filed with the
Commission:
(a) The Registrant's Registration Statement on Form S-8 filed
on October 21, 1996 -- Registration No. 333-14515 (the
"1996 Registration Statement").
(b) The Registrant's Annual Report on Form 10-KSB for the
fiscal year ended November 30, 1996, filed with the
Commission pursuant to Section 13(a) of the Securities
Exchange Act of 1934 (the "Exchange Act").
(c) The Registrant's Quarterly Reports on Form 10-QSB for the
fiscal quarters ended February 28, 1997, May 31, 1997 and
August 31, 1997.
(d) The Registrant's Registration Statement on Form 8-A, filed
with the Commission April 19, 1984 pursuant to Section 12
of the Exchange Act, in which there is described the
terms, rights and provisions applicable to the
Registrant's outstanding Common Stock.
All reports and definitive proxy or information statements filed
pursuant to Section 13(a), 13(c), 14 or 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 hereby have been sold or
which deregisters all securities then remaining unsold shall be deemed to be
incorporated by reference into this Registration Statement and to be a part
hereof from the date of filing of such documents.
Item 4. Description of Securities
Not applicable.
Item 5. Interests of Named Experts and Counsel
Not applicable.
Item 6. Indemnification of Directors and Officers
(a) Section 317 of the California General Corporation Law provides
for the indemnification to officers and directors of the Company and its
subsidiaries against expenses, judgments, fines and amounts paid in settlement
under certain conditions and subject to certain limitations.
(b) Article Three of the Bylaws of the Company provides that the
Company shall have power to indemnify any person who is or was a director,
officer, employee or agent of the Company as provided in Section 317
II-1
<PAGE> 3
of the California General Corporation Law. The rights to indemnity thereunder
continue as to a person who has ceased to be a director, officer, employee or
agent and shall inure to the benefit of the heirs, executors and administrators
of the person. In addition, expenses incurred by a director or officer in
defending a civil or criminal action, suit of proceeding by reason of the fact
that he or she is or was a director or officer of the Company (or was serving at
the Company's request as a director or officer of another corporation) shall be
paid by the Company in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he or she
is not entitled to be indemnified by the Company as authorized by the relevant
section of the California General Corporation Law.
(c) Article IV of the Company's Articles of Incorporation provides
that the liability of the directors of the Company for monetary damages shall be
eliminated to the fullest extent permissible under California law. Accordingly,
a director will not be liable for monetary damages for breach of duty to the
Company or its shareholders in any action brought by or in the right of the
Company. However, a director remains liable to the extent required by law for
(i) acts or omissions that involve intentional misconduct or a knowing and
culpable violation of law, (ii) acts or omissions that a director believes to be
contrary to the best interests of the Company or its shareholders or that
involve the absence of good faith on the part of the director, (iii) any
transaction from which a director derived an improper personal benefit, (iv)
acts or omissions that show a reckless disregard for the director's duty to the
Company or its shareholders in circumstances in which the director was aware, or
should have been aware, in the ordinary course of performing a director's
duties, of a risk of serious injury to the Company or its shareholders, (v) acts
or omissions that constitute an unexcused pattern of inattention that amounts to
an abdication of the director's duty to the Company or its shareholders, (vi)
any act or omission occurring prior to the date when the exculpation provision
became effective and (vii) any act or omission as an officer, notwithstanding
that the officer is also a director or that his or her actions, if negligent or
improper, have been ratified by the directors. The effect of the provisions in
the Articles of Incorporation is to eliminate the rights of the Company and its
shareholders (through shareholder derivative suits on behalf of the Company) to
recover monetary damages against a director for breach of duty as a director,
including breaches resulting from negligent behavior in the context of
transactions involving a change of control of the Company or otherwise, except
in the situations described in clauses (i) through (vii) above. These provisions
will not alter the liability of directors under federal securities laws.
The Company is authorized to provide indemnification of its
agents (as defined in Section 317 of the California Corporations Code) for
breach of duty to the Company and its shareholders through bylaw provisions or
through agreements with the agents, or both, in excess of the indemnification
otherwise permitted by Section 317 of the California Corporations Code, subject
to the limits on such excess indemnification set forth in Section 204 of the
California Corporations Code. The Company has entered into such indemnification
agreements with each of its directors and officers.
Item 7. Exemption from Registration Claimed
Not applicable.
Item 8. Exhibits
<TABLE>
<CAPTION>
Exhibit Number Exhibits
- -------------- --------
<S> <C>
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Independent Auditors' Consent - Peterson & Co.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.1
24. Power of Attorney. Reference is made to page II-4 of this Registration
Statement.
99.1 1995 Stock Option/Stock Issuance Plan, as amended and restated through
October 8, 1997.
99.2* Form of Stock Option Agreement.
</TABLE>
II-2
<PAGE> 4
<TABLE>
<S> <C>
99.3* Form of Notice of Grant.
</TABLE>
----------------------
* These exhibits were previously filed as part of, and are hereby
incorporated by reference to exhibits 99.2 and 99.3 of, the Company's
Form S-8 registration statement filed on October 21, 1996.
Item 9. Undertakings
A. The undersigned Registrant hereby undertakes: (1) to file,
during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement (i) to include any prospectus required
by Section 10(a)(3) of the Securities Act of 1933, (ii) to reflect in the
prospectus any facts or events arising after the effective date of this
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in this Registration Statement, and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in this Registration Statement or any material change to such
information in this Registration Statement; provided, however, that clauses
(1)(i) and (1)(ii) shall not apply if the information required to be included in
a post-effective amendment by those paragraphs is contained in periodic reports
filed by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference into this
Registration Statement; (2) that for the purpose of determining any liability
under the Securities Act of 1933 each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof; and (3) to remove from registration by
means of a post-effective amendment any of the securities being registered which
remain unsold at the termination of the Registrant's 1995 Stock Option Plan.
II-3
<PAGE> 5
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-8 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Diego, State of California, on this 21st
day of November, 1997.
CARDIONDYNAMICS INTERNATIONAL CORPORATION
By /s/ Richard E. Otto
---------------------------------------
Richard E. Otto
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS:
That the undersigned officers and directors of CardioDynamics
International Corporation, a California corporation, do hereby constitute and
appoint Richard E. Otto and Stephen P. Loomis, or either of them, their lawful
attorneys and agents, with full power and authority to do any and all acts and
things and to execute any and all instruments which said attorneys and agents,
and any one of them, determine may be necessary or advisable or required to
enable said corporation to comply with the Securities Act of 1933, as amended,
and any rules or regulations or requirements of the Securities and Exchange
Commission in connection with this Registration Statement. Without limiting the
generality of the foregoing power and authority, the powers granted include the
power and authority to sign the names of the undersigned officers and directors
in the capacities indicated below to this Registration Statement, to any and all
amendments, both pre-effective and post-effective, and supplements to this
Registration Statement, and to any and all instruments or documents filed as
part of or in conjunction with this Registration Statement or amendments or
supplements thereof, and each of the undersigned hereby ratifies and confirms
all that said attorneys and agents, or any of them, shall do or cause to be done
by virtue hereof. This Power of Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this
Power of Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ RICHARD E. OTTO Chief Executive Officer November 21, 1997
- -----------------------------
Richard E. Otto and Director
(Principal Executive Officer)
/s/ STEPHEN P. LOOMIS Vice-President, Finance and Chief Financial Director November 21, 1997
- -----------------------------
Stephen P. Loomis (Principal Financial Officer and Accounting Officer)
/s/ STEPHENSON M. DECHANT Director November 21, 1997
- -----------------------------
Stephenson M. Dechant
/s/ CAM L. GARNER Director November 21, 1997
- -----------------------------
Cam L. Garner
/s/ NICHOLAS V. DIACO, M.D. Director November 21, 1997
- -----------------------------
Nicholas V. Diaco, M.D.
Director November___, 1997
- -----------------------------
James C. Gilstrap
/s/ LOUIS P. FERRERO Director November 21, 1997
- -----------------------------
</TABLE>
II-4
<PAGE> 6
<TABLE>
<S> <C> <C>
Louis P. Ferrero
/s/ MICHAEL D. PADILLA Director November 21, 1997
- -----------------------------
Michael D. Padilla
/s/ ALLEN E. PAULSON Director November 21, 1997
- -----------------------------
Allen E. Paulson
/s/ RICHARD O. MARTIN Director November 21, 1997
- -----------------------------
Richard O. Martin
</TABLE>
II-5
<PAGE> 7
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Number Exhibits
- -------------- --------
<S> <C>
5.1 Opinion of Brobeck, Phleger & Harrison LLP.
23.1 Independent Auditors' Consent - Peterson & Co.
23.2 Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5.1
24. Power of Attorney. Reference is made to page II-4 of this Registration
Statement.
99.1 1995 Stock Option/Stock Issuance Plan, as amended and restated through
October 8, 1997.
99.2* Form of Stock Option Agreement.
99.3* Form of Notice of Grant.
</TABLE>
----------------------
* These exhibits were previously filed as part of, and are hereby incorporated
by reference to exhibits 99.2 and 99.3 of, the Company's Form S-8 registration
statement filed on October 21, 1996.
<PAGE> 1
EXHIBIT 5.1
Opinion of Brobeck, Phleger & Harrison LLP
November 21, 1997
CardioDynamics International Corporation
6175 Nancy Ridge Drive, Suite 300
San Diego, California 92121
Ladies and Gentlemen:
In connection with your registration on Form S-8 (the "Registration
Statement") under the Securities Act of 1933, as amended, of an additional
1,000,000 shares of Common Stock of CardioDynamics International Corporation
(the "Company") under the Company's Amended and Restated 1995 Stock Option/Stock
Issuance Plan, we advise you that, in our opinion, if and when such shares have
been issued and sold (and the consideration therefor received) pursuant to the
provisions of the option agreements executed under the Company's Amended and
Restated 1995 Stock Option/Stock Issuance Plan and in accordance with the
Registration Statement, such shares will be duly-authorized, validly-issued,
fully-paid and non-assessable shares of the Company's Common Stock.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Yours very truly,
BROBECK, PHLEGER & HARRISON LLP
<PAGE> 1
EXHIBIT 23.1
Independent Auditors' Consent - Peterson & Co.
We consent to the reference of our firm under the caption "Experts" and to the
incorporation by reference in this Registration Statement of CardioDynamics
International Corporation on Form S-8 (pertaining to 1,000,0000 common shares)
and in the related prospectuses of our report dated February 25, 1997 (except
for Note 14 as to which the date is March 6, 1997), on the financial statements
of CardioDynamics International Corporation for the fiscal year ended November
30, 1996.
/s/ Peterson & Co.
------------------
PETERSON & CO.
San Diego, California
November 21, 1997
<PAGE> 1
EXHIBIT 23.2
Consent of Brobeck, Phleger & Harrison LLP is contained in Exhibit 5
<PAGE> 1
EXHIBIT 24
Power of Attorney. Reference is made to page II-4 of this Registration Statement
<PAGE> 1
EXHIBIT 99.1
CardioDynamics International Corporation 1995 Stock Option/Stock Issuance Plan
<PAGE> 2
CARDIODYNAMICS INTERNATIONAL CORPORATION
1995 STOCK OPTION/STOCK ISSUANCE PLAN
(AS AMENDED AND RESTATED THROUGH OCTOBER 8, 1997)
ARTICLE ONE
GENERAL PROVISIONS
I. PURPOSE OF THE PLAN
This 1995 Stock Option/Stock Issuance Plan (the "Plan") is intended
to promote the interests of CardioDynamics International Corporation, a
California 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 not otherwise defined shall have the meanings
assigned to such terms in the attached Appendix.
II. STRUCTURE OF THE PLAN
A. The Plan shall be divided into three 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 of the Corporation,
(ii) the Stock Issuance Program under which eligible persons
may, at the discretion of the Plan Administrator, be issued shares of
common stock of the Corporation directly, either through the immediate
purchase of such shares or as a bonus for services rendered the
Corporation (or any Parent or Subsidiary), and
(iii) the Automatic Option Grant Program under which
non-employee directors shall automatically receive option grants at
periodic intervals to purchase shares of common stock of the Corporation.
B. The provisions of Articles One and Five shall apply to all equity
programs under the Plan and shall accordingly govern the interests of all
persons under the Plan.
III. ADMINISTRATION OF THE PLAN
A. This Plan shall be administered by the Board or by a compensation
committee consisting of two or more Board members who assume full responsibility
for the administration of the Plan (the "Plan Administrator"). Members of any
such compensation 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.
B. The Plan Administrator shall have full power and authority
(subject to the express provisions of the Plan) to establish such rules and
regulations as it may deem appropriate for the proper administration of the Plan
and to make such determinations under, and issue such interpretations of, the
Plan and any outstanding option grants or stock issuances as it may deem
necessary or advisable. Decisions of the Plan Administrator shall be final and
binding on all parties who have an interest in the Plan or any outstanding
option or stock issuance.
<PAGE> 3
C. Notwithstanding the above, the administration of the Automatic
Option Grant Program under Article Three shall be self executing in accordance
with the terms and conditions thereof and the Plan Administrator shall not
exercise any discretionary functions in respect to matters governed by Article
Three.
D. The Plan Administrator shall, within the scope of its
administrative jurisdiction under the Plan, have full authority to determine,
(i) with respect to the option grants under the Discretionary Option Grant
Program, which eligible persons are to receive option grants, the time or times
when such option grants are to be made, the number of shares to be covered by
each such grant, the status of the granted option as either an Incentive Option
or a Non-Statutory Option, the time or times at which each option is to become
exercisable, the vesting schedule (if any) applicable to the option shares
(provided that vesting shall not be slower than 20% per year over five (5) years
from the option grant date) and the maximum term for which the option is to
remain outstanding and (ii) with respect to stock issuances under the Stock
Issuance Program, which eligible persons are to receive stock issuances, the
time or times when such issuances are to be made, the number of shares to be
issued to each Participant, the vesting schedule (if any) applicable to the
issued shares and the consideration to be paid by the Participant for such
shares.
E. The Plan Administrator shall have the absolute discretion either
to grant options in accordance with the Discretionary Option Grant Program or to
effect stock issuances in accordance with the Stock Issuance Program.
IV. OPTION GRANTS AND STOCK ISSUANCES
A. Subject to Section V.B below, the persons eligible to be a
recipient of stock issuances under the Stock Issuance Program (each recipient, a
"Participant") and/or option grants pursuant to the Discretionary Option Grant
Program (each recipient, an "Optionee") are as follows:
(i) directors, officers and other employees of the Corporation
(or its parent or subsidiary corporations) who render services which
contribute to the management, growth and financial success of the
Corporation (or its parent or subsidiary corporations); and
(ii) those consultants or other independent contractors who
provide valuable services to the Corporation (or its parent or subsidiary
corporations).
B. The individuals eligible to receive option grants under the
Automatic Option Grant Program shall be those individuals who serve as
non-employee Board members during the term of the Plan.
V. STOCK SUBJECT TO THE PLAN
A. The stock issuable under the Plan shall be shares of authorized
but unissued common stock of the Corporation ("Common Stock"). The maximum
number of shares of Common Stock which may be issued over the term of the Plan
shall not exceed 2,529,000 shares.
B. No one person participating in the Plan may receive options,
separately exercisable stock appreciation rights and direct stock issuances for
more than 800,000 shares of Common Stock in the aggregate over the term of the
Plan.
C. Shares of Common Stock subject to outstanding options shall be
available for subsequent issuance under the Plan to the extent (i) the options
expire or terminate for any reason prior to exercise in full or (ii) the options
are cancelled in accordance with the cancellation-regrant provisions of Article
Two. All shares issued under the Plan, whether or not those shares are
subsequently 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 be paid with shares of
Common Stock or should shares of Common Stock otherwise issuable under the Plan
be withheld by the Corporation in
2.
<PAGE> 4
satisfaction of the withholding taxes incurred in connection with the exercise
of an option or the vesting of a stock issuance under the Plan, then the number
of shares of Common Stock available for issuance under the Plan shall be reduced
by the gross number of shares for which the option is exercised or which vest
under the stock issuance, and not by the net number of shares of Common Stock
issued to the holder of such option or stock issuance.
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, separately
exercisable stock appreciation rights and direct stock issuances over the term
of the Plan, (iv) the number and/or class of securities for which automatic
option grants are to be subsequently made 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 or Stock Issuance Agreement in
order to prevent the dilution or enlargement of benefits thereunder. The
adjustments determined by the Plan Administrator shall be final, binding and
conclusive.
ARTICLE TWO
DISCRETIONARY OPTION GRANT PROGRAM
I. OPTION TERMS
Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
shall comply with the terms specified below. Each document evidencing an
Incentive Option shall, in addition, be subject to the provisions of the Plan
applicable to such options.
A. Exercise Price.
1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date; provided that
the price shall be 110% of the Fair Market Value per share of Common Stock on
the option grant date in the case of any person who owns stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Corporation or any Parent or Subsidiary (a "10% Shareholder").
2. The exercise price shall become immediately due upon
exercise of the option and shall, subject to the provisions of Section I of
Article Five and the documents evidencing the option, be payable in one or more
of the forms specified below:
(i) cash or check made payable to the Corporation,
(ii) shares of Common Stock held for the requisite period
necessary to avoid a charge to the Corporation's earnings for financial
reporting purposes and valued at Fair Market Value on the exercise date,
or
(iii) to the extent the option is exercised for vested shares,
through a special sale and remittance procedure pursuant to which the
Optionee shall concurrently provide irrevocable written instructions to
(a) a Corporation-designated brokerage firm to effect the immediate sale
of the purchased shares and remit to the Corporation, out of the sale
proceeds available on the settlement date, sufficient funds to cover the
aggregate exercise price payable for the purchased shares plus all
applicable Federal, state and local income and employment taxes required
to be withheld by the Corporation by reason of such exercise and (b) the
Corporation to deliver the
3.
<PAGE> 5
certificates for the purchased shares directly to such brokerage firm in
order to complete the sale transaction.
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 (which shall be at
least six months from cessation of Service if cessation was caused by
death or Permanent Disability, and at least 30 days from cessation of
Service if cessation was caused by other than death, Permanent Disability,
or termination for Misconduct or other good cause), 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. 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) 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
4.
<PAGE> 6
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. Shareholder Rights. The holder of an option shall have no
shareholder 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, shall be consistent with the provisions of California
Corporations Commissioner Rule 260.140.41(k)(2), and shall be 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 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
within the meaning of Internal Revenue Code Section 414(p). 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
II. INCENTIVE OPTIONS
The terms specified below shall be applicable to all Incentive
Options. Except as modified by the provisions of this Section II, all the
provisions of Articles One, Two and Five 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% Shareholder. If any Employee to whom an Incentive Option is
granted is a 10% shareholder (within the meaning of Internal Revenue Code
Section 424(d)), then the exercise price per share shall not be less than one
hundred ten percent (110%) of the Fair Market Value per share of Common Stock on
the option grant date, and the option term shall not exceed five (5) years
measured from the option grant date.
III. CORPORATE TRANSACTION
5.
<PAGE> 7
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
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. Immediately following the consummation of the Corporate
Transaction, all outstanding options shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation (or
parent thereof).
D. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction had
the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments 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.
E. Any options which are assumed or replaced in the Corporate
Transaction and do not otherwise accelerate at that time, shall automatically
accelerate (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) in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within eighteen (18) 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.
F. 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.
G. 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.
IV. 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
6.
<PAGE> 8
Grant Program 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.
V. 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:
(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 persons subject to Section 16 of the Act 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.
(iv) The balance of the option (if any) shall continue in full
force
7.
<PAGE> 9
and effect in accordance with the documents evidencing such option.
ARTICLE THREE
STOCK ISSUANCE PROGRAM
I. STOCK ISSUANCE TERMS
Shares of Common Stock may be issued under the Stock Issuance
Program through direct and immediate issuances without any intervening option
grants. Each such stock issuance shall be evidenced by a Stock Issuance
Agreement which complies with the terms specified below.
A. Purchase Price
1. The purchase 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 stock issuance date; provided that
the price shall be 110% of the Fair Market Value per share of Common Stock on
the stock issuance date in the case of any 10% Shareholder.
2. Subject to the provisions of Section I of Article Five,
shares of Common Stock may be issued under the Stock Issuance Program for one or
both of the following items of consideration which the Plan Administrator may
deem appropriate in each individual instance:
(i) cash or check made payable to the Corporation, or
(ii) past services rendered to the Corporation (or any Parent
or Subsidiary).
B. Vesting Provisions
1. Shares of Common Stock issued under the Stock Issuance
Program may, in the discretion of the Plan Administrator, be fully and
immediately vested upon issuance or may vest in one or more installments over
the Participant's period of Service or upon attainment of specified performance
objectives. The of the vesting schedule applicable to any unvested shares of
Common Stock issued under the Stock Issuance Program, namely:
(i) the Service period to be completed by the Participant or
the performance objectives to be attained,
(ii) the number of installments in which the shares are to
vest,
(iii) the interval or intervals (if any) which are to lapse
between installments, and
(iv) the effect which death, Permanent Disability or other
event designated by the Plan Administrator is to have upon the vesting
schedule,
shall be determined by the Plan Administrator (provided that vesting with
respect to the Participant's period of Service shall not be slower than 20% per
year over five (5) years from the date the stock was purchased) and incorporated
into the stock issuance agreement.
2. Any new, substituted or additional securities or other
property (including money paid other than as a regular cash dividend) which the
Participant may have the right to receive with respect to the Participant's
unvested shares of Common Stock by reason of any stock dividend, stock split,
recapitalization,
8.
<PAGE> 10
combination of shares, exchange of shares or other change affecting the
outstanding Common Stock as a class without the Corporation's receipt of
consideration shall be issued subject to (i) the same vesting requirements
applicable to the Participant's unvested shares of Common Stock and (ii) such
escrow arrangements as the Plan Administrator shall deem appropriate.
3. The Participant shall have full shareholder rights with
respect to any shares of Common Stock issued to the Participant under the Stock
Issuance Program, whether or not the Participant's interest in those shares is
vested. Accordingly, the Participant shall have the right to vote such shares
and to receive any regular cash dividends paid on such shares.
4. Should the Participant cease to remain in Service while
holding one or more unvested shares of Common Stock issued under the Stock
Issuance Program or should the performance objectives not be attained with
respect to one or more such unvested shares of Common Stock, then those shares
shall be immediately surrendered to the Corporation for cancellation, and the
Participant shall have no further shareholder rights with respect to those
shares. To the extent the surrendered shares were previously issued to the
Participant for consideration paid in cash or cash equivalent (including the
Participant's purchase-money indebtedness), the Corporation shall repay to the
Participant the cash consideration paid for the surrendered shares and shall
cancel the unpaid principal balance of any outstanding purchase-money note of
the Participant attributable to such surrendered shares.
5. The Plan Administrator may in its discretion waive the
surrender and cancellation of one or more unvested shares of Common Stock (or
other assets attributable thereto) which would otherwise occur upon the
non-completion of the vesting schedule applicable to such shares. Such waiver
shall result in the immediate vesting of the Participant's interest in the
shares of Common Stock as to which the waiver applies. Such waiver may be
effected at any time, whether before or after the Participant's cessation of
Service or the attainment or non-attainment of the applicable performance
objectives.
C. Limited Transferability of Stock Issuance Rights. During the
lifetime of the Participant, the stock issuance right shall be personal to the
Participant and shall not be assignable or transferrable other than by will or
by the laws of descent and distribution following the Participant's death.
II. CORPORATE TRANSACTION
A. All of the outstanding repurchase rights under the Stock Issuance
Program shall terminate automatically, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
of any Corporate Transaction, except to the extent (i) those repurchase rights
are assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed in the stock issuance agreement.
B. Any repurchase rights that are assigned in the Corporate
Transaction shall automatically terminate, and all the shares of Common Stock
subject to those terminated rights shall immediately vest in full, in the event
the Optionee's Service should subsequently terminate by reason of an Involuntary
Termination within eighteen (18) months following the effective date of such
Corporate Transaction.
III. SHARE ESCROW/LEGENDS
Unvested shares may, in the Plan Administrator's discretion, be held
in escrow by the Corporation until the Participant's interest in such shares
vests or may be issued directly to the Participant with restrictive legends on
the certificates evidencing those unvested shares.
ARTICLE FOUR
AUTOMATIC OPTION GRANT PROGRAM
9.
<PAGE> 11
I. TERMS AND CONDITIONS OF AUTOMATIC OPTION GRANTS
A. Grant of Options. Option grants will be made automatically to
each non-employee Board member who has not otherwise been in the prior employ of
the Corporation during the preceding two years. Each such person shall
automatically be granted a nonstatutory option to purchase 1,000 shares with
respect to each calendar month (beginning August 1995) during all of which he or
she serves as a director, on the last day of each such respective calendar
month. The number of shares granted pursuant to this Automatic Grant Program
shall be subject to periodic adjustment pursuant to the applicable provisions of
Section V.D. of Article One.
B. Exercise Price. The exercise price per share of each automatic
option grant made under this Article Four shall be equal to one hundred percent
(100%) of the Fair Market Value per share of Common Stock on the grant date;
provided that the exercise price shall be 110% of the Fair Market Value per
share of Common Stock on the grant date in the case of any 10% Shareholder.
C. Payment.
The exercise price shall be payable in one of the alternative
forms specified below:
(i) full payment in cash or check drawn to the Corporation's
order;
(ii) full payment in shares of Common Stock held for at least
six (6) months and valued at fair market value on the Exercise Date (as
such term is defined below);
(iii) full payment in a combination of shares of Common Stock
held for at least six (6) months and valued at fair market value on the
Exercise Date and cash or check; or
(iv) full payment through a broker-dealer sale and remittance
procedure pursuant to which the non-employee Board member (A) shall
provide irrevocable written instructions to a 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 option price payable for the
purchased shares plus all applicable Federal and state income taxes
required to be withheld by the Corporation in connection with such
purchase and (B) shall provide written directives to the Corporation to
deliver the certificates for the purchased shares directly to such
brokerage firm in order to complete the sale transaction.
For purposes of this Section I.C. of Article Four, the Exercise Date
shall be the date on which written notice of the option exercise is delivered to
the Corporation. Except to the extent the sale and remittance procedure is
utilized in connection with the exercise of the option, payment of the option
price for the purchased shares must accompany such notice.
D. Option Term. Each automatic grant under this Article Four shall
have a maximum term of ten (10) years measured from the automatic grant date.
E. Exercisability. Each automatic grant under this Article Four
shall be exercisable in full immediately.
F. Non-Transferability. During the lifetime of the optionee, each
automatic option grant, together with the limited stock appreciation right
pertaining to such option, if any, shall be exercisable only by the optionee and
shall not be assignable or transferable by the optionee other than a transfer of
the option effected by will or by the laws of descent and distribution following
optionee's death.
G. Effect of Termination of Board Membership.
10.
<PAGE> 12
Should the optionee cease to serve as a Board member for any
reason (other than death) while holding one or more automatic option grants
under this Article Four, then such optionee shall have a twenty-four (24) month
period following the date of such cessation of Board membership in which to
exercise each such option.
In no event shall any automatic grant under this Article Four
remain exercisable after the specified expiration date of the ten (10)-year
option term. Upon the expiration of the applicable exercise period in accordance
with the preceding subparagraph or (if earlier) upon the expiration of the ten
(10) year option term, the automatic grant shall terminate and cease to be
outstanding for any unexercised shares.
II. LIMITED STOCK APPRECIATION RIGHT.
A. Upon the occurrence of a Hostile Take-Over, each non-employee
Board member holding an automatic option grant which has been outstanding under
this Article Four for a period of at least six (6) months shall have the
unconditional right (exercisable for a thirty (30)-day period following such
Hostile Take-Over) to surrender such option in return for 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 surrendered option
(whether or not the option is otherwise at the time exercisable for such shares)
over (ii) the aggregate exercise price payable for such shares. Such cash
distribution shall be paid within five (5) days following the option surrender
date. 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.
B. The shares of Common Stock subject to each option surrendered in
connection with the Hostile Take-Over shall NOT be available for subsequent
issuance under this Plan.
III. CORPORATE TRANSACTION/CHANGE IN CONTROL/HOSTILE TAKE-OVER
A. Immediately following the consummation of any Corporate
Transaction, each automatic option grant shall (subject to paragraph B below)
terminate and cease to be outstanding, except to the extent assumed by the
successor corporation (or parent thereof).
B. Upon the occurrence of a Hostile Take-Over, the Optionee shall
have a thirty (30)-day period in which to surrender to the Corporation each
automatic option held by him or her for a period of at least six (6) months. 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 surrendered option over (ii) the
aggregate exercise price payable for such shares. Such cash distribution shall
be paid within five (5) days following the surrender of the option to the
Corporation. No approval or consent of the Board shall be required in connection
with such option surrender and cash distribution.
C. 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.
IV. 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.
V. 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.
ARTICLE FIVE
11.
<PAGE> 13
MISCELLANEOUS
I. ACCELERATION
The Plan Administrator shall have the discretion, exercisable either
at the time an option is granted under the Discretionary Stock Option Program,
at the time that stock is issued under the Stock Issuance Program or at any time
while the option or stock remains outstanding, to provide for the acceleration
of one or more outstanding options and the termination of repurchase rights on
one or more outstanding shares upon the occurrence of such events as the Plan
Administrator may determine, including upon a Corporate Transaction regardless
of whether or not such options are to be assumed or replaced or the repurchase
rights are to be assigned in the Corporate Transaction.
II. FINANCING
A. The Plan Administrator may permit any Optionee or Participant to
pay the option exercise price under the Discretionary Option Grant Program or
the purchase price for shares issued under the Stock Issuance Program by
delivering a promissory note payable in one or more installments. The terms of
any such promissory note (including the interest rate and the terms of
repayment) shall be established by the Plan Administrator in its sole
discretion. Promissory notes may be authorized with or without security or
collateral. In all events, the maximum credit available to the Optionee or
Participant may not exceed the sum of (i) the aggregate option exercise price or
purchase price payable for the purchased shares plus (ii) any Federal, state and
local income and employment tax liability incurred by the Optionee or the
Participant in connection with the option exercise or share purchase.
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.
III. TAX WITHHOLDING
A. The Corporation's obligation to deliver shares of Common Stock
upon the exercise of options or stock appreciation rights or upon the issuance
or vesting of such shares under the Plan shall be subject to the satisfaction of
all applicable Federal, state and local income and employment tax withholding
requirements.
B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options or unvested shares of Common Stock under the
Plan (other than the options granted or the shares issued under the Automatic
Option Grant Program) with the right to use shares of Common Stock in
satisfaction of all or part of the federal, state and local income or employment
taxes incurred by such holders in connection with the exercise of their options
or the vesting of their shares. 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 or the vesting of such shares, a
portion of those shares with an aggregate Fair Market Value equal to the
percentage of such 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 or the
shares vest, one or more shares of Common Stock previously acquired by
such holder (other than in connection with the option exercise or share
vesting triggering the taxes) with an aggregate Fair Market Value equal to
the percentage of such taxes (not to exceed one hundred percent (100%))
designated by the holder.
IV. EFFECTIVE DATE AND TERM OF THE PLAN
12.
<PAGE> 14
A. The Plan shall become effective on the date the Plan is adopted
by the Board, and options may be granted under the Discretionary Option Grant
Program from and after the effective date. However, no options granted under the
Plan may be exercised, and no shares shall be issued under the Plan, until the
Plan is approved by the Corporation's shareholders. If such shareholder approval
is not obtained within twelve (12) months after such 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 terminate upon the earliest of (i) June 14, 2005,
(ii) the date on which all shares available for issuance under the Plan shall
have been issued pursuant to the exercise of the options or the issuance of
shares (whether vested or unvested) under the Plan or (iii) the termination of
all outstanding options in connection with a Corporate Transaction. Upon such
Plan termination, all options and unvested stock issuances outstanding on such
date shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such options or issuances.
13.
<PAGE> 15
V. 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, stock appreciation rights or unvested stock issuances at the
time outstanding under the Plan unless the Optionee or the Participant 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. In addition, the Board shall
not, without the approval of the Corporation's shareholders, (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,
separately exercisable stock appreciation rights and direct stock issuances 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.
B. Options to purchase shares of Common Stock may be granted under
the Discretionary Option Grant Program and shares of Common Stock may be issued
under the Stock Issuance Program that are in each instance in excess of the
number of shares then available for issuance under the Plan, provided any excess
shares actually issued under those programs are held in escrow until there is
obtained shareholder approval of an amendment sufficiently increasing the number
of shares of Common Stock available for issuance under the Plan. If such
shareholder approval is not obtained within twelve (12) months after the date
the first such excess issuances are made, then (i) any unexercised options
granted on the basis of such excess shares shall terminate and cease to be
outstanding and (ii) the Corporation shall promptly refund to the Optionees and
the Participants the exercise or purchase price paid for any excess shares
issued under the Plan and held in escrow, together with interest (at the
applicable Short Term Federal Rate) for the period the shares were held in
escrow, and such shares shall thereupon be automatically cancelled and cease to
be outstanding.
VI. 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.
VII. 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 (i) upon the exercise of any option or stock appreciation right or (ii)
under the Stock Issuance Program shall be subject to the Corporation's
procurement of all approvals and permits required by regulatory authorities
having jurisdiction over the Plan, the 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 NASD, if applicable) on which Common Stock is then
listed for trading.
14.
<PAGE> 16
VIII. NO EMPLOYMENT/SERVICE RIGHTS
Nothing in the Plan shall confer upon the Optionee or the
Participant any right to continue in Service for any period of specific duration
or interfere with or otherwise restrict in any way the rights of the Corporation
(or any Parent or Subsidiary employing or retaining such person) or of the
Optionee or the Participant, which rights are hereby expressly reserved by each,
to terminate such person's Service at any time for any reason, with or without
cause.
IX. FINANCIAL STATEMENTS
Each Optionee and Participant shall be entitled to receive annually
the Corporation's annual report to shareholders and the financial statements
included therein.
15.
<PAGE> 17
APPENDIX
The following definitions shall be in effect under the Plan:
A. BOARD shall mean the Corporation's Board of Directors.
B. 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 Securities Exchange Act of 1934) 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 shareholders
which the Board does not recommend such shareholders 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.
C. CORPORATE TRANSACTION shall mean either of the following
shareholder-approved transactions to which the Corporation is a party:
(i) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of which
is to change the State of the Company's incorporation,
(ii) the sale, transfer or other disposition of all or
substantially all of the assets of the Company in liquidation or
dissolution of the Company, or
(iii) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%) of
the total combined voting power of the Company's outstanding securities
are transferred to holders different from those who held such securities
immediately prior to such merger.
D. CORPORATION shall mean CardioDynamics International Corporation, a
California corporation.
E. 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.
F. 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
Stock 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
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Stock 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) If the Common Stock is at the time not traded on the
Nasdaq Stock Market or listed on any Stock Exchange, the Fair Market Value
shall be determined by the Plan Administrator after taking into account
such factors as the Plan Administrator shall deem appropriate.
G. HOSTILE TAKE-OVER shall mean a change in ownership of the Corporation
effected through 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
Securities Exchange Act of 1934) 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 shareholders which the Board does not recommend such
shareholders to accept.
H. INCENTIVE OPTION shall mean an option which satisfies the requirements
of Internal Revenue Code Section 422.
I. 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 any
non-discretionary and objective-standard incentive payment or bonus award)
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.
J. MISCONDUCT shall mean the commission of any act of fraud, embezzlement
or dishonesty by the Optionee or Participant, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation (or
any Parent or Subsidiary) may consider as grounds for the dismissal or discharge
of any Optionee, Participant or other person in the Service of the Corporation
(or any Parent or Subsidiary).
K. NON-STATUTORY OPTION shall mean an option which is not an Incentive
Option.
L. 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
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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.
M. PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
of the Optionee or the Participant to engage in any substantial gainful activity
by reason of any medically determinable physical or mental impairment expected
to result in death or to be of continuous duration of twelve (12) months or
more.
N. 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.
O. 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.
P. 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.
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