<PAGE> 1
As filed with the Securities and Exchange Commission on February 19, 1998
Registration No. 333-30889-01
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
POST-EFFECTIVE AMENDMENT
NO. 1
ON
FORM S-8
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933*
---------------
Cardinal Health, Inc.
---------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Ohio 31-0958666
---- ----------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
5555 Glendon Court, Dublin, Ohio 43016
-------------------------------- -----
(Address of Principal Executive Offices) (Zip Code)
</TABLE>
---------------
MediQual Systems, Inc. 1987 Nonqualified Stock Option Plan
MediQual Systems, Inc. 1996 Stock Incentive Plan
------------------------------------------------
(Full title of the plans)
---------------
George H. Bennett, Jr.,
Executive Vice President, Secretary and General Counsel
Cardinal Health, Inc.
5555 Glendon Court
Dublin, Ohio 43016
(Name and address of agent for service)
(614) 717-5000
(Telephone number, including area code, of agent for service)
---------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
Title of Amount Proposed Proposed Amount of
securities to to be maximum offering maximum aggregate registration
be registered registered(1) price per share(1) offering price fee
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares,
without par value 24,668 (2) (2) (2)
=================================================================================================================================
<FN>
(1) Also includes an indeterminable number of additional shares that may become issuable pursuant to the anti-dilution
provisions of the Plans.
(2) Not applicable. All filing fees payable in connection with the registration of the issuance of these securities were paid in
connection with the filing of the Registrant's Form S-4 Registration Statement (333-30889) on July 8, 1997.
* Filed as a Post-Effective Amendment on Form S-8 to such Form S-4 Registration Statement pursuant to the procedure described
in Part II under "Introductory Statement."
</FN>
</TABLE>
<PAGE> 2
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
INTRODUCTORY STATEMENT
Cardinal Health, Inc. (the "Company" or the "Registrant") hereby amends
its Registration Statement on Form S-4 (No. 333-30889) (the "Form S-4") by
filing this Post-Effective Amendment No. 1 on Form S-8 ("Amendment No. 1") with
respect to up to 24,668 of the Registrant's Common Shares, without par value
("Common Shares"), issuable in connection with the following plans
(collectively, the "Plans") of MediQual Systems, Inc. ("MediQual"): 1987
Nonqualified Stock Option Plan and 1996 Stock Incentive Plan. All such Common
Shares were previously included in the Form S-4.
On February 18, 1998, Hub Merger Corp., a Delaware corporation and a
wholly owned subsidiary of the Registrant ("HMC"), was merged with and into
MediQual (the "Merger") pursuant to an Amended and Restated Agreement and Plan
of Merger dated as of July 7, 1997, as amended, among the Registrant, HMC and
MediQual (the "Merger Agreement"). As a result of the Merger, each outstanding
share of MediQual Common Stock (with certain specified exceptions) was converted
into Common Shares of the Registrant pursuant to the exchange ratio (the
"Exchange Ratio") set forth in the Merger Agreement. Also as a result of the
Merger, shares of MediQual Common Stock are no longer issuable upon the exercise
of options to purchase MediQual Common Stock ("MediQual Options") pursuant to
the Plans. Instead, participants in the Plans will receive in lieu of MediQual
Common Stock that number of Common Shares of the Registrant equal to the number
of shares of MediQual Common Stock issuable immediately prior to the effective
time of the Merger upon exercise of a MediQual Option multiplied by the Exchange
Ratio, with an exercise price for such option equal to the exercise price which
existed under the corresponding MediQual Option divided by the Exchange Ratio.
The designation of Amendment No. 1 as Registration No. 333-30889-01
denotes that Amendment No. 1 relates only to the Common Shares issuable pursuant
to the Plans and that this is the first Post-Effective Amendment to the S-4
filed with respect to such shares.
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The documents listed below are incorporated by reference in the
registration statement. All documents filed by the Company pursuant to Sections
13(a), 13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), subsequent to the date of the filing of this registration
statement and prior to the filing of a post-effective amendment that indicates
that all securities registered hereunder have been sold, or that de-registers
all securities then remaining unsold, shall be deemed to be incorporated by
reference in the registration statement and to be a part hereof from the date of
the filing of such documents.
(a) The Annual Report on Form 10-K of the Company for the fiscal year
ended June 30, 1997 filed with the Commission on September 29, 1997, as amended
by Form 10-K/A (Amendment No. 1) filed with the Commission on January 7, 1998;
(b) The information contained in the Company's Proxy Statement dated
October 13, 1997 for its Annual Meeting of Shareholders held on November 5, 1997
that was filed with the Commission on Schedule 14A on October 13, 1997, other
than the information contained therein under the captions "Report of the
Committee on Executive Compensation" and "Performance Graphs";
(c) The Quarterly Report on Form 10-Q of the Company for the fiscal
quarter ended September 30, 1997 filed with the Commission on November 14, 1997;
(d) The Quarterly Report on Form 10-Q of the Company for the fiscal
quarter ended December 31, 1997 filed with the Commission on February 11, 1998;
and
(e) The description of the Company's Common Shares contained in the
Company's Registration Statement on Form 8-A dated August 19, 1994, pursuant to
Section 12 of the Exchange Act.
<PAGE> 3
ITEM 5. INTEREST OF NAMED EXPERTS AND COUNSEL.
The legality of the Common Shares offered hereby has been passed upon
for the Company by Paul S. Williams, Assistant General Counsel of the Company.
Mr. Williams holds unvested options to purchase Common Shares of the Company.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 1701.13(E) of the Ohio Revised Code sets forth conditions and
limitations governing the indemnification of officers, directors, and other
persons.
Article 6 of the Company's Restated Code of Regulations ("Code of
Regulations"), as amended, contains certain indemnification provisions adopted
pursuant to authority contained in Section 1701.13(E) of the Ohio Revised Code.
The Company's Code of Regulations provides for the indemnification of its
officers, directors, employees, and agents against all expenses with respect to
any judgments, fines, and amounts paid in settlement, or with respect to any
threatened, pending, or completed action, suit, or proceeding to which they were
or are parties or are threatened to be made parties by reason of acting in such
capacities, provided that it is determined, either by a majority vote of a
quorum of disinterested directors of the Company or the shareholders of the
Company or otherwise as provided in Section 1701.13(E) of the Ohio Revised Code,
that (a) they acted in good faith and in a manner they reasonably believed to be
in or not opposed to the best interest of the Company; (b) in any action, suit,
or proceeding by or in the right of the Company, they were not, and have not
been adjudicated to have been, negligent or guilty of misconduct in the
performance of their duties to the Company; and (c) with respect to any criminal
action or proceeding, that they had no reasonable cause to believe that their
conduct was unlawful. Section 1701.13(E) provides that to the extent a director,
officer, employee, or agent has been successful on the merits or otherwise in
defense of any such action, suit, or proceeding, he shall be indemnified against
expenses reasonably incurred in connection therewith. At present there are no
material claims, actions, suits, or proceedings pending where indemnification
would be required under these provisions, and the Company does not know of any
such threatened claims, actions, suits, or proceedings which may result in a
request for such indemnification.
The Company has entered into indemnification contracts with its
directors and executive officers. These contracts generally: (i) confirm the
existing indemnity provided to them under the Company's Code of Regulations and
assure that this indemnity will continue to be provided; (ii) provide that if
the Company does not maintain directors' and officers' liability insurance, the
Company will, in effect, become a self-insurer of the coverage; and (iii)
provide that, in addition, the directors and officers shall be indemnified to
the fullest extent permitted by law against all expenses (including legal fees),
judgments, fines, penalties, and settlement amounts paid or incurred by them in
any action or proceeding, including any action by or in the right of the
Company, on account of their service as a director, officer, employee, or agent
of the Company or at the request of the Company as a director, officer,
employee, trustee, fiduciary, manager, member or agent of another corporation,
partnership, trust, limited liability company, employee benefit plan or other
enterprise; and (iv) provide for the mandatory advancement of expenses to the
executive officer or director in connection with the defense of any proceedings,
provided the executive officer or director agrees to reimburse the Company for
that advancement if it is ultimately determined that the executive officer or
director is not entitled to indemnification for that proceeding under the
agreement. Coverage under the contracts is excluded: (A) on account of conduct
which is finally adjudged to be knowingly fraudulent, deliberately dishonest, or
willful misconduct; or (B) if a final court of adjudication shall determine that
such indemnification is not lawful; or (C) in respect of any suit in which
judgment is rendered for violations of Section 16(b) of the Securities and
Exchange Act or similar provisions of any federal, state or local statutory law;
or (D) on account of any remuneration paid which is finally adjudged to have
been in violation of law; or (E) on account of conduct occurring prior to the
time the executive officer or director became an officer, director, employee, or
agent of the Company or its subsidiaries (but in not event earlier than the time
such entity became a subsidiary of the Company); or (F) with respect to
proceedings initiated or brought voluntarily by the executive officer or
director and not by way of defense, except for proceedings brought to enforce
rights under the indemnification agreement.
-2-
<PAGE> 4
ITEM 8. EXHIBITS.
<TABLE>
<CAPTION>
Exhibit Number Description of Exhibit
- -------------- ----------------------
<S> <C>
5 Opinion of Paul S. Williams as to legality of the Common Shares being registered
23(a) Consent of Deloitte & Touche LLP, Columbus, Ohio
23(b) Consent of Deloitte & Touche LLP, Costa Mesa, California
23(c) Consent of Arthur Andersen LLP
23(d) Consent of Ernst & Young LLP
23(e) Consent of Price Waterhouse LLP
23(f) Consent of Paul S. Williams (included in Opinion filed as Exhibit 5 hereto)
24 Power of attorney (included on the Signature Page of this Form S-8)
99(a) MediQual Systems, Inc. 1987 Nonqualified Stock Option Plan
99(b) MediQual Systems, Inc. 1996 Stock Incentive Plan
</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: (i) to
include any prospectus required by Section 10(a)(3) of the Securities Act of
1933, as amended (the "Securities Act"); (ii) to reflect in the prospectus any
facts or events arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set forth in
the registration statement; and (iii) to include any material information with
respect to the plans of distribution not previously disclosed in the
registration statement or any material change to such information in the
registration statement; provided, however, that clauses (i) and (ii) do not
apply if the information required to be included in a post-effective amendment
by those clauses is contained in periodic reports filed with or furnished to the
Securities and Exchange Commission by the Registrant pursuant to Section 13 or
Section 15(d) of the Exchange Act that are incorporated by reference in the
registration statement;
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof; 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 offering.
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 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.
-3-
<PAGE> 5
C. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described under Item 6 above or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any 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.
-4-
<PAGE> 6
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 this Post-Effective Amendment No.1 on Form S-8 to
Form S-4 Registration Statement and has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Dublin, State of Ohio, on the 18th day of February, 1998.
CARDINAL HEALTH, INC.
By: /s/ Robert D. Walter
--------------------------------
Robert D. Walter, Chairman
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Robert D. Walter, George H. Bennett, Jr.,
and Paul S. Williams, and each of them, severally, as his/her attorney-in-fact
and agent, with full power of substitution and resubstitution, for him/her and
in his/her name, place, and stead, in any and all capacities, to sign any and
all pre- or post-effective amendments to this Registration Statement, and to
file the same with all exhibits hereto, and other documents with the Securities
and Exchange Commission, granting unto said attorney-in-fact and agent, and each
of them, full power and authority to do and perform each and every act and thing
requisite or necessary to be done in and about the premises, as fully to all
intents and purposes as he/she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No.1 on Form S-8 to Form S-4 Registration Statement has
been signed by the following persons in the capacities indicated on the 18th day
of February, 1998.
<TABLE>
<CAPTION>
Signature Title
- --------- -----
<S> <C>
/s/ Robert D. Walter Chairman and Chief Executive
- ------------------------------ Officer (principal executive officer) and
Robert D. Walter Director
/s/ David Bearman Executive Vice President and Chief
- ------------------------------ Financial Officer (principal financial
David Bearman officer)
/s/Richard J. Miller Vice President, Controller and Principal
- ------------------------------ Accounting Officer
Richard J. Miller
/s/ John F. Finn Director
- ------------------------------
John F. Finn
</TABLE>
-5-
<PAGE> 7
<TABLE>
<S> <C>
/s/ Robert L. Gerbig Director
- ------------------------------
Robert L. Gerbig
/s/ John F. Havens Director
- ------------------------------
John F. Havens
/s/ Regina E. Herzlinger Director
- ------------------------------
Regina E. Herzlinger
/s/ John C. Kane Director
- ------------------------------
John C. Kane
/s/ J. Michael Losh Director
- ------------------------------
J. Michael Losh
/s/ George R. Manser Director
- ------------------------------
George R. Manser
/s/ John B. McCoy Director
- ------------------------------
John B. McCoy
/s/ Jerry E. Robertson Director
- ------------------------------
Jerry E. Robertson
/s/ L. Jack Van Fossen Director
- ------------------------------
L. Jack Van Fossen
/s/ Melburn G. Whitmire Director
- ------------------------------
Melburn G. Whitmire
</TABLE>
-6-
<PAGE> 8
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- -------------- ----------------------
<S> <C>
5 Opinion of Paul S. Williams as to legality of the Common Shares being registered
23(a) Consent of Deloitte & Touche LLP, Columbus, Ohio
23(b) Consent of Deloitte & Touche LLP, Costa Mesa, California
23(c) Consent of Arthur Andersen LLP
23(d) Consent of Ernst & Young LLP
23(e) Consent of Price Waterhouse LLP
23(f) Consent of Paul S. Williams (included in Opinion filed as Exhibit 5 hereto)
24 Power of attorney (included on the Signature Page of this Form S-8)
99(a) MediQual Systems, Inc. 1987 Nonqualified Stock Option Plan
99(b) MediQual Systems, Inc. 1996 Stock Incentive Plan
</TABLE>
-7-
<PAGE> 1
EXHIBIT 5
February 18, 1998
Cardinal Health, Inc.
5555 Glendon Court
Dublin, OH 43016
Gentlemen:
I have acted as counsel to Cardinal Health, Inc., an Ohio
corporation (the "Company"), in connection with Post-Effective Amendment No. 1
on Form S-8 to the Company's Registration Statement on Form S-4 (the
"Registration Statement") filed under the Securities Act of 1933, as amended,
(the "Act") relating to the issuance of up to 24,668 Common Shares, without
par value (the "Common Shares"), of the Company pursuant to the following plans
(collectively, the "Plans") of MediQual Systems, Inc.: 1987 Nonqualified Stock
Option Plan and 1996 Stock Incentive Plan.
In connection with the foregoing, I have examined: (a) the
Amended and Restated Articles of Incorporation, as amended, and Restated Code of
Regulations, as amended, of the Company, (b) the Plans, and (c) such records of
the corporate proceedings of the Company and such other documents as I deemed
necessary to render this opinion.
Based on such examination, I am of the opinion that the Common
Shares available for issuance under the Plans, when issued, delivered and paid
for in accordance with the terms and conditions of the Plans, will be legally
issued, fully paid and nonassessable.
I hereby consent to the filing of this Opinion as Exhibit 5 to
the Registration Statement and the reference to me in Item 5 of Part II of the
Registration Statement. In giving such consent, I do not thereby admit that I am
in the category of persons whose consent is required under Section 7 of the Act
or the rules and regulations of the Securities and Exchange Commission.
Very truly yours,
/s/ Paul S. Williams
Paul S. Williams, Esq.
<PAGE> 1
EXHIBIT 23(a)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Cardinal Health, Inc. on Form S-8 filed as Post Effective Amendment No. 1 to
Registration Statement No. 333-30889 on Form S-4 of our report dated August 12,
1997, except for Note 16 as to which the date is August 23, 1997 and Note 17 as
to which the date is December 30, 1997 (which report expresses an unqualified
option and includes an explanatory paragraph relating to the restatement
described in Note 17), appearing in the Annual Report on Form 10-K/A of Cardinal
Health, Inc. for the year ended June 30, 1997.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Columbus, Ohio
February 18, 1998
<PAGE> 1
EXHIBIT 23(b)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement on
Form S-8 (No. 333-30889-01) filed as Post Effective Amendment No. 1 to
Registration Statement No. 333-30889 on Form S-4 of Cardinal Health, Inc. of our
report dated October 31, 1997, related to the financial statements of Bergen
Brunswig Corporation appearing in the Annual Report on Form 10-K of Bergen
Brunswig Corporation for the fiscal year ended September 30, 1997.
/s/ Deloitte & Touche LLP
Costa Mesa, California
February 18, 1998
<PAGE> 1
EXHIBIT 23(c)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated January 13, 1997 (except for the matter discussed in Note 9 as to which
the date is July 7, 1997) with respect to the audited financial statements of
MediQual Systems, Inc. and to all references to our Firm, included in or made
part of this Registration Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 18, 1998
<PAGE> 1
EXHIBIT 23(d)
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement (Post
Effective Amendment No. 1 on Form S-8 to Form S-4 No. 333-30889) of Cardinal
Health, Inc., pertaining to the MediQual Systems, Inc. 1987 Nonqualified Stock
Option Plan and MediQual Systems, Inc. 1996 Stock Incentive Plan, of our report
dated August 2, 1996, with respect to the consolidated financial statements of
Pyxis Corporation, included in the Annual Report (Form 10-K/A) of Cardinal
Health, Inc. for the year ended June 30, 1997, filed with the Securities and
Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
San Diego, California
February 18, 1998
<PAGE> 1
EXHIBIT 23(e)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 filed as Post Effective Amendment No. 1 to Registration
Statement on Form S-4 (No. 333-30889) of Cardinal Health, Inc. of our report
dated January 30, 1997 related to the financial statements of Owen Healthcare,
Inc. which appear on page 11 of Cardinal Health, Inc.'s Annual Report on Form
10-K/A (Amendment No. 1) for the year ended June 30, 1997.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Houston, Texas
February 18, 1998
<PAGE> 1
Exhibit 99(a)
MEDIQUAL SYSTEMS, INC.
1987 NONQUALIFIED STOCK OPTION PLAN
1. Purpose. The purpose of the MediQual Systems, Inc. 1987
Nonqualified Stock Option Plan ("Plan"), as herein set forth, is to encourage
stock ownership by certain employees, consultants and directors of MediQual
Systems, Inc. ("Company") and its subsidiaries, to provide an incentive for such
employees, consultants and directors to expand and improve the profits and
prosperity of the Company and its subsidiaries, and to assist the Company and
its subsidiaries in attracting and retaining employees, consultants and
directors through the grant of options pursuant to this Plan ("Options") to
purchase shares of the Company's common stock ("Shares") and thereby share in
the Company's growth and profits.
2. Administration. The Board of Directors of the Company
("Board") shall appoint a committee, as may be constituted from time to time
("Committee"), comprised at any time of not fewer than three members who are
"disinterested persons" as defined in Rule 16b-3 of the Securities and Exchange
Commission. The Committee shall interpret this Plan, prescribe, amend and
rescind rules and regulations relating thereto and make all other determinations
necessary or advisable for the administration of this Plan. Any such action by
the Committee shall be final and conclusive on all persons having any interest
in the Shares to which such action relates. A majority of the members of the
Committee shall constitute a quorum and all determinations of the Committee
shall be made by a majority of its members. Any determination of the Committee
under this Plan may be made without notice of meeting of the Committee by a
writing signed by a majority of the Committee members. No member of the Board or
of the Committee shall be liable for any action taken or omitted, or
determination made, by him or her in good faith.
3. Eligibility. Options may be granted under this Plan only to
employees, consultants or directors of the Company or its subsidiaries who are
not, and were not at any time during the prior twelve-month period, members of
the Committee. The Committee shall determine, within the limits of the express
provisions of this Plan, those employees, consultants and directors of the
Company or any of its subsidiaries ("Optionees") to whom, and the time or times
at which, Options shall be granted. The Committee's determination to grant
Options to an Optionee in any year shall not require the Committee to so
designate such Optionee in any other year. The Committee shall also determine
the number of Shares to be subject to each Option, the duration of each Option,
the exercise price
<PAGE> 2
-2-
("Option price") under each Option, the time or times within which (during the
term of the Option) all or portions of each Option may be exercised and whether
cash or Shares or any combination thereof may be accepted in full or partial
payment upon exercise of an Option. The Committee shall consider such facts as
it deems pertinent in selecting Optionees and in determining the Options to be
granted to them, including without limitation: (i) the financial condition of
the Company and its subsidiaries; (ii) anticipated profits for the current or
future years; (iii) contributions of Optionees to the profitability and
development of the Company and its subsidiaries; and (iv) other compensation
provided to Optionees.
4. Option Exercise Price and Number of Shares.
(a) Individual Option Exercise Price and Number of
Shares. Each Option when granted shall state the number of Shares to which it
pertains and shall state the Option price for each Share.
(b) Total Number of Shares Available. Options may be
granted for a number of Shares not to exceed, in the aggregate, two million one
hundred thirty-five thousand four hundred (2,135,400) Shares ($0.001 par value),
except as such number of Shares shall be adjusted in accordance with the
provisions of Section 6 hereof. Such Shares may be either authorized but
unissued Shares or treasury Shares. In the event that any Option granted under
this Plan expires unexercised, or is surrendered by an Optionee for
cancellation, or is terminated or ceases to be exercisable for any other reason
without having been fully exercised, prior to the end of the period during which
Options may be granted under this Plan, the Shares theretofore subject to such
Option, or to the unexercised portion thereof, shall again become available for
new Options to be granted under this Plan to any eligible employee, consultant
or director of the Company or any of its subsidiaries (including the holder of
such former Option).
5. Period of Option and Certain Limitations on Right to Exercise.
Options granted pursuant to this Plan shall be authorized by the Committee and
shall be evidenced by agreements in such form as the Committee shall from time
to time approve. Such agreements shall comply with and be subject to the
following terms and conditions:
(a) General Period of Exercise. The terms of the Option
granted shall provide when the Option shall be exercisable. No Option may be
exercised for a fractional Share. No Option may be exercised more than ten (10)
years and one (1) day after the grant of the Option. By
<PAGE> 3
-3-
action of the Committee, the time any Option granted is exercisable may be
accelerated or modified as deemed appropriate, subject to Section 13. Unless the
Committee determines otherwise, Options need not be exercised in the order of
grant and may be exercised in any manner consistent with the Option grant.
(b) Termination of Option. Subject to the provisions of
Section 5(a) hereof, in the event that any Optionee shall cease to be an
employee, consultant or director of the Company or any of its subsidiaries for
any reason other than death or disability, all Options held by the Optionee
shall terminate. If an Optionee dies while in the employ of the Company or any
of its subsidiaries or while engaged to provide consulting services to the
Company or any of its subsidiaries or while serving as a director of the Company
or any of its subsidiaries, the Optionee's estate, personal representative or
the person that acquires the Optionee's Option by bequest or inheritance or by
reason of the Optionee's death shall have the right, subject to the provisions
of this Section 5(b) and Sections 6 and 9 hereof, to exercise the deceased
Optionee's Option at any time within one (1) year from the date of the
Optionee's death, but only as to the number of Shares as to which the deceased
Optionee's Option was exercisable on the date of the Optionee's death. If an
Optionee ceases to be an employee, consultant or director of the Company or any
of its subsidiaries because of a disability of the Optionee (within the meaning
of section 105(d)(4) of the Internal Revenue Code of 1986, as amended), the
Optionee shall have the right, subject to the provisions of Section 5(a) and 6
hereof, to exercise such Optionee's Option at any time within three (3) months
after the cessation of employment or service as a consultant or director but
only as to such number of Shares as to which the Optionee's Option was
exercisable at the date of such cessation of employment or service. In any such
event, unless so exercised within the period as aforesaid, the Option shall
terminate. The time of cessation of employment or service and whether an
authorized leave of absence or absence on military or government service shall
constitute cessation of employment or service for the purpose of this Plan,
shall be determined by the Committee.
(c) Method of Exercise. Options may be exercised by
giving written notice to the Treasurer of the Company, stating the number of
Shares with respect to which the Option is being exercised and tendering payment
therefor. Payment for Shares generally shall be made in cash. To the extent
permitted by the Committee, payment for Shares may be made in cash or other
Shares or any combination thereof.
<PAGE> 4
-4-
6. Adjustments.
(a) Capital Adjustment. The aggregate number of Shares
with respect to which Options may be granted hereunder, the number of Shares
subject to each outstanding Option, and the Option price per Share for each such
Option, shall be appropriately adjusted, as the Committee may determine, for any
increase or decrease in the number of Shares resulting from a subdivision or
consolidation of Shares or any other capital adjustment whether through
reorganization, payment of a Share dividend or other increase or decrease in the
number of such Shares outstanding effected without receipt of consideration by
the Company
(b) Acceleration Upon Transactions. Subject to any
required action by the Company's stockholders, if the Company shall be a party
to a transaction involving a merger or consolidation (except a merger or
consolidation which does not require approval of the Company's stockholders
under the provisions of the General Corporation Law of the State of Delaware) or
a sale of all or substantially all of its assets or if the Company shall
dissolve or be liquidated (any such merger, consolidation, sale, dissolution or
liquidation being herein sometimes referred to as a "Transaction"), in addition
to the total number of Options already exercisable pursuant to the terms of the
Option grants, the following Options shall become immediately exercisable during
a period of not less than thirty (30) days preceding the effective date of the
Transaction:
(i) all unexercised Options which by their terms would
become exercisable on or before the ninetieth (90th) day after the
earlier of the date on which the Company enters into an agreement for,
or the closing of, the Transaction or the Company's adoption of the
plan of dissolution or liquidation (the date of such agreement, closing
or adoption of the plan being herein referred to as the "Applicable
Date"); and
(ii) fifty percent (50%) of all remaining Options which by
their terms would become exercisable after the ninetieth (90th) day
following the Applicable Date.
Notice of exercisability of the Options because of this provision shall
be given personally or shall be mailed, first-class postage prepaid, to all
holders of Options at least thirty (30) days prior to the effective date of the
Transaction. Such notice shall state the date the Transaction is expected to
become effective.
<PAGE> 5
-5-
(c) Applicability of Options Not Exercised. Cancelled or Otherwise
Provided For Upon a Transaction. Options not exercised pursuant to Section 6(b)
and not otherwise provided for pursuant to Section 6(b) shall terminate upon the
occurrence of a Transaction.
(d) Other Provision For Unexercisable and Unexercised Options in a
Transaction. In respect of a Transaction, any or all Options which are not
exercised (whether or not theretofore exercisable or becoming exercisable
pursuant to Section 6(b)) may be otherwise provided for (by any means, such as,
for example, cash payment, conversion into other property or securities or
otherwise as specified in the notice referred to in this sentence) as of the
effective date of the Transaction by the giving of not less than thirty (30)
days notice to the holders thereof of the Company's intention to so otherwise
provide for such Options as specified in such notice, all as of the effective
date of the Transaction.
7. Option Agreements. Each Optionee shall agree to such terms and
conditions in connection with the exercise of the Options granted, as the
Committee may deem appropriate. Option agreements need not be identical. The
certificates evidencing the Shares acquired upon exercise of an Option may bear
a legend referring to the terms and conditions contained in the respective
Option agreement and this Plan, and the Company may place a stop transfer order
with its transfer agent against the transfer of such Shares. If requested to do
so by the Committee at the time of exercise of an Option, each Optionee shall
execute a certificate indicating that he or she is purchasing the Shares under
such Option for investment and not with any present intention to sell the same.
8. Legal and Other Requirements. The obligation of the Company to
sell and deliver Shares under Options granted under this Plan shall be subject
to all applicable laws, regulations, rules and approvals, including, but not by
way of limitation, the effectiveness of a registration statement under the
Securities Act of 1933, if deemed necessary or appropriate by the Committee,
covering the Shares reserved for issuance upon exercise of Options. An Optionee
shall have no rights as a stockholder with respect to any Shares covered by an
Option granted to, or exercised by, such Optionee until the date of delivery of
a stock certificate to such Optionee for such Shares. Shares issued hereunder
may be legended as the Committee shall deem appropriate to reflect the
restrictions imposed under the Plan or by securities laws generally. No
adjustment other than pursuant to Section 6 hereof shall be made for dividends
or other rights for which the record date is prior to the date such stock
certificate is delivered.
<PAGE> 6
-6-
9. Nontransferability. During the lifetime of an Optionee, any
Option granted to such Optionee shall be exercisable only by the Optionee or the
Optionee's guardian or legal representative. No Option shall be assignable or
transferable, except by will or by the laws of descent and distribution. The
granting of an Option shall impose no obligation upon the Optionee to exercise
such Option.
10. Tax Withholding. The Company and its subsidiaries shall comply
with the obligations imposed on the Company and its subsidiaries under
applicable tax withholding laws, if any, with respect to Options granted
hereunder, Shares transferred upon exercise thereof, and the disposition of such
Shares thereafter, and shall be entitled to do any act or thing to effectuate
any such required compliance, including. without limitation, withholding from
amounts payable by the Company and its subsidiaries to an Optionee and including
making demand on an Optionee for the amounts required to be withheld.
11. No Contract of Employment. Neither the adoption of this Plan
nor the grant of any Option shall be deemed to obligate the Company or its
subsidiaries to continue the employment or service of any employee, consultant
or director of the Company or its subsidiaries for any particular period.
12. Indemnification of Committee. The members of the Committee
shall be indemnified by the Company to the fullest extent permitted by Delaware
law, the Company's Certificate of Incorporation and the Company's by-laws.
13. Amendment and Termination of Plan. The Company may amend this
Plan from time to time or terminate this Plan at any time, but no such action
shall reduce the number of the Shares subject to the then outstanding Options
granted to any Optionee or adversely to an Optionee change the terms and
conditions thereof without the Optionee's consent. However, except for the
adjustments expressly provided for herein, no amendment may be made solely by
Board action if the amendment would: (i) materially increase the benefits
accruing to Optionees under this Plan; (ii) materially increase the number of
Shares which may be issued under this Plan; or (iii) materially modify the
requirements as to eligibility for participation in this Plan.
<PAGE> 7
-7-
14. Effective Date of Plan. This Plan shall become effective upon
adoption by the Board; provided, however, that it shall be submitted for
approval by the holders of a majority of the outstanding Shares within twelve
(12) months thereafter, and Options granted prior to such stockholder approval
shall become null and void if such stockholder approval is not obtained.
<PAGE> 1
EXHIBIT 99(b)
MEDIQUAL SYSTEMS, INC.
1996 STOCK INCENTIVE PLAN
1. PURPOSES OF THE PLAN.
The purposes of this 1996 Stock Incentive Plan of MediQual Systems,
Inc. (the "Company") are to promote the interests of the Company and its
stockholders by strengthening the Company's ability to attract, motivate, and
retain employees and consultants of exceptional ability and to provide a means
to encourage stock ownership and a proprietary interest in the Company to
selected employees and consultants of the Company upon whose judgment,
initiative, and efforts the financial success and growth of the business of the
Company largely depend.
2. DEFINITIONS.
(a) "Accelerate," "Accelerated," and "Acceleration," when used with
respect to an Option, mean that as of the relevant time of reference, such
Option shall become fully exercisable with respect to the total number of shares
of Common Stock subject to such Option and may be exercised for all or any
portion of such shares.
(b) "Acquisition" means
(i) a merger or consolidation in which securities
possessing more than 50% of the total combined voting power of
the Company's outstanding securities are transferred to a
person or persons different from the persons who held those
securities immediately prior to such transaction, or
(ii) the sale, transfer, or other disposition of all
or substantially all of the Company's assets to one or more
persons (other than any wholly owned subsidiary of the
Company) in a single transaction or series of related
transactions.
(c) "Beneficial Ownership" means beneficial ownership determined
pursuant to Securities and Exchange Commission Rule 13d-3 promulgated under the
Exchange Act.
(d) "Board" means the Board of Directors of the Company.
(e) "Committee" means the Compensation Committee of the Board;
provided, that the Board by resolution duly adopted may at any time or from time
to time determine to assume any or all of the functions of the Committee under
the Plan, and during the period of effectiveness of any such resolution,
references herein to the "Committee" shall mean the Board acting in such
capacity.
(f) "Change in Control" means a change in ownership or control of the
Company effected through either of the following transactions:
(i) any person or related group of persons (other
than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with
the Company) directly or indirectly acquires Beneficial
Ownership of securities possessing more than 50% of the total
combined voting power of the Company's outstanding securities
pursuant to a tender or exchange offer made directly to the
Company's stockholders that the Board does not recommend such
stockholders to accept, or
<PAGE> 2
(ii) over a period of 36 consecutive months or less,
there is a change in the composition of the Board such that a
majority of the Board members (rounded up to the next whole
number, if a fraction) ceases, by reason of one or more proxy
contests for the election of Board members, to be composed 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 the preceding clause (A) who were still in office
at the time such election or nomination was approved by the
Board.
(g) "Common Stock" means the authorized common stock of the Company.
(h) "Company" means MediQual Systems, Inc.
(i) "Eligible Employee" means any person who is, at the time of the
grant of an Option or Restricted Stock Award, an employee (including officers
and employee directors) or consultant of the Company or any Subsidiary.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended and in effect from time to time.
(k) "Fair Market Value" means the value of a share of Common Stock as
of the relevant time of reference, as determined as follows. If the Common Stock
is then publicly traded, Fair Market Value shall be (i) the last sale price of a
share of Common Stock on the principal national securities exchange on which the
Common Stock is traded, if the Common Stock is then traded on a national
securities exchange; or (ii) the last sale price of the Common Stock reported in
the NASDAQ National Market System, if the Common Stock is not then traded on a
national securities exchange; or (iii) the average of the closing bid and asked
prices for the Common Stock quoted by an established quotation service for
over-the-counter securities, if the Common Stock is not then traded on a
national securities exchange or reported in the NASDAQ National Market System.
If the Common Stock is not then publicly traded, Fair Market Value shall be the
fair value of a share of the Common Stock as determined by the Board or the
Committee, taking into consideration such factors as it deems appropriate, which
may include recent sale and offer prices of Common Stock in arm's-length private
transactions.
(l) "Hostile Takeover" means a change in ownership of the Company
effected through the following transaction:
(i) any person or related group of persons (other
than the Company or a person that directly or indirectly
controls, is controlled by, or is under common control with
the Company) directly or indirectly acquires Beneficial
Ownership of securities possessing more than 50% of the total
combined voting power of the Company's outstanding securities
pursuant to a tender or exchange offer made directly to the
Company's stockholders that the Board does not recommend such
stockholders to accept, and
(ii) more than 50% of the securities so acquired in
such tender or exchange offer are accepted from holders other
than the officers and directors of the Company who are subject
to the short-swing profit restrictions of Section 16 of the
Exchange Act.
(m) "Participant" means any Eligible Employee selected to receive an
Option or Restricted Stock Award pursuant to Section 5.
(n) "Restricted Stock Award" means a right to the grant or purchase, at
a price determined by the Committee, of Common Stock which is nontransferable
and subject to substantial risk of forfeiture until specific conditions of
continuing employment or performance are met.
(o) "Incentive Stock Option" means an Option intended to qualify as an
"incentive stock option" under Section 422A of the Internal Revenue Code and
regulations thereunder.
<PAGE> 3
(p) "Option" means an Incentive Stock Option or a nonqualified stock
option.
(q) "Plan" means this 1996 Stock Incentive Plan as set forth herein and
as amended and/or restated from time to time.
(r) "Subsidiary" means any subsidiary corporation (as defined in
Section 425 of the Internal Revenue Code) of the Company.
(s) "Takeover Price" means, with respect to any Incentive Stock Option,
the Fair Market Value per share of Common Stock on the date such Option is
surrendered to the Company in connection with a Hostile Takeover, or in the case
of a nonqualified Option, such Fair Market Value or, if greater, the highest
reported price per share of Common Stock paid by the tender offeror in effecting
such Hostile Takeover.
3. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
(a) Subject to adjustment in accordance with the provisions of Section
3(c) and Section 8 of the Plan, the aggregate number of shares of Common Stock
that may be issued or transferred pursuant to Options or Restricted Stock Awards
under the Plan shall not exceed 1,500,000 shares, which aggregate number of
shares, automatically and without further action, shall increase, on January 1,
1998, and each January 1 thereafter during the term of the Plan, by an
additional number of shares of Common Stock equal to ten per cent (10%) of (i)
the difference between the total number of shares of Common Stock and Common
Stock equivalents issued and outstanding as of the close of business on December
31 of the preceding year and (ii) the total number of shares of Common Stock and
Common Stock equivalents issued and outstanding as of the close of business on
December 31 of the year prior to such preceding year.
(b) The shares of Common Stock to be delivered under the Plan will be
made available, at the discretion of the Committee, from authorized but unissued
shares of Common Stock and/or from previously issued shares of Common Stock
reacquired by the Company.
(c) If shares covered by any Option cease to be issuable for any
reason, and/or shares covered by Restricted Stock Awards are forfeited, such
number of shares will no longer be charged against the limitation provided in
Section 3(a) and may again be made subject to Options or Restricted Stock
Awards.
4. ADMINISTRATION OF THE PLAN.
(a) The Plan will be governed by and interpreted and construed in
accordance with the internal laws of the State of Delaware (without reference to
principles of conflicts or choice of law). The captions of sections of the Plan
are for reference only and will not affect the interpretation or construction of
the Plan.
(b) The Plan will be administered by the Committee, which shall consist
of two or more persons. The Committee has and may exercise such powers and
authority of the Board as may be necessary or appropriate for the Committee to
carry out its functions as described in the Plan. The Committee shall determine
the Eligible Employees to whom, and the time or times at which, Options or
Restricted Stock Awards may be granted and the number of shares subject to each
Option or Restricted Stock Award. The Committee also has authority (i) to
interpret the Plan, (ii) to determine the terms and provisions of the Option or
Restricted Stock Award instruments, and (iii) to make all other determinations
necessary or advisable for Plan administration. The Committee has authority to
prescribe, amend, and rescind rules and regulations relating to the Plan. All
interpretations, determinations, and actions by the Committee will be final,
conclusive, and binding upon all parties.
(c) No member of the Committee will be liable for any action taken or
determination made in good faith by the Committee with respect to the Plan or
any Option or Restricted Stock Award under it.
<PAGE> 4
5. GRANTS.
(a) The Committee shall determine and designate from time to time those
Eligible Employees who are to be granted Options or Restricted Stock Awards, the
type of each Option to be granted and the number of shares covered thereby or
issuable upon exercise thereof, and the number of shares covered by each
Restricted Stock Award. Each Option and Restricted Stock Award will be evidenced
by a written agreement or instrument and may include any other terms and
conditions consistent with the Plan, as the Committee may determine.
(b) No person will be eligible for the grant of an Incentive Stock
Option who owns or would own immediately before the grant of such Option,
directly or indirectly, stock possessing more than ten percent of the total
combined voting power of all classes of stock of the Company or of any parent
corporation or Subsidiary. This will not apply if, at the time such Incentive
Stock Option is granted, its exercise price is at least 110% of the Fair Market
Value of the Common Stock and by its terms, it is not exercisable after the
expiration of five years from the date of grant. Subject to adjustment in
accordance with the provisions of Section 8 of the Plan, (i) no person may in
any year be granted Options or Restricted Stock Awards with respect to more than
500,000 shares of Common Stock, and (ii) no more than an aggregate of 3,000,000
shares of Common Stock may be issued pursuant to the exercise of Incentive Stock
Options granted under the Plan.
6. TERMS AND CONDITIONS OF STOCK OPTIONS.
(a) The price at which Common Stock may be purchased by a Participant
under an Option shall be determined by the Committee; provided, however, that
the purchase price under a nonqualified Option shall not be less than 85% of the
Fair Market Value of the Common Stock on the date of grant of such Option, and
the purchase price under an Incentive Stock Option shall not be less than 100%
of the Fair Market Value of the Common Stock on the date of grant of such
Option.
(b) Each Option shall be exercisable at such time or time, during such
periods, and for such numbers of shares as shall be determined by the Committee
and set forth in the agreement or instrument evidencing the Option grant
(subject to Acceleration by the Committee, in its discretion). The Option shall
expire no later than three months following termination of the optionee's
employment or consulting relationship with the Company or a Subsidiary, except
in the event that such termination is due to death or disability, in which case
the Option may be exercisable for a maximum of twelve months after such
termination. In any event, the Option shall expire no later than the tenth
anniversary of the date of grant.
(c) Unless the Compensation Committee otherwise determines (whether at
the time the Option is granted or otherwise), upon the exercise of an Option,
the purchase price will be payable in full in cash.
(d) Incentive Stock Options may be granted under the Plan only to
employees of the Company or a Subsidiary, and the aggregate Fair Market Value
(determined as of the date the Incentive Stock Option is granted) of the number
of shares with respect to which Incentive Stock Options are exercisable for the
first time by a Participant in any calendar year shall not exceed one hundred
thousand dollars ($100,000) or such other limit as may be required by the
Internal Revenue Code. Any Options that purport to be Incentive Stock Options
but which are granted to persons other than employees of the Company or a
Subsidiary shall be, and any Options that purport to be Incentive Stock Options
but are granted in amounts in excess of those specified in this Section 6(d),
shall to the extent of such excess be, nonqualified Options.
(e) No fractional shares will be issued pursuant to the exercise of an
Option, nor will any cash payment be made in lieu of fractional shares.
(f) Subject to the short-swing profit restrictions of the Federal
securities laws, each Option granted to any officer of the Company may provide
that upon the occurrence of a Hostile Takeover, such Option, if outstanding for
at least six months, will automatically be canceled in exchange for a cash
distribution from the Company in an amount equal to the excess of (i) the
aggregate Takeover Price of the shares of Common Stock at the time subject to
the canceled Option (regardless of whether the Option is otherwise then
exercisable for such shares) over (ii) the aggregate Option price payable for
such shares. Such cash distribution shall be made within
<PAGE> 5
five days after the consummation of the Hostile Takeover. Neither the approval
of the Committee nor the consent of the Board shall be required in connection
with such Option cancellation and cash distribution.
7. TERMS AND CONDITIONS OF RESTRICTED STOCK AWARDS.
(a) All shares of Common Stock subject to Restricted Stock Awards
granted or sold pursuant to the Plan may be issued or transferred for such
consideration (which may consist wholly of services) as the Committee may
determine, and will be subject to the following conditions:
(i) The shares may not be sold, transferred, or otherwise
alienated or hypothecated until the restrictions are removed or expire,
unless the Committee determines otherwise.
(ii) The Committee shall provide in the agreement or
instrument evidencing the grant of the Restricted Stock Awards that the
certificates representing shares subject to Restricted Stock Awards
granted or sold pursuant to the Plan will be held in escrow by the
Company until the restrictions on the shares lapse in accordance with
the provisions of subsection (b) of this Section 7.
(iii) Each certificate representing shares subject to
Restricted Stock Awards granted or sold pursuant to the Plan will bear
a legend making appropriate reference to the restrictions imposed.
(iv) The Committee may impose other conditions on any shares
subject to Restricted Stock Awards granted or sold pursuant to the Plan
as it may deem advisable, including without limitation, restrictions
under the Securities Act of 1933, as amended, under the requirements of
any stock exchange or securities quotations system upon which such
shares or shares of the same class are then listed, and under any blue
sky or other securities laws applicable to such shares.
(b) The restrictions imposed under subparagraph (a) above upon
Restricted Stock Awards will lapse at such time or times, and/or upon the
achievement of such predetermined performance objectives, as shall be determined
by the Committee and set forth in the agreement or instrument evidencing the
Option grant, provided, however, that the restrictions on Restricted Stock
Awards shall not fully lapse in less than three years from the date of grant, or
not less than one year from the date of grant if such restrictions also require
the achievement of one or more predetermined performance objectives. In the
event a holder of a Restricted Stock Award ceases to be an employee or
consultant of the Company, all shares under the Restricted Stock Award that
remain subject to restrictions at the time his or her employment or consulting
relationship terminates will be returned to or repurchased by the Company unless
the Committee determines otherwise.
(c) Subject to the provisions of subparagraphs (a) and (b) above, the
holder will have all rights of a shareholder with respect to the shares covered
by Restricted Stock Awards granted or sold, including the right to receive all
dividends and other distributions paid or made with respect thereto; provided,
however, that he or she shall execute an irrevocable proxy or enter into a
voting agreement with the Company as determined by the Committee for the purpose
of granting the Company or its nominee the right to vote all shares that remain
subject to restrictions under this Section 7 in the same proportions (for and
against) as the outstanding voting shares of the Company that are not subject to
such restrictions are voted by the other shareholders of the Company on any
matter, unless the Committee determines otherwise.
8. ADJUSTMENT PROVISIONS.
(a) All of the share numbers set forth in the Plan reflect the capital
structure of the Company at the time of the effectiveness of the Company's first
registration statement on Form S-1 filed under the Securities Act of 1933, as
amended. Subject to Section 8(b), if subsequent to such date the outstanding
shares of Common Stock of the Company are increased, decreased, or exchanged for
a different number or kind of shares or other securities, or if additional
shares or new or different shares or other securities are distributed with
respect to such shares of Common Stock or other securities, through merger,
consolidation, sale of all or substantially all the property of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split, or other distribution with respect to such shares of Common
Stock, or other securities, an appropriate and proportionate
<PAGE> 6
adjustment shall be made in (i) the maximum numbers and kinds of shares provided
in Sections 3 and 5, (ii) the numbers and kinds of shares or other securities
subject to the then outstanding Options and Restricted Stock Awards, and (iii)
the price for each share or other unit of any other securities subject to then
outstanding Options (without change in the aggregate purchase price as to which
such Options remain exercisable).
(b) The Committee shall have discretion to provide for the Acceleration
of one or more outstanding Options held by employees and the vesting of unvested
shares held by employees as Restricted Stock Awards upon the occurrence of a
Change in Control of the Company. Such Accelerated vesting may be conditioned on
the subsequent termination of the affected optionee's employment. Any Options
Accelerated in connection with a Change in Control shall remain fully
exercisable until the expiration or sooner termination of the Option Term.
(c) In the event of an Acquisition: The unvested shares of Common Stock
held by employees as Restricted Stock Awards shall immediately vest in full,
except to the extent that the Company's repurchase rights with respect to those
shares are to be assigned to the acquiring entity; and all outstanding Options
held by employees will Accelerate to the extent not assumed by the acquiring
entity or replaced by comparable options to purchase shares of the capital stock
of the successor or acquiring entity or parent thereof (the determination of
comparability to be made by the Committee, which determination shall be final,
binding, and conclusive). The Committee shall have discretion, exercisable
either in advance of an Acquisition or at the time thereof, to provide (upon
such terms as it may deem appropriate) for (i) the automatic Acceleration of one
or more outstanding Options held by employees that are assumed or replaced and
do not otherwise Accelerate by reason of the Acquisition, and/or (ii) the
subsequent termination of one or more of the Company's repurchase rights with
respect to shares held by employees as Restricted Stock Awards that are assigned
in connection with the Acquisition and do not otherwise terminate at that time,
in the event that the employment of the respective grantees of such Options or
Restricted Stock Awards should subsequently terminate following such
Acquisition.
(d) Each outstanding Option that is assumed in connection with an
Acquisition, or is otherwise to continue in effect subsequent to such
Acquisition, shall be appropriately adjusted, immediately after such
Acquisition, to apply to the number and class of securities that would have been
issued to the Option holder, in consummation of such Acquisition, had such
holder exercised such Option immediately prior to such Acquisition. Appropriate
adjustments shall also be made to the Option price payable per share, provided,
that the aggregate Option price payable for such securities shall remain the
same. The class and number of securities available for issuance under the Plan
following the consummation of such Acquisition shall be appropriately adjusted.
(e) Adjustments under this Section 8 will be made by the Committee in
accordance with the terms of such sections, whose determination as to what
adjustments will be made and the extent thereof so as to effectuate the intent
of such sections will be final, binding, and conclusive. No fractional shares
will be issued under the Plan on account of any such adjustments.
9. GENERAL PROVISIONS.
(a) Nothing in the Plan or in any instrument executed pursuant to the
Plan will confer upon any Participant any right to continue in the employ of or
as a consultant to the Company or any of its Subsidiaries or affect the right of
the Company or any Subsidiary to terminate the employment or consulting
relationship of any Participant at any time, with or without cause.
(b) No shares of Common Stock will be issued or transferred pursuant to
an Option or Restricted Stock Award unless and until all then applicable
requirements imposed by Federal and state securities and other laws, rules and
regulations and by any regulatory agencies having jurisdiction, and by any stock
exchanges or securities quotations systems upon which the Common Stock may be
listed, have been fully met. As a condition precedent to the issuance of shares
pursuant to the grant or exercise of an Option or Restricted Stock Award, the
Company may require the Participant to take any reasonable action to meet such
requirements.
(c) No Participant and no beneficiary or other person claiming under or
through such Participant will have any right, title, or interest in or to any
shares of Common Stock allocated or reserved under the Plan or
<PAGE> 7
subject to any Option, except as to such shares of Common Stock, if any, that
have been issued or transferred to such Participant.
(d) The Committee shall adopt rules regarding the withholding of
federal, state, or local taxes of any kind required by law to be withheld with
respect to payments and delivery of shares to Participants under the Plan. With
respect to any nonqualified stock option, the Committee, in its discretion, may
permit the Participant to satisfy, in whole or in part, any tax withholding
obligation that may arise in connection with the exercise of the nonqualified
stock option by electing to have the Company withhold shares of Common Stock
having a Fair Market Value equal to the amount of the tax withholding.
(e) No Option and no right under the Plan, contingent or otherwise,
will be transferable or assignable or subject to any encumbrance, pledge, or
charge of any nature except that, under such rules and regulations as the
Committee may establish pursuant to the terms of the Plan, a beneficiary may be
designated with respect to an Option in the event of death of a Participant. If
such beneficiary is the executor or administrator of the estate of the
Participant, any rights with respect to such Option may be transferred to the
person or persons or entity (including a trust) entitled thereto under the will
of the holder of such Option.
(f) The Committee may cancel, with the consent of the Participant, all
or a portion of any Option granted under the Plan to be conditioned upon the
granting to the Participant of a new Option for the same or a different number
of shares as the Option surrendered, or may require such voluntary surrender as
a condition to a grant of a new Option to such Participant; in each case, such
new Options to have an exercise price per share based upon the Fair Market Value
of the Common Stock as of the new grant date (i.e., the purchase price under a
new nonqualified Option shall not be less than 85% of the Fair Market Value of
the Common Stock on the date of grant of such new nonqualified Option, and the
purchase price under a new Incentive Stock Option shall not be less than 100% of
the Fair Market Value of the Common Stock on the date of grant of such new
Incentive Stock Option (110%, if the grantee of such new Incentive Stock Option
is a greater-than-10% stockholder of the Company, as set forth in Section 5(b)
above)). Subject to the provisions of Section 6(d), such new Option shall be
exercisable at such time or time, during such periods, and for such numbers of
shares, and in accordance with any other terms or conditions, as are specified
by the Committee at the time the new Option is granted, all determined in
accordance with the provisions of the Plan without regard to the price, period
of exercise, or any other terms or conditions of the Option surrendered.
(g) The written agreements or instruments evidencing Restricted Stock
Awards or Options granted under the Plan may contain such other provisions as
the Committee may deem advisable. Without limiting the foregoing, and if so
authorized by the Committee, the Company may, with the consent of the
Participant and at any time or from time to time, cancel all or a portion of any
Option granted under the Plan then subject to exercise and discharge its
obligation with respect to the Option either by payment to the Participant of an
amount of cash equal to the excess, if any, of the Fair Market Value, at such
time, of the shares subject to the portion of the Option so canceled over the
aggregate purchase price specified in the Option covering such shares, or by
issuance or transfer to the Participant of shares of Common Stock with a Fair
Market Value at such time, equal to any such excess, or by a combination of cash
and shares. Upon any such payment of cash or issuance of shares, (i) there shall
be charged against the aggregate limitations set forth in Section 3(a) a number
of shares equal to the number of shares so issued plus the number of shares
purchasable with the amount of any cash paid to the Participant on the basis of
the Fair Market Value as of the date of payment, and (ii) the number of shares
subject to the portion of the Option so canceled, less the number of shares so
charged against such limitations, shall thereafter be available for other
grants.
10. AMENDMENT AND TERMINATION.
(a) The Board shall have the power, in its discretion, to amend,
modify, suspend, or terminate the Plan at any time, subject to the rights of
holders of outstanding Options and Restricted Stock Awards on the date of such
action, and to the approval of the stockholders of the Company if an amendment
or modification would change the eligibility requirements of the Plan, extend
the term of the Plan, or increase the number of shares of Common Stock subject
to grant as Options or Restricted Stock Awards under the Plan.
<PAGE> 8
(b) The Committee may, with the consent of a Participant, make such
modifications in the terms and conditions of an Option or Restricted Stock Award
held by such Participant as it deems advisable.
(c) No amendment, suspension or termination of the Plan will, without
the consent of the Participant, alter, terminate, impair, or adversely affect
any right or obligation under any Option or Restricted Stock Award previously
granted to such Participant under the Plan.
11. EFFECTIVE DATE OF PLAN AND DURATION OF PLAN.
The Plan became effective upon its adoption by the Board on May 28,
1996, subject to subsequent approval by the Company's stockholders. Unless
previously terminated, the Plan will terminate on May 28, 2006.
<PAGE> 9
AMENDMENT NO. 1 TO
1996 STOCK INCENTIVE PLAN
Effective as of January 24, 1997, the first sentence of Section 8(a) of
the Company's 1996 Stock Incentive Plan was deleted in its entirety and replaced
by the following sentence:
"All of the share numbers set forth in the Plan reflect the capital
structure of the Company as of October 15, 1996."
