As filed with the Securities and Exchange Commission on September 13, 1999
Registration No. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
Under
THE SECURITIES ACT OF 1933
----------------------
PMC-SIERRA, INC.
(Exact name of registrant as specified in its charter)
----------------------
Delaware 94-2925073
- ------------------------ ------------------------------------
(State of Incorporation) (I.R.S. Employer Identification No.)
105-8555 Baxter Place
Burnaby, British Columbia V5A 4V7
Canada
(Address of principal executive offices)
----------------------
Abrizio Inc. 1997 Stock Option Plan
(Full title of the plan)
----------------------
The Corporation Trust Company
1209 Orange Street
Wilmington, Delaware 19801
(800) 677-3394
(Name, address and telephone number of agent for service)
----------------------
Copy to:
Neil Wolff
Wilson Sonsini Goodrich & Rosati, P.C.
650 Page Mill Road
Palo Alto, California 94304-1050
----------------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Title of Maximum Maximum Amount
Securities Amount Offering Aggregate of
to be to be Price Per Offering Registration
Registered (1) Registered Share Price Fee
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
$0.001 par value 132,684 (2) $0.03156 (2) $4,187.51 (2) $1.14
- ---------------------------------------------------------------------------------------------
Common Stock,
$0.001 par value 622,136 (2) $0.3322 (2) $206,673.58 (2) $57.46
- ---------------------------------------------------------------------------------------------
Common Stock,
$0.001 par value 194,001 (3) $100.66 (3) $19,528,140.67 (3) $5,428.83
=============================================================================================
<FN>
(1) Pursuant to the Agreement and Plan of Reorganization dated as of August 24, 1999, among
PMC-Sierra, Inc., Pyrenees Acquisition Corporation and Abrizio Inc., PMC assumed,
effective as of August 27, 1999, all of the outstanding options to purchase common
stock of Abrizio under the Abrizio 1997 Stock Option Plan, and such options became
exercisable to purchase shares of PMC's common stock, with appropriate adjustments to
the number of shares and exercise price of each assumed option.
(2) Options granted pursuant to an employee stock option plan. Estimated pursuant to Rule
457(h)(1) under the Securities Act of 1933, as amended, solely for the purpose of
calculating the registration fee. Based on the price per share at which the options may
be exercised.
(3) Shares reserved for future issuance. Estimated pursuant to Rule 457(c) under the
Securities Act of 1933, as amended, solely for the purpose of calculating the
registration fee. Based on the average of the high and low prices of the common stock
on September 7, 1999, as reported on the Nasdaq National Market.
=============================================================================================
</FN>
</TABLE>
<PAGE>
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
Item 3. Incorporation of Documents by Reference.
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The following documents and information are incorporated by reference
as filed with the Securities and Exchange Commission:
(a) PMC-Sierra, Inc.'s ("PMC's") Form 10-K Annual Report for the
fiscal year ended December 27, 1998 (File No. 0-19084).
(b) PMC's Form 10-Q Quarterly Reports for the quarters ended June
27, 1999, and March 28, 1999 (File No. 0-19804).
(c) PMC's Form 8-K dated August 27, 1999, and August 24, 1999 (as
amended August 25, 1999) (File No. 0-19804).
(d) PMC's Registration Statements on Form S-8, dated October 3,
1996 (File No. 333-13357), August 29, 1997 (File No. 333-34671), and June 4,
1998 (File No. 333-55983).
All documents subsequently filed by PMC pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, as amended, prior to
the filing of a post-effective amendment which indicates that all securities
offered have been sold or which deregisters all securities then remaining
unsold, shall be deemed to be incorporated by reference in this registration
statement and to be part hereof from the date of filing such documents.
Item 4. Description of Securities.
- ------- --------------------------
Not applicable.
Item 5. Interests of Named Experts and Counsel.
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Certain legal matters with respect to the shares will be passed upon
by Wilson, Sonsini, Goodrich & Rosati, a Professional Corporation, Palo Alto,
California.
Item 6. Indemnification of Directors and Officers.
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Section 145 of the Delaware General Corporation Law generally
provides that a corporation is empowered to indemnify any person who is made a
party to any threatened, pending or completed action, suit or proceeding by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation or is or was serving, at the request of the corporation, in any
of such capacities of another corporation or other enterprise, if such director,
officer, employee or agent acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. This statute describes in detail the right of
PMC to indemnify any such person.
PMC's Certificate of Incorporation eliminates in certain
circumstances the liability of directors of PMC for monetary damages for breach
of their fiduciary duty as directors. This provision does not eliminate the
liability of a director (i) for breach of the director's duty of loyalty to PMC
or its stockholders, (ii) for acts or omissions by the director not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for willful or negligent declaration of an unlawful dividend, stock
purchase or redemption or (iv) for transactions from which the director derived
an improper personal benefit.
<PAGE>
PMC's Certificate of Incorporation also provides generally for
indemnification of all directors and officers of PMC to the fullest extent
permitted by the General Corporation Law of the State of Delaware. Such right to
indemnification shall be deemed to be a contract right and includes generally
the right to be paid by PMC the expenses incurred in defending any proceeding
covered by this provision in advance of its final disposition. Individuals who
are entitled to indemnification may bring suit to seek recovery of amounts due
under the foregoing provisions and to recover the expenses of such suit if
successful.
PMC has entered into indemnification agreements to such effect with
its officers and directors containing provisions which are in some respects
broader than the specific indemnification provisions contained in the General
Corporation Law of Delaware. The indemnification agreements may require PMC,
among other things, to indemnify such officers and directors against certain
liabilities that may arise by reason of their status or service as directors or
officers (other than liabilities arising from willful misconduct of a culpable
nature) and to advance their expenses incurred as a result of any proceeding
against them as to which they could be indemnified.
PMC believes that it is the position of the Commission that insofar
as the foregoing provisions may be invoked to disclaim liability for damages
arising under the Securities Act, such provisions are against public policy as
expressed in the Security Act and are therefore unenforceable.
PMC currently maintains an officers' and directors' liability
insurance policy which covers, subject to the exclusions and limitations of the
policy, officers and directors of PMC against certain liabilities which may be
incurred by them solely in such capacities.
Item 7. Exemption from Registration Claimed.
- ------- ------------------------------------
Not applicable.
Item 8. Exhibits.
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Exhibit
Number
-------
4.1 Abrizio Inc. 1997 Stock Option Plan and form of Option
Agreement thereunder
5.1 Opinion of Wilson Sonsini Goodrich & Rosati, Professional
Corporation
23.1 Consent of Deloitte & Touche LLP, Independent Auditors
23.2 Consent of Ernst & Young LLP, Independent Auditors
23.3 Consent of Counsel (Contained in Exhibit 5.1 above)
24.1 Power of Attorney (see page II-4)
Item 9. Undertakings.
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(a) PMC hereby undertakes:
(1) To file, during any period in which offers or sales
are being made, a post-effective amendment to this
registration statement to include any material
information with respect to the plan of distribution
not previously disclosed in the registration
statement or any material change to such information
in the registration statement.
<PAGE>
(2) That, for the purpose of determining any liability
under the Securities Act, each such post-effective
amendment shall be deemed to be a new registration
statement relating to the securities offered therein,
and the offering of such securities at that time
shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of
post-effective amendment any of the securities being
registered which remain unsold at the termination of
the offering.
(b) PMC hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of PMC's annual report pursuant
to Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of PMC pursuant to the Delaware General Corporation Law, the Certificate of
Incorporation or the Bylaws of PMC, Indemnification Agreements entered into
between PMC and its officers and directors, or otherwise, PMC has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by PMC 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 hereunder, PMC 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.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, PMC 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
Burnaby, British Columbia, Canada, on this 13th day of September, 1999.
PMC-SIERRA, INC.
By: /s/ROBERT L. BAILEY
-------------------------------------
Robert L. Bailey, President and Chief
Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each such person whose
signature appears below constitutes and appoints, jointly and severally, Robert
L. Bailey and John W. Sullivan his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Registration Statement on Form S-8 (including post-effective amendments), and to
file the same, with all exhibits thereto, and other documents in connection
therewith, with the Commission, hereby ratifying and confirming all that each of
said attorneys-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Robert L. Bailey President, Chief Executive Officer and September 13, 1999
- -------------------------- Director (Principal Executive Officer)
Robert L. Bailey
/s/ John W. Sullivan Vice President of Finance and Chief September 13, 1999
- -------------------------- Financial Officer (Principal Financial and
John W. Sullivan Accounting Officer)
/s/ James V. Diller Chairman of the Board of Directors September 9, 1999
- --------------------------
James V. Diller
/s/ Alexandre Balkanski Director September 9, 1999
- --------------------------
Alexandre Balkanski
/s/ Frank J. Marshall Director September 9, 1999
- --------------------------
Frank J. Marshall
/s/ L. Colin Beaumont Director September 10, 1999
- --------------------------
L. Colin Beaumont
</TABLE>
ABRIZIO INC.
1997 STOCK OPTION PLAN
As Adopted November 25, 1997 and Amended June 17, 1998
1. PURPOSE. The purpose of this Plan is to provide incentives to
attract, retain and motivate eligible persons whose present and potential
contributions are important to the success of the Company, its Parent and
Subsidiaries, by offering them an opportunity to participate in the Company's
future performance through awards of Options. Capitalized terms not defined in
the text are defined in Section 21. This Plan is intended to be a written
compensatory benefit plan within the meaning of Rule 701 promulgated under the
Securities Act.
2. SHARES SUBJECT TO THE PLAN.
2.1 Number of Shares Available. Subject to Sections 2.2 and
16, the total number of Shares reserved and available for grant and issuance
pursuant to this Plan will be 2,600,356 Shares or such lesser number of Shares
as permitted under Section 260.140.45 of Title 10 of the California Code of
Regulations. Subject to Sections 2.2 and 16, Shares that are subject to issuance
upon exercise of an Option but cease to be subject to such Option for any reason
other than exercise of such Option will be available for grant and issuance in
connection with future Options under this Plan. At all times the Company will
reserve and keep available a sufficient number of Shares as will be required to
satisfy the requirements of all outstanding Options granted under this Plan.
2.2 Adjustment of Shares. In the event that the number of
outstanding shares of the Company's common stock is changed by a stock dividend,
recapitalization, stock split, reverse stock split, subdivision, combination,
reclassification or similar change in the capital structure of the Company
without consideration, then (a) the number of Shares reserved for issuance under
this Plan and (b) the Exercise Prices of and number of Shares subject to
outstanding Options, will be proportionately adjusted, subject to any required
action by the Board or the shareholders of the Company and compliance with
applicable securities laws; provided, however, that fractions of a Share will
not be issued but will either be paid in cash at the Fair Market Value of such
fraction of a Share or will be rounded down to the nearest whole Share, as
determined by the Committee in its discretion.
3. ELIGIBILITY. ISOs (as defined in Section 5 below) may be granted
only to employees (including officers and directors who are also employees) of
the Company or of a Parent or Subsidiary of the Company. NQSOs (as defined in
Section 5 below) may be granted to employees, officers, directors and
consultants of the Company or of any Parent or Subsidiary of the Company;
provided such consultants render bona fide services not in connection with the
offer and sale of securities in a capital-raising transaction. A person may be
granted more than one Option under this Plan.
4. ADMINISTRATION.
4.1 Committee Authority. This Plan will be administered by the
Committee or the Board acting as the Committee. Subject to the general purposes,
terms and conditions of this Plan, and to the direction of the Board, the
Committee has full power to implement and carry out this Plan. Without
limitation, the Committee has the authority to:
<PAGE>
(a) construe and interpret this Plan, any Stock
Option Agreement or Exercise Agreement (each as defined in Section 5 below) and
any other agreement or document executed pursuant to this Plan;
(b) prescribe, amend and rescind rules and
regulations relating to this Plan;
(c) select persons to receive Options;
(d) determine the form and terms of Options;
(e) determine the number of Shares or other
consideration subject to Options;
(f) determine whether Options will be granted
singly, in combination with, in tandem with, in replacement of, or as
alternatives to, any Options granted under this Plan or any awards under any
other incentive or compensation plan of the Company or any Parent or Subsidiary
of the Company;
(g) grant waivers of Plan or Option conditions;
(h) determine the vesting and exercisability of
Options;
(i) correct any defect, supply any omission, or
reconcile any inconsistency in this Plan, any Option or any Stock Option
Agreement or Exercise Agreement (each as defined in Section 5 below);
(j) determine whether an Option has been earned; and
(k) make all other determinations necessary or
advisable for the administration of this Plan.
4.2 Committee Discretion. Any determination made by the
Committee with respect to any Option will be made in its sole discretion at the
time of grant of the Option or, unless in contravention of any express term of
this Plan or Option, and subject to Section 5.9, at any later time, and such
determination will be final and binding on the Company and on all persons having
an interest in any Option under this Plan. The Committee may delegate to one or
more officers of the Company the authority to grant Options under this Plan.
5. OPTIONS. The Committee may grant Options to eligible persons and
will determine whether such Options will be Incentive Stock Options within the
meaning of the Code ("ISOs") or Nonqualified Stock Options ("NQSOs"), the number
of Shares subject to the Option, the Exercise Price of the Option, the period
during which the Option may be exercised, and all other terms and conditions of
the Option, subject to the following:
5.1 Form of Option Grant. Each Option granted under this Plan
will be evidenced by an Agreement which will expressly identify the Option as an
ISO or an NQSO ("Stock Option Agreement"), and will be in such form and contain
such provisions (which need not be the same for each Participant) as the
Committee may from time to time approve, and which will comply with and be
subject to the terms and conditions of this Plan.
<PAGE>
5.2 Date of Grant. The date of grant of an Option will be the
date on which the Committee makes the determination to grant such Option, unless
otherwise specified by the Committee. The Stock Option Agreement and a copy of
this Plan will be delivered to the Participant within a reasonable time after
the granting of the Option.
5.3 Exercise Period. Options may be exercisable immediately
(subject to repurchase pursuant to Section 10 of this Plan) or may be
exercisable within the times or upon the events determined by the Committee as
set forth in the Stock Option Agreement governing such Option; provided,
however, that no Option will be exercisable after the expiration of ten (10)
years from the date the Option is granted; and provided further that no ISO
granted to a person who directly or by attribution owns more than ten percent
(10%) of the total combined voting power of all classes of stock of the Company
or of any Parent or Subsidiary of the Company ("Ten Percent Shareholder") will
be exercisable after the expiration of five (5) years from the date the ISO is
granted. The Committee may provide for Options to become exercisable at one time
or from time to time, periodically or otherwise, in such number of Shares or
percentage of Shares as the Committee determines. Subject to earlier termination
of the Option as provided herein, each Participant who is not an officer,
director or consultant of the Company or of a Parent or Subsidiary of the
Company shall have the right to exercise an Option granted hereunder at the rate
of at least twenty percent (20%) per year over five (5) years from the date such
Option is granted.
5.4 Exercise Price. The Exercise Price of an Option will be
determined by the Committee when the Option is granted and may not be less than
85% of the Fair Market Value of the Shares on the date of grant; provided that
(i) the Exercise Price of an ISO will not be less than 100% of the Fair Market
Value of the Shares on the date of grant and (ii) the Exercise Price of any
Option granted to a Ten Percent Shareholder will not be less than 110% of the
Fair Market Value of the Shares on the date of grant. Payment for the Shares
purchased must be made in accordance with Section 6 of this Plan.
5.5 Method of Exercise. Options may be exercised only by
delivery to the Company of a written stock option exercise agreement (the
"Exercise Agreement") in a form approved by the Committee (which need not be the
same for each Participant), stating the number of Shares being purchased, the
restrictions imposed on the Shares purchased under such Exercise Agreement, if
any, and such representations and agreements regarding Participant's investment
intent and access to information and other matters, if any, as may be required
or desirable by the Company to comply with applicable securities laws, together
with payment in full of the Exercise Price, and any applicable taxes, for the
number of Shares being purchased.
5.6 Termination. Subject to earlier termination pursuant to
Sections 16 or 17 and notwithstanding the exercise periods set forth in the
Stock Option Agreement, exercise of an Option will always be subject to the
following:
(a) If the Participant is Terminated for any reason
except death, Disability or Cause, then the Participant may exercise such
Participant's Options, only to the extent that such Options are exercisable on
the Termination Date and such Options must be exercised by the Participant, if
at all, as to all or some of the Vested Shares calculated as of the Termination
Date within three (3) months after the Termination Date (or within such shorter
time period, not less than thirty (30) days after the Termination Date, or such
longer time period not exceeding five (5) years after the Termination Date as
may be determined by the Committee with any exercise after three (3) months
after the Termination Date deemed to be an NQSO), but in any event, no later
than the expiration date of the Options.
<PAGE>
(b) If the Participant is Terminated because of
Participant's death or Disability (or the Participant dies within three (3)
months after Participant's Termination other than for Cause), then Participant's
Options may be exercised, only to the extent that such Options are exercisable
by Participant on the Termination Date and must be exercised by Participant (or
Participant's legal representative or authorized assignee), as to all of some of
the Vested Shares calculated as of the Termination Date if at all, within twelve
(12) months after the Termination Date (or within such shorter time period, not
less than six (6) months after the Termination Date, or such longer time period
not exceeding five (5) years after the Termination Date as may be determined by
the Committee, with any exercise after (a) three (3) months after the
Termination Date when the Termination is for any reason other than the
Participant's death or disability, within the meaning of Code Section 22(e)(3),
or (b) twelve (12) months after the Termination Date when the Termination is
because of Participant's disability, within the meaning of Code Section
22(e)(3), deemed to be an NQSO), but in any event no later than the expiration
date of the Options.
(c) If the Participant is terminated for Cause, then
Participant's Options shall expire on such Participant's Termination Date, or at
such later time and on such conditions as are determined by the Committee.
5.7 Limitations on Exercise. The Committee may specify a
reasonable minimum number of Shares that may be purchased on exercise of an
Option, provided that such minimum number will not prevent Participant from
exercising the Option for the full number of Shares for which it is then
exercisable.
5.8 Limitations on ISOs. The aggregate Fair Market Value
(determined as of the date of grant) of Shares with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year (under
this Plan or under any other incentive stock option plan of the Company or any
Parent or Subsidiary of the Company) will not exceed $100,000. If the Fair
Market Value of Shares on the date of grant with respect to which ISOs are
exercisable for the first time by a Participant during any calendar year exceeds
$100,000, then the Options for the first $100,000 worth of Shares to become
exercisable in such calendar year will be ISOs and the Options for the amount in
excess of $100,000 that become exercisable in that calendar year will be NQSOs.
In the event that the Code or the regulations promulgated thereunder are amended
after the Effective Date (as defined in Section 17 below) to provide for a
different limit on the Fair Market Value of Shares permitted to be subject to
ISOs, then such different limit will be automatically incorporated herein and
will apply to any Options granted after the effective date of such amendment.
5.9 Modification, Extension or Renewal. The Committee may
modify, extend or renew outstanding Options and authorize the grant of new
Options in substitution therefor, provided that any such action may not, without
the written consent of a Participant, impair any of such Participant's rights
under any Option previously granted. Any outstanding ISO that is modified,
extended, renewed or otherwise altered will be treated in accordance with
Section 424(h) of the Code. Subject to Section 5.10, the Committee may reduce
the Exercise Price of outstanding Options without the consent of Participants
affected by a written notice to them; provided, however, that the Exercise Price
may not be reduced below the minimum Exercise Price that would be permitted
under Section 5.4 of this Plan for Options granted on the date the action is
taken to reduce the Exercise Price.
5.10 No Disqualification. Notwithstanding any other provision
in this Plan, no term of this Plan relating to ISOs will be interpreted, amended
or altered, nor will any discretion or authority granted under this Plan be
exercised, so as to disqualify this Plan under Section 422 of the Code or,
without the consent of the Participant affected, to disqualify any ISO under
Section 422 of the Code.
6. PAYMENT FOR SHARE PURCHASES.
6.1 Payment. Payment for Shares purchased pursuant to this
Plan may be made in cash (by check) or, where expressly approved for the
Participant by the Committee and where permitted by law:
<PAGE>
(a) by cancellation of indebtedness of the Company
to the Participant;
(b) by surrender of shares that: (1) either (A) have
been owned by the Participant for more than six (6) months and have been paid
for within the meaning of SEC Rule 144 (and, if such shares were purchased from
the Company by use of a promissory note, such note has been fully paid with
respect to such shares) or (B) were obtained by the Participant in the public
market and (2) are clear of all liens, claims, encumbrances or security
interests;
(c) by tender of a full recourse promissory note
having such terms as may be approved by the Committee and bearing interest at a
rate sufficient to avoid imputation of income under Sections 483 and 1274 of the
Code; provided, however, that Participants who are not employees or directors of
the Company will not be entitled to purchase Shares with a promissory note
unless the note is adequately secured by collateral other than the Shares.
(d) by waiver of compensation due or accrued to the
Participant for services rendered;
(e) provided that a public market for the Company's
stock exists:
(1) through a "same day sale" commitment
from the Participant and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD Dealer") whereby the Participant
irrevocably elects to exercise the Option and to sell a portion of the Shares so
purchased to pay for the Exercise Price, and whereby the NASD Dealer irrevocably
commits upon receipt of such Shares to forward the Exercise Price directly to
the Company; or
(2) through a "margin" commitment from the
Participant and an NASD Dealer whereby the Participant irrevocably elects to
exercise the Option and to pledge the Shares so purchased to the NASD Dealer in
a margin account as security for a loan from the NASD Dealer in the amount of
the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the Exercise Price directly to the Company; or
(f) by any combination of the foregoing.
6.2 Loan Guarantees. The Committee may help the Participant
pay for Shares purchased under this Plan by authorizing a guarantee by the
Company of a third-party loan to the Participant.
7. WITHHOLDING TAXES.
7.1 Withholding Generally. Whenever Shares are to be issued in
satisfaction of Options granted under this Plan, the Company may require the
Participant to remit to the Company an amount sufficient to satisfy federal,
state and local withholding tax requirements prior to the delivery of any
certificate or certificates for such Shares. Whenever, under this Plan, payments
in satisfaction of Options are to be made in cash, such payment will be net of
an amount sufficient to satisfy federal, state, and local withholding tax
requirements.
7.2 Stock Withholding. When, under applicable tax laws, the
Participant incurs tax liability in connection with the exercise or vesting of
any Option that is subject to tax withholding and the Participant is obligated
to pay the Company the amount required to be withheld, the Committee may in its
sole discretion allow the Participant to satisfy the minimum withholding tax
obligation by electing to have the Company withhold from the Shares to be issued
that number of Shares having a Fair Market Value equal to the minimum amount
required to be withheld, determined on the date that the amount of tax to be
withheld is to be determined. All elections by a Participant to have Shares
withheld for this purpose will be made in accordance with the requirements
established by the Committee and be in writing in a form acceptable to the
Committee.
<PAGE>
8. PRIVILEGES OF STOCK OWNERSHIP.
8.1 Voting and Dividends. No Participant will have any of the
rights of a shareholder with respect to any Shares until the Shares are issued
to the Participant. After Shares are issued to the Participant, the Participant
will be a shareholder and have all the rights of a shareholder with respect to
such Shares, including the right to vote and receive all dividends or other
distributions made or paid with respect to such Shares; provided, that the
Participant will have no right to retain such stock dividends or stock
distributions with respect to Unvested Shares that are repurchased pursuant to
Section 10. The Company will comply with Section 260.140.1 of Title 10 of the
California Code of Regulations with respect to the voting rights of common
stock.
8.2 Financial Statements. The Company will provide financial
statements to each Participant prior to such Participant's purchase of Shares
under this Plan, and to each Participant annually during the period such
Participant has Options outstanding, or as otherwise required under Section
260.140.46 of Title 10 of the California Code of Regulations. Notwithstanding
the foregoing, the Company will not be required to provide such financial
statements to Participants when issuance is limited to key employees whose
services in connection with the Company assure them access to equivalent
information.
9. TRANSFERABILITY. Options granted under this Plan, and any interest
therein, will not be transferable or assignable by Participant, and may not be
made subject to execution, attachment or similar process, otherwise than by will
or by the laws of descent and distribution. During the lifetime of the
Participant an Option will be exercisable only by the Participant or
Participant's legal representative and any elections with respect to an Option
may be made only by the Participant or Participant's legal representative.
10. RESTRICTIONS ON SHARES.
10.1 Right of First Refusal. At the discretion of the
Committee, the Company may reserve to itself and/or its assignee(s) in the Stock
Option Agreement a right of first refusal to purchase all Shares that a
Participant (or a subsequent transferee) may propose to transfer to a third
party, unless otherwise not permitted by Section 25102(o) of the California
Corporations Code, provided, that such right of first refusal terminates upon
the Company's initial public offering of common stock pursuant to an effective
registration statement filed under the Securities Act.
10.2 Right of Repurchase. At the discretion of the Committee,
the Company may reserve to itself and/or its assignee(s) in the Stock Option
Agreement a right to repurchase Unvested Shares held by a Participant following
such Participant's Termination at any time within ninety (90) days after
Participant's Termination Date (or in the case of securities issued upon
exercise of an Option after the Participant's Termination Date, within ninety
(90) days after the date of such exercise) for cash and/or cancellation of
purchase money indebtedness, at the Participant's Exercise Price, provided, that
to the extent the Participant is not an officer, director or consultant of the
Company or of a Parent or Subsidiary of the Company such right to repurchase
Unvested Shares lapses at the rate of at least twenty percent (20%) per year
over five (5) years from the date of grant of the Option.
<PAGE>
11. CERTIFICATES. All certificates for Shares or other securities
delivered under this Plan will be subject to such stock transfer orders, legends
and other restrictions as the Committee may deem necessary or advisable,
including restrictions under any applicable federal, state or foreign securities
law, or any rules, regulations and other requirements of the SEC or any stock
exchange or automated quotation system upon which the Shares may be listed or
quoted.
12. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a
Participant's Shares, the Committee may require the Participant to deposit all
certificates representing Shares, together with stock powers or other
instruments of transfer approved by the Committee, appropriately endorsed in
blank, with the Company or an agent designated by the Company to hold in escrow
until such restrictions have lapsed or terminated, and the Committee may cause a
legend or legends referencing such restrictions to be placed on the
certificates. Any Participant who is permitted to execute a promissory note as
partial or full consideration for the purchase of Shares under this Plan will be
required to pledge and deposit with the Company all or part of the Shares so
purchased as collateral to secure the payment of Participant's obligation to the
Company under the promissory note; provided, however, that the Committee may
require or accept other or additional forms of collateral to secure the payment
of such obligation and, in any event, the Company will have full recourse
against the Participant under the promissory note notwithstanding any pledge of
the Participant's Shares or other collateral. In connection with any pledge of
the Shares, Participant will be required to execute and deliver a written pledge
agreement in such form as the Committee will from time to time approve. The
Shares purchased with the promissory note may be released from the pledge on a
pro rata basis as the promissory note is paid.
13. EXCHANGE AND BUYOUT OF OPTIONS. The Committee may, at any time or
from time to time, authorize the Company, with the consent of the respective
Participants, to issue new Options in exchange for the surrender and
cancellation of any or all outstanding Options. The Committee may at any time
buy from a Participant an Option previously granted with payment in cash, shares
of common stock of the Company (including restricted stock) or other
consideration, based on such terms and conditions as the Committee and the
Participant may agree.
14. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. This Plan is
intended to comply with Section 25102(o) of the California Corporations Code.
Any provision of this Plan which is inconsistent with Section 25102(o) shall,
without further act or amendment by the Company or the Board, be reformed to
comply with the requirements of Section 25102(o). An Option will not be
effective unless such Option is in compliance with all applicable federal and
state securities laws, rules and regulations of any governmental body, and the
requirements of any stock exchange or automated quotation system upon which the
Shares may then be listed or quoted, as they are in effect on the date of grant
of the Option and also on the date of exercise or other issuance.
Notwithstanding any other provision in this Plan, the Company will have no
obligation to issue or deliver certificates for Shares under this Plan prior to
(a) obtaining any approvals from governmental agencies that the Company
determines are necessary or advisable, and/or (b) compliance with any exemption,
completion of any registration or other qualification of such Shares under any
state or federal law or ruling of any governmental body that the Company
determines to be necessary or advisable. The Company will be under no obligation
to register the Shares with the SEC or to effect compliance with the exemption,
registration, qualification or listing requirements of any state securities
laws, stock exchange or automated quotation system, and the Company will have no
liability for any inability or failure to do so.
15. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Option granted
under this Plan will confer or be deemed to confer on any Participant any right
to continue in the employ of, or to continue any other relationship with, the
Company or any Parent or Subsidiary of the Company or limit in any way the right
of the Company or any Parent or Subsidiary of the Company to terminate
Participant's employment or other relationship at any time, with or without
cause.
<PAGE>
16. CORPORATE TRANSACTIONS.
16.1 Assumption or Replacement of Options by Successor. In the
event of (a) a dissolution or liquidation of the Company, (b) a merger or
consolidation in which the Company is not the surviving corporation, (c) a
merger in which the Company is the surviving corporation but after which the
shareholders of the Company immediately prior to such merger (other than any
shareholder which merges with the Company in such merger, or which owns or
controls another corporation which merges, with the Company in such merger)
cease to own their shares or other equity interests in the Company, or (d) the
sale of all or substantially all of the assets of the Company, any or all
outstanding Options may be assumed, converted or replaced by the successor or
acquiring corporation (if any), which assumption, conversion or replacement will
be binding on all Participants. In the alternative, the successor or acquiring
corporation may substitute equivalent Options or provide substantially similar
consideration to Participants as was provided to shareholders (after taking into
account the existing provisions of the Options). The successor or acquiring
corporation may also issue, in place of outstanding Shares of the Company held
by the Participant, substantially similar shares or other property subject to
repurchase restrictions and other provisions no less favorable to the
Participant than those which applied to such outstanding Shares immediately
prior to such transaction described in this Subsection 16.1. In the event such
successor or acquiring corporation (if any) refuses to assume or substitute
Options, as provided above, pursuant to a transaction described in this
Subsection 16.1, then notwithstanding any other provision in this Plan to the
contrary, such Options will expire on such transaction at such time and on such
conditions as the Board will determine.
16.2 Other Treatment of Options. Subject to any greater rights
granted to Participants under the foregoing provisions of this Section 16, in
the event of the occurrence of any transaction described in subsection 16.1, any
outstanding Options will be treated as provided in the applicable agreement or
plan of merger, consolidation, dissolution, liquidation or sale of assets.
16.3 Assumption of Options by the Company. The Company, from
time to time, also may substitute or assume outstanding options granted by
another company, whether in connection with an acquisition of such other company
or otherwise, by either (a) granting an Option under this Plan in substitution
of such other company's option, or (b) assuming such option as if it had been
granted under this Plan if the terms of such assumed option could be applied to
an Option granted under this Plan. Such substitution or assumption will be
permissible if the holder of the substituted or assumed option would have been
eligible to be granted an Option under this Plan if the other company had
applied the rules of this Plan to such grant. In the event the Company assumes
an option granted by another company, the terms and conditions of such option
will remain unchanged (except that the exercise price and the number and nature
of shares issuable upon exercise of any such option will be adjusted
appropriately pursuant to Section 424(a) of the Code). In the event the Company
elects to grant a new Option rather than assuming an existing option, such new
Option may be granted with a similarly adjusted Exercise Price.
17. ADOPTION AND SHAREHOLDER APPROVAL. This Plan will become effective
on the date that it is adopted by the Board (the "Effective Date"). This Plan
will be approved by the shareholders of the Company (excluding Shares issued
pursuant to this Plan), consistent with applicable laws, within twelve (12)
months before or after the Effective Date. Upon the Effective Date, the Board
may grant Options pursuant to this Plan; provided, however, that: (a) no Option
may be exercised prior to initial shareholder approval of this Plan, and (b) no
Option granted pursuant to an increase in the number of Shares approved by the
Board shall be exercised prior to the time such increase has been approved by
the shareholders of the Company. In the event that initial shareholder approval
is not obtained within twelve (12) months before or after this Plan is adopted
by the Board, all Options granted hereunder will be canceled.
<PAGE>
18. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided
herein, this Plan will terminate ten (10) years from the Effective Date or, if
earlier, the date of shareholder approval. This Plan and all agreements
hereunder shall be governed by and construed in accordance with the laws of the
State of California.
19. AMENDMENT OR TERMINATION OF PLAN. Subject to Section 5.9, the Board
may at any time terminate or amend this Plan in any respect, including without
limitation amendment of any form of Stock Option Agreement or instrument to be
executed pursuant to this Plan; provided, however, that the Board will not,
without the approval of the shareholders of the Company, amend this Plan in any
manner that requires such shareholder approval pursuant to Section 25102(o) of
the California Corporations Code or the Code or the regulations promulgated
thereunder as such provisions apply to ISO plans.
20. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by
the Board, the submission of this Plan to the shareholders of the Company for
approval, nor any provision of this Plan will be construed as creating any
limitations on the power of the Board to adopt such additional compensation
arrangements as it may deem desirable, including, without limitation, the
granting of stock options or any other equity awards outside of this Plan, and
such arrangements may be either generally applicable or applicable only in
specific cases.
21. DEFINITIONS. As used in this Plan, the following terms will have
the following meanings:
"Board" means the Board of Directors of the Company.
"Cause" means Termination because of (i) any willful material
violation by the Participant of any law or regulation applicable to the business
of the Company or a Parent or Subsidiary of the Company, the Participant's
conviction for or guilty plea to, a felony or a crime involving moral turpitude
or any willful perpetration by the Participant of a common law fraud, (ii) the
Participant's commission of an act of personal dishonesty which involves a
personal profit in connection with the Company or any other entity having a
business relationship with the Company, (iii) any material breach by the
Participant of any material provision of any agreement or understanding between
the Company or a Parent or Subsidiary of the Company and the Participant
regarding the terms of the Participant's service as an employee, director or
consultant to the Company or a Parent or Subsidiary of the Company, including
without limitation, the willful and continued failure or refusal of the
Participant to perform the material duties required of such Participant as an
employee, director or consultant of the Company or a Parent or Subsidiary of the
Company, other than as a result of having a Disability, or a breach of any
applicable invention assignment and confidentiality agreement or similar
agreement between the Company or a Parent or Subsidiary of the Company and the
Participant, (iv) Participant's intentional disregard of the policies of the
Company or a Parent or Subsidiary of the Company so as to cause loss, damage or
injury to the property, reputation or employees of the Company or a Parent or
Subsidiary of the Company, or (v) any other misconduct by the Participant which
is materially injurious to the financial condition or business reputation of, or
is otherwise materially injurious to, the Company or a Parent or Subsidiary of
the Company.
"Code" means the Internal Revenue Code of 1986, as amended.
"Committee" means the committee appointed by the Board to
administer this Plan, or if no committee is appointed, the Board.
"Company" means Abrizio Inc., a California corporation, or any
successor corporation.
"Disability" means a disability, whether temporary or
permanent, partial or total, as determined by the Committee.
<PAGE>
"Exercise Price" means the price at which a holder of an
Option may purchase the Shares issuable upon exercise of the Option.
"Fair Market Value" means, as of any date, the value of a
share of the Company's common stock determined as follows:
(a) if such common stock is then quoted on the Nasdaq
National Market, its closing price on the Nasdaq
National Market on the date of determination as
reported in The Wall Street Journal;
(b) if such common stock is publicly traded and is then
listed on a national securities exchange, its closing
price on the date of determination on the principal
national securities exchange on which the common
stock is listed or admitted to trading as reported in
The Wall Street Journal;
(c) if such common stock is publicly traded but is not
quoted on the Nasdaq National Market nor listed or
admitted to trading on a national securities
exchange, the average of the closing bid and asked
prices on the date of determination as reported by
The Wall Street Journal (or, if not so reported, as
otherwise reported by any newspaper or other source
as the Board may determine); or
(d) if none of the foregoing is applicable, by the
Committee in good faith.
"Option" means an award of an option to purchase Shares
pursuant to Section 5.
"Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the Company if each of such
corporations other than the Company owns stock possessing 50% or more of the
total combined voting power of all classes of stock in one of the other
corporations in such chain.
"Participant" means a person who receives an Option under this
Plan.
"Plan" means this Abrizio Inc. 1997 Stock Option Plan, as
amended from time to time.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shares" means shares of the Company's common stock reserved
for issuance under this Plan, as adjusted pursuant to Sections 2 and 16, and any
successor security.
"Subsidiary" or "Subsidiaries" means any corporation or
corporations (other than the Company) in an unbroken chain of corporations
beginning with the Company if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.
<PAGE>
"Termination" or "Terminated" means, for purposes of this Plan
with respect to a Participant, that the Participant has for any reason ceased to
provide services as an employee, officer, director or consultant to the Company
or a Parent or Subsidiary of the Company. A Participant will not be deemed to
have ceased to provide services in the case of (i) sick leave, (ii) military
leave, or (iii) any other leave of absence approved by the Committee, provided
that such leave is for a period of not more than ninety (90) days, unless
reinstatement (or, in the case of an employee with an ISO, reemployment) upon
the expiration of such leave is guaranteed by contract or statute or unless
provided otherwise pursuant to formal policy adopted from time to time by the
Company and issued and promulgated in writing. In the case of any Participant on
(i) sick leave, (ii) military leave or (iii) an approved leave of absence, the
Committee may make such provisions respecting suspension of vesting of the
Option while the Participant is on leave from the Company or a Parent or
Subsidiary of the Company as the Committee may deem appropriate, except that in
no event may an Option be exercised after the expiration of the term set forth
in the Stock Option Agreement. The Committee will have sole discretion to
determine whether a Participant has ceased to provide services and the effective
date on which the Participant ceased to provide services (the "Termination
Date").
"Unvested Shares" means "Unvested Shares" as defined in Section
2.2 of the Stock Option Agreement.
"Vested Shares" means "Vested Shares" as defined in Section 2.2
of the Stock Option Agreement.
<PAGE>
No. ____
ABRIZIO INC.
1997 STOCK OPTION PLAN
STOCK OPTION agreement
This Stock Option Agreement ("Agreement") is made and entered into as
of the Date of Grant set forth below (the "Date of Grant") by and between
Abrizio Inc., a California corporation (the "Company"), and the Participant
named below ("Participant"). Capitalized terms not defined herein shall have the
meanings ascribed to them in the Company's 1997 Stock Option Plan (the "Plan").
Participant: ___________________________________
Social Security Number: ___________________________________
Address: ___________________________________
___________________________________
Total Option Shares: ___________________________________
Exercise Price Per Share: ___________________________________
Date of Grant: ___________________________________
Vesting Start Date: ___________________________________
Expiration Date: ___________________________________
[unless earlier terminated under
Section 3 below]
Type of Stock Option
(Check one): [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
1. Grant of Option. The Company hereby grants to Participant an
option (this "Option") to purchase the total number of shares of common stock of
the Company set forth above as Total Option Shares (the "Shares") at the
Exercise Price Per Share set forth above (the "Exercise Price"), subject to all
of the terms and conditions of this Agreement and the Plan. If designated as an
Incentive Stock Option above, this Option is intended to qualify as an
"incentive stock option" ("ISO") within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code").
2. Exercise Period.
2.1 Exercise Period of Option. Provided Participant continues
to provide services to the Company or any Subsidiary or Parent of the Company,
this Option will become vested and exercisable as to portions of the Shares as
follows: (a) this Option shall not vest nor be exercisable with respect to any
of the Shares until the first anniversary of the Vesting Start Date (the "First
Vesting Date"); (b) on the First Vesting Date this Option will become vested and
exercisable as to 1/4th (25%) of the Shares; and (c) thereafter at the end of
each full succeeding month this Option will become vested and exercisable as to
1/48th (2.0833%) of the Shares. If application of the vesting percentage causes
a fractional share, such share shall be rounded down to the nearest whole share.
<PAGE>
2.2 Vesting of Options. Shares that are vested pursuant to the
schedule set forth in Section 2.1 are "Vested Shares." Shares that are not
vested pursuant to the schedule set forth in Section 2.1 are "Unvested Shares."
2.3 Expiration. The Option shall expire on the Expiration Date
set forth above and must be exercised, if at all, on or before the Expiration
Date, unless earlier terminated under Section 3 below.
3. Termination.
3.1 Termination for Any Reason Except Death, Disability or
Cause. If Participant is Terminated for any reason, except death, Disability or
Cause, this Option, to the extent (and only to the extent) that it is
exercisable by Participant on the Termination Date, may be exercised by
Participant, if at all, as to all or some of the Vested Shares calculated as of
the Termination Date no later than three (3) months after the Termination Date,
but in any event no later than the Expiration Date.
3.2 Termination Because of Death or Disability. If Participant
is Terminated because of death or Disability of Participant (or the Participant
dies within three (3) months after Termination other than for Cause) this
Option, to the extent that it is exercisable by Participant on the Termination
Date, may be exercised by Participant (or Participant's legal representative),
if at all, as to all or some of the Vested Shares calculated as of the
Termination Date no later than twelve (12) months after the Termination Date,
but in any event no later than the Expiration Date. Any exercise beyond (a)
three (3) months after the Termination Date when the Termination is for any
reason other than the Participant's death or disability, within the meaning of
Section 22(e)(3) of the Code is deemed to be an NQSO.
3.3 Termination for Cause. If Participant is Terminated for
Cause, then this Option will expire on Participant's Termination Date, or at
such later time and on such conditions as are determined by the Committee.
3.4 No Obligation to Employ. Nothing in the Plan or this
Agreement shall confer on Participant any right to continue in the employ of, or
other relationship with, the Company or any Parent or Subsidiary of the Company,
or limit in any way the right of the Company or any Parent or Subsidiary of the
Company to terminate Participant's employment or other relationship at any time,
with or without Cause.
4. Manner of Exercise.
4.1 Stock Option Exercise Agreement. To exercise this Option,
Participant (or in the case of exercise after Participant's death or incapacity,
Participant's executor, administrator, heir or legatee, as the case may be) must
deliver to the Company an executed stock option exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
Company from time to time (the "Exercise Agreement"), which shall set forth,
inter alia, Participant's election to exercise this Option, the number of Shares
being purchased, any restrictions imposed on the Shares and any representations,
warranties and agreements regarding Participant's investment intent and access
to information as may be required by the Company to comply with applicable
securities laws. If someone other than Participant exercises this Option, then
such person must submit documentation reasonably acceptable to the Company that
such person has the right to exercise this Option.
4.2 Limitations on Exercise. The Option may not be exercised
unless such exercise is in compliance with all applicable federal and state
securities laws, as they are in effect on the date of exercise. The Option may
not be exercised as to fewer than one hundred (100) Shares, unless it is
exercised as to all Shares as to which this Option is then exercisable.
<PAGE>
4.3 Payment. The Exercise Agreement shall be accompanied by
full payment of the Exercise Price for the Shares being purchased in cash (by
check), or where permitted by law:
(a) by cancellation of indebtedness of the company
to the Participant;
(b) by waiver of compensation due or accrued to the
Participant for services rendered;
(c) by waiver of compensation due or accrued to
Participant for services rendered;
(d) provided that a public market for the Company's
stock exists, (1) through a "same day sale" commitment from Participant and a
broker-dealer that is a member of the National Association of Securities Dealers
(an "NASD Dealer") whereby Participant irrevocably elects to exercise this
Option and to sell a portion of the Shares so purchased to pay for the Exercise
Price and whereby the NASD Dealer irrevocably commits upon receipt of such
Shares to forward the Exercise Price directly to the Company, or (2) through a
"margin" commitment from Participant and an NASD Dealer whereby Participant
irrevocably elects to exercise this Option and to pledge the Shares so purchased
to the NASD Dealer in a margin account as security for a loan from the NASD
Dealer in the amount of the Exercise Price, and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the Exercise Price
directly to the Company; or
(e) by any combination of the foregoing.
4.4 Tax Withholding. Prior to the issuance of the Shares upon
exercise of this Option, Participant must pay or provide for any applicable
federal, state and local withholding obligations of the Company. If the
Committee permits, Participant may provide for payment of withholding taxes upon
exercise of this Option by requesting that the Company retain Shares with a Fair
Market Value equal to the minimum amount of taxes required to be withheld. In
such case, the Company shall issue the net number of Shares to the Participant
by deducting the Shares retained from the Shares issuable upon exercise.
4.5 Issuance of Shares. Provided that the Exercise Agreement
and payment are in form and substance satisfactory to counsel for the Company,
the Company shall issue the Shares registered in the name of Participant,
Participant's authorized assignee, or Participant's legal representative, and
shall deliver certificates representing the Shares with the appropriate legends
affixed thereto.
5. Notice of Disqualifying Disposition of ISO Shares. If this
Option is an ISO, and if Participant sells or otherwise disposes of any of the
Shares acquired pursuant to the ISO on or before the later of (a) the date two
(2) years after the Date of Grant, and (b) the date one (1) year after transfer
of such Shares to Participant upon exercise of this Option, Participant shall
immediately notify the Company in writing of such disposition. Participant
agrees that Participant may be subject to income tax withholding by the Company
on the compensation income recognized by Participant from the early disposition
by payment in cash or out of the current wages or other compensation payable to
Participant.
6. Compliance with Laws and Regulations. The Plan and this
Agreement are intended to comply with Section 25102(o) of the California
Corporations Code. Any provision of this Agreement which is inconsistent with
Section 25102(o) shall, without further act or amendment by the Company or the
Board, be reformed to comply with the requirements of Section 25102(o). The
exercise of this Option and the issuance and transfer of Shares shall be subject
to compliance by the Company and Participant with all applicable requirements of
federal and state securities laws and with all applicable requirements of any
stock exchange on which the Company's common stock may be listed at the time of
such issuance or transfer. Participant understands that the Company is under no
obligation to register or qualify the Shares with the SEC, any state securities
commission or any stock exchange to effect such compliance.
<PAGE>
7. Nontransferability of Option. The Option may not be transferred
in any manner other than by will or by the laws of descent and distribution and
may be exercised during the lifetime of Participant only by Participant or in
the event of Participant's incapacity, by Participant's legal representative.
The terms of this Option shall be binding upon the executors, administrators,
successors and assigns of Participant.
8. Company's Right of First Refusal. Before any Vested Shares held
by Participant or any transferee of such Vested Shares may be sold or otherwise
transferred (including without limitation a transfer by gift or operation of
law), the Company and/or its assignee(s) shall have an assignable right of first
refusal to purchase the Vested Shares to be sold or transferred on the terms and
conditions set forth in the Exercise Agreement (the "Right of First Refusal").
The Company's Right of First Refusal will terminate when the Company's
securities become publicly traded.
9. Tax Consequences. Set forth below is a brief summary as of the
Effective Date of the Plan of some of the federal and California tax
consequences of exercise of this Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISER BEFORE EXERCISING THE OPTION
OR DISPOSING OF THE SHARES.
9.1 Exercise of ISO. If this Option qualifies as an ISO, there
will be no regular federal or California income tax liability upon the exercise
of this Option, although the excess, if any, of the Fair Market Value of the
Shares on the date of exercise over the Exercise Price will be treated as a tax
preference item for federal alternative minimum tax purposes and may subject the
Participant to the alternative minimum tax in the year of exercise.
9.2 Exercise of Nonqualified Stock Option. If this Option does
not qualify as an ISO, there may be a regular federal and California income tax
liability upon the exercise of this Option. Participant will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Shares on the date of
exercise over the Exercise Price. If Participant is or was an employee of the
Company, the Company may be required to withhold from Participant's compensation
or collect from Participant and pay to the applicable taxing authorities an
amount equal to a percentage of this compensation income at the time of
exercise.
9.3 Disposition of Shares. The following tax consequences may
apply upon disposition of the Shares.
(a) Incentive Stock Options. If the Shares are
held for more than twelve (12) months after the date of the transfer of the
Shares pursuant to the exercise of an ISO and are disposed of more than two (2)
years after the Date of Grant, any gain realized on disposition of the Shares
will be treated as long term capital gain for federal and California income tax
purposes. If Shares purchased under an ISO are disposed of within the applicable
one (1) year or two (2) year period, any gain realized on such disposition will
be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price.
<PAGE>
(b) Nonqualified Stock Options. If the Shares
are held for more than twelve (12) months after the date of the transfer of the
Shares pursuant to the exercise of an NQSO, any gain realized on disposition of
the Shares will be treated as long term capital gain.
(c) Withholding. The Company may be required to
withhold from the Participant's compensation or collect from the Participant and
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income.
10. Privileges of Stock Ownership. Participant shall not have any
of the rights of a shareholder with respect to any Shares until the Shares are
issued to Participant.
11. Interpretation. Any dispute regarding the interpretation of
this Agreement shall be submitted by Participant or the Company to the Committee
for review. The resolution of such a dispute by the Committee shall be final and
binding on the Company and Participant.
12. Entire Agreement. The Plan is incorporated herein by reference.
This Agreement and the Plan constitute the entire agreement of the parties and
supersede all prior undertakings and agreements with respect to the subject
matter hereof.
13. Notices. Any notice required to be given or delivered to the
Company under the terms of this Agreement shall be in writing and addressed to
the Corporate Secretary of the Company at its principal corporate offices. Any
notice required to be given or delivered to Participant shall be in writing and
addressed to Participant at the address indicated above or to such other address
as such party may designate in writing from time to time to the Company. All
notices shall be deemed to have been given or delivered upon: personal delivery;
three (3) days after deposit in the United States mail by certified or
registered mail (return receipt requested); one (1) business day after deposit
with any return receipt express courier (prepaid); or one (1) business day after
transmission by facsimile, rapifax or telecopier.
14. Successors and Assigns. The Company may assign any of its
rights under this Agreement, including the Right of First Refusal. This
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Company. Subject to the restrictions on transfer set forth
herein, this Agreement shall be binding upon Participant and Participant's
heirs, executors, administrators, legal representatives, successors and assigns.
15. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California as such laws
are applied to agreements between California residents entered into and to be
performed entirely within California. If any provision of this Agreement is
determined by a court of law to be illegal or unenforceable, then such provision
will be enforced to the maximum extent possible and the other provisions will
remain fully effective and enforceable.
16. Acceptance. Participant hereby acknowledges receipt of a copy
of the Plan and this Agreement. Participant has read and understands the terms
and provisions thereof, and accepts this Option subject to all the terms and
conditions of the Plan and this Agreement. Participant acknowledges that there
may be adverse tax consequences upon exercise of this Option or disposition of
the Shares and that Participant should consult a tax adviser prior to such
exercise or disposition.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed in triplicate by its duly authorized representative and Participant has
executed this Agreement in triplicate as of the Date of Grant.
ABRIZIO INC. PARTICIPANT
By: ___________________________ ____________________________
(Signature)
_______________________________ ____________________________
(Please print name) (Please print name)
_______________________________
(Please print title)
[SIGNATURE PAGE TO STOCK OPTION AGREEMENT]
<PAGE>
1997 STOCK OPTION PLAN
STOCK OPTION EXERCISE AGREEMENT
This Exercise Agreement (this "Exercise Agreement") is made and entered
into as of ______________, 19___ (the "Effective Date") by and between Abrizio
Inc., a California corporation (the "Company"), and the Purchaser named below
(the "Purchaser"). Capitalized terms not defined herein shall have the meanings
ascribed to them in the Company's 1997 Stock Option Plan (the "Plan").
Purchaser: _______________________________
Social Security Number: _______________________________
Address: _______________________________
_______________________________
Total Number of Shares: _______________________________
Exercise Price Per Share: _______________________________
Total Exercise Price: _______________________________
Option No. ___ and Date of Grant: _______________________________
Type of Option: [ ] Incentive Stock Option
[ ] Nonqualified Stock Option
1. Exercise of Option.
1.1 Exercise. Pursuant to exercise of that certain
option ("Option") granted to Purchaser under the Plan and subject to the terms
and conditions of this Exercise Agreement, Purchaser hereby purchases from the
Company, and the Company hereby sells to Purchaser, the Total Number of Shares
set forth above ("Shares") of the Company's Common Stock at the Exercise Price
Per Share set forth above ("Exercise Price"). As used in this Exercise
Agreement, the term "Shares" refers to the Shares purchased under this Exercise
Agreement and includes all securities received (a) in replacement of the Shares,
(b) as a result of stock dividends or stock splits with respect to the Shares,
and (c) all securities received on account of the Shares in a merger,
recapitalization, reorganization or similar corporate transaction.
<PAGE>
1.2 Title to Shares. The exact spelling of the
name(s) under which Purchaser will take title to the Shares is:
____________________________________________________________
____________________________________________________________
Purchaser desires to take title to the Shares as follows:
[ ] Individual, as separate property
[ ] Husband and wife, as community property
[ ] Joint Tenants
[ ] Alone or with spouse as trustee(s) of the
following trust (including date):
________________________________________________
________________________________________________
[ ] Other; please specify: ____________________________
________________________________________________
1.3 Payment. Purchaser hereby delivers payment of
the Exercise Price in the manner permitted in the Stock Option Agreement as
follows (check and complete as appropriate):
[ ] in cash (by check) in the amount of $____________,
receipt of which is acknowledged by the Company;
[ ] by cancellation of indebtedness of the Company to
Purchaser in the amount of $__________;
[ ] by the waiver hereby of compensation due or accrued for
services rendered in the amount of $_________.
2. Delivery.
2.1 Deliveries by Purchaser. Purchaser hereby
delivers to the Company (i) this Exercise Agreement, (ii) three (3) copies of a
blank Stock Power and Assignment Separate from Stock Certificate in the form of
Exhibit 1 attached hereto (the "Stock Powers"), both executed by Purchaser (and
Purchaser's spouse, if any), (iii) if Purchaser is married, a Consent of Spouse
in the form of Exhibit 2 attached hereto (the "Spouse Consent") executed by
Purchaser's spouse, and (iv) the Exercise Price and payment or other provision
for any applicable tax obligations.
2.2 Deliveries by the Company. Upon its receipt of
the Exercise Price, payment or other provision for any applicable tax
obligations and all the documents to be executed and delivered by Purchaser to
the Company under Section 2.1, the Company will issue a duly executed stock
certificate evidencing the Shares in the name of Purchaser, to be placed in
escrow as provided in Section 10 until expiration or termination of the
Company's Right of First Refusal described in Section 8.
3. Representations and Warranties of Purchaser. Purchaser
represents and warrants to the Company that:
3.1 Agrees to Terms of the Plan. Purchaser has
received a copy of the Plan and the Stock Option Agreement, has read and
understands the terms of the Plan, the Stock Option Agreement and this Exercise
Agreement, and agrees to be bound by their terms and conditions. Purchaser
acknowledges that there may be adverse tax consequences upon exercise of the
Option or disposition of the Shares, and that Purchaser should consult a tax
adviser prior to such exercise or disposition.
3.2 Purchase for Own Account for Investment.
Purchaser is purchasing the Shares for Purchaser's own account for investment
purposes only and not with a view to, or for sale in connection with, a
distribution of the Shares within the meaning of the Securities Act. Purchaser
has no present intention of selling or otherwise disposing of all or any portion
of the Shares and no one other than Purchaser has any beneficial ownership of
any of the Shares.
3.3 Access to Information. Purchaser has had
access to all information regarding the Company and its present and prospective
business, assets, liabilities and financial condition that Purchaser reasonably
considers important in making the decision to purchase the Shares, and Purchaser
has had ample opportunity to ask questions of the Company's representatives
concerning such matters and this investment.
3.4 Understanding of Risks. Purchaser is fully
aware of: (i) the highly speculative nature of the investment in the Shares;
(ii) the financial hazards involved; (iii) the lack of liquidity of the Shares
and the restrictions on transferability of the Shares (e.g., that Purchaser may
not be able to sell or dispose of the Shares or use them as collateral for
loans); (iv) the qualifications and backgrounds of the management of the
Company; and (v) the tax consequences of investment in the Shares. Purchaser is
capable of evaluating the merits and risks of this investment, has the ability
to protect Purchaser's own interests in this transaction and is financially
capable of bearing a total loss of this investment.
3.5 No General Solicitation. At no time was
Purchaser presented with or solicited by any publicly issued or circulated
newspaper, mail, radio, television or other form of general advertising or
solicitation in connection with the offer, sale and purchase of the Shares.
4. Compliance with Securities Laws.
4.1 Compliance with U.S. Federal Securities Laws.
Purchaser understands and acknowledges that the Shares have not been registered
with the SEC under the Securities Act and that, notwithstanding any other
provision of the Stock Option Agreement to the contrary, the exercise of any
rights to purchase any Shares is expressly conditioned upon compliance with the
Securities Act and all applicable state securities laws. Purchaser agrees to
cooperate with the Company to ensure compliance with such laws. The Shares are
being issued under the Securities Act pursuant to the exemption provided by SEC
Rule 701.
4.2 Compliance with California Securities Laws.
The Plan, The stock option agreement, and this Exercise Agreement are intended
to comply with Section 25102(o) of the California Corporations Code. Any
provision of this Exercise Agreement which is inconsistent with Section 25102(o)
shall, without further act or amendment by the Company or the Board, be reformed
to comply with the requirements of Section 25102(o). THE SALE OF THE SECURITIES
THAT ARE THE SUBJECT OF THIS EXERCISE AGREEMENT, IF NOT YET QUALIFIED WITH THE
CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION,
IS SUBJECT TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE
RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS
UNLAWFUL UNLESS THE SALE IS EXEMPT. THE RIGHTS OF THE PARTIES TO THIS EXERCISE
AGREEMENT ARE EXPRESSLY CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN
EXEMPTION BEING AVAILABLE.
<PAGE>
5. Restricted Securities.
5.1 No Transfer Unless Registered or Exempt.
Purchaser understands that Purchaser may not transfer any Shares unless such
Shares are registered under the Securities Act or qualified under applicable
state securities laws or unless, in the opinion of counsel to the Company,
exemptions from such registration and qualification requirements are available.
Purchaser understands that only the Company may file a registration statement
with the SEC and that the Company is under no obligation to do so with respect
to the Shares. Purchaser has also been advised that exemptions from registration
and qualification may not be available or may not permit Purchaser to transfer
all or any of the Shares in the amounts or at the times proposed by Purchaser.
5.2 SEC Rule 144. In addition, Purchaser has been
advised that SEC Rule 144 promulgated under the Securities Act, which permits
certain limited sales of unregistered securities, is not presently available
with respect to the Shares and, in any event, requires that the Shares be held
for a minimum of one (1) year, and in certain cases two (2) years, after they
have been purchased and paid for (within the meaning of Rule 144). Purchaser
understands that Rule 144 may indefinitely restrict transfer of the Shares so
long as Purchaser remains an "affiliate" of the Company or if "current public
information" about the Company (as defined in Rule 144) is not publicly
available.
5.3 SEC Rule 701. The Shares are issued pursuant
to SEC Rule 701 promulgated under the Securities Act and may become freely
tradeable by non-affiliates (under limited conditions regarding the method of
sale) ninety (90) days after the first sale of Common Stock of the Company to
the general public pursuant to a registration statement filed with and declared
effective by the SEC, subject to the lengthier market standoff agreement
contained in Section 7 of this Exercise Agreement or any other agreement entered
into by Purchaser. Affiliates must comply with the provisions (in addition to
the holding period requirements) of Rule 144.
6. Restrictions on Transfers.
6.1 Disposition of Shares. Purchaser hereby agrees
that Purchaser shall make no disposition of the Shares (other than as permitted
by this Exercise Agreement) unless and until:
<PAGE>
(a) Purchaser shall have notified the Company
of the proposed disposition and provided a written summary of the terms and
conditions of the proposed disposition;
(b) Purchaser shall have complied with all
requirements of this Exercise Agreement applicable to the disposition of the
Shares;
(c) Purchaser shall have provided the Company
with written assurances, in form and substance satisfactory to counsel for the
Company, that (i) the proposed disposition does not require registration of the
Shares under the Securities Act or (ii) all appropriate action necessary for
compliance with the registration requirements of the Securities Act or of any
exemption from registration available under the Securities Act (including Rule
144) has been taken; and
(d) Purchaser shall have provided the Company
with written assurances, in form and substance satisfactory to the Company, that
the proposed disposition will not result in the contravention of any transfer
restrictions applicable to the Shares pursuant to the provisions of the
Commissioner Rules identified in Section 4.2.
6.2 Restriction on Transfer. Purchaser shall not
transfer, assign, grant a lien or security interest in, pledge, hypothecate,
encumber or otherwise dispose of any of the Shares which are subject to the
Company's Right of First Refusal, except as permitted by this Exercise
Agreement.
6.3 Transferee Obligations. Each person (other
than the Company) to whom the Shares are transferred by means of one of the
permitted transfers specified in this Exercise Agreement must, as a condition
precedent to the validity of such transfer, acknowledge in writing to the
Company that such person is bound by the provisions of this Exercise Agreement
and that the transferred Shares are subject to (i) the Company's Right of First
Refusal granted hereunder and (ii) the market stand-off provisions of Section 7,
to the same extent such Shares would be so subject if retained by the Purchaser.
7. Market Standoff Agreement. Purchaser agrees in
connection with any registration of the Company's securities that, upon the
request of the Company or the underwriters managing any public offering of the
Company's securities, Purchaser will not sell or otherwise dispose of any Shares
without the prior written consent of the Company or such underwriters, as the
case may be, for such period of time (not to exceed 180 days) after the
effective date of such registration requested by such managing underwriters and
subject to all restrictions as the Company or the underwriters may specify.
Purchaser further agrees to enter into any agreement reasonably required by the
underwriters to implement the foregoing.
<PAGE>
8. Company's Right of First Refusal. Before any Vested
Shares held by Purchaser or any transferee of such Vested Shares (either being
sometimes referred to herein as the "Holder") may be sold or otherwise
transferred (including without limitation a transfer by gift or operation of
law), the Company and/or its assignee(s) shall have an assignable right of first
refusal to purchase the Vested Shares to be sold or transferred (the "Offered
Shares") on the terms and conditions set forth in this Section (the "Right of
First Refusal").
8.1 Notice of Proposed Transfer. The Holder of the
Offered Shares shall deliver to the Company a written notice (the "Notice")
stating: (i) the Holder's bona fide intention to sell or otherwise transfer the
Offered Shares; (ii) the name of each proposed bona fide purchaser or other
transferee ("Proposed Transferee"); (iii) the number of Offered Shares to be
transferred to each Proposed Transferee; (iv) the bona fide cash price or other
consideration for which the Holder proposes to transfer the Offered Shares (the
"Offered Price"); and (v) that the Holder will offer to sell the Offered Shares
to the Company and/or its assignee(s) at the Offered Price as provided in this
Section.
8.2 Exercise of Right of First Refusal. At any
time within thirty (30) days after the date of the Notice, the Company and/or
its assignee(s) may, by giving written notice to the Holder, elect to purchase
all (or, with the consent of the Holder, less than all) the Offered Shares
proposed to be transferred to any one or more of the Proposed Transferees named
in the Notice, at the purchase price determined as specified below.
8.3 Purchase Price. The purchase price for the
Offered Shares purchased under this Section will be the Offered Price. If the
Offered Price includes consideration other than cash, then the cash equivalent
value of the non-cash consideration shall conclusively be deemed to be the value
of such non-cash consideration as determined in good faith by the Board.
8.4 Payment. Payment of the Offered Price will be
payable, at the option of the Company and/or its assignee(s) (as applicable), by
check or by cancellation of all or a portion of any outstanding indebtedness of
the Holder to the Company (or to such assignee, in the case of a purchase of
Offered Shares by such assignee) or by any combination thereof. The Offered
Price will be paid without interest within sixty (60) days after the Company's
receipt of the Notice, or, at the option of the Company and/or its assignee(s),
in the manner and at the time(s) set forth in the Notice.
8.5 Holder's Right to Transfer. If all of the
Offered Shares proposed in the Notice to be transferred to a given Proposed
Transferee are not purchased by the Company and/or its assignee(s) as provided
in this Section, then the Holder may sell or otherwise transfer such Offered
Shares to that Proposed Transferee at the Offered Price or at a higher price,
provided that such sale or other transfer is consummated within 120 days after
the date of the Notice, and provided further, that (i) any such sale or other
transfer is effected in compliance with all applicable securities laws and (ii)
the Proposed Transferee agrees in writing that the provisions of this Section
will continue to apply to the Offered Shares in the hands of such Proposed
Transferee. If the Offered Shares described in the Notice are not transferred to
the Proposed Transferee within such 120 day period, then a new Notice must be
given to the Company, and the Company will again be offered the Right of First
Refusal before any Shares held by the Holder may be sold or otherwise
transferred.
<PAGE>
8.6 Exempt Transfers. Notwithstanding anything to
the contrary in this Section, the following transfers of Vested Shares will be
exempt from the Right of First Refusal: (i) the transfer of any or all of the
Vested Shares during Purchaser's lifetime by gift or on Purchaser's death by
will or intestacy to Purchaser's "immediate family" (as defined below) or to a
trust for the benefit of Purchaser or Purchaser's immediate family, provided
that each transferee or other recipient agrees in a writing satisfactory to the
Company that the provisions of this Section will continue to apply to the
transferred Vested Shares in the hands of such transferee or other recipient;
(ii) any transfer of Vested Shares made pursuant to a statutory merger or
statutory consolidation of the Company with or into another corporation or
corporations (except that the Right of First Refusal will continue to apply
thereafter to such Vested Shares, in which case the surviving corporation of
such merger or consolidation shall succeed to the rights of the Company under
this Section unless the agreement of merger or consolidation expressly otherwise
provides); or (iii) any transfer of Vested Shares pursuant to the winding up and
dissolution of the Company. As used herein, the term "immediate family" will
mean Purchaser's spouse, the lineal descendant or antecedent, father, mother,
brother or sister, child, adopted child, grandchild or adopted grandchild of the
Purchaser or the Purchaser's spouse, or the spouse of any child, adopted child,
grandchild or adopted grandchild of Purchaser or the Purchaser's spouse.
8.7 Termination of Right of First Refusal. The
Company's Right of First Refusal will terminate when the Company's securities
become publicly traded.
9. Rights as Shareholder. Subject to the terms and
conditions of this Exercise Agreement, Purchaser will have all of the rights of
a shareholder of the Company with respect to the Shares from and after the date
that Shares are issued to Purchaser until such time as Purchaser disposes of the
Shares or the Company and/or its assignee(s) exercise(s) the Right of First
Refusal. Upon an exercise of the Right of First Refusal, Purchaser will have no
further rights as a holder of the Shares so purchased upon such exercise, except
the right to receive payment for the Shares so purchased in accordance with the
provisions of this Exercise Agreement, and Purchaser will promptly surrender the
stock certificate(s) evidencing the Shares so purchased to the Company for
transfer or cancellation.
10. Escrow. As security for Purchaser's faithful performance
of this Exercise Agreement, Purchaser agrees, immediately upon receipt of the
stock certificate(s) evidencing the Shares, to deliver such certificate(s),
together with the Stock Powers executed by Purchaser and by Purchaser's spouse,
if any (with the date and number of Shares left blank), to the Secretary of the
Company or other designee of the Company ("Escrow Holder"), who is hereby
appointed to hold such certificate(s) and Stock Powers in escrow and to take all
such actions and to effectuate all such transfers and/or releases of such Shares
as are in accordance with the terms of this Exercise Agreement. Purchaser and
the Company agree that Escrow Holder will not be liable to any party to this
Exercise Agreement (or to any other party) for any actions or omissions unless
Escrow Holder is grossly negligent or intentionally fraudulent in carrying out
the duties of Escrow Holder under this Exercise Agreement. Escrow Holder may
rely upon any letter, notice or other document executed by any signature
purported to be genuine and may rely on the advice of counsel and obey any order
of any court with respect to the transactions contemplated by this Exercise
Agreement. The Shares will be released from escrow upon termination of the Right
of First Refusal.
<PAGE>
11. Restrictive Legends and Stop-Transfer Orders.
11.1 Legends. Purchaser understands and agrees that
the Company will place the legends set forth below or similar legends on any
stock certificate(s) evidencing the Shares, together with any other legends that
may be required by state or U.S. Federal securities laws, the Company's Articles
of Incorporation or Bylaws, any other agreement between Purchaser and the
Company or any agreement between Purchaser and any third party:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN
STATES. THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER THE SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED
TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE
PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE
ISSUER TO THE EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN
COMPLIANCE WITH THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO CERTAIN RESTRICTIONS ON PUBLIC RESALE AND TRANSFER, RIGHT OF
REPURCHASE AND RIGHT OF FIRST REFUSAL OPTIONS HELD BY THE ISSUER
AND/OR ITS ASSIGNEE(S) AS SET FORTH IN A STOCK OPTION EXERCISE
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE
SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE
OF THE ISSUER. SUCH PUBLIC SALE AND TRANSFER RESTRICTIONS AND
THE RIGHT OF REPURCHASE AND RIGHT OF FIRST REFUSAL ARE BINDING
ON TRANSFEREES OF THESE SHARES.
11.2 Stop-Transfer Instructions. Purchaser agrees
that, to ensure compliance with the restrictions imposed by this Exercise
Agreement, the Company may issue appropriate "stop-transfer" instructions to its
transfer agent, if any, and if the Company transfers its own securities, it may
make appropriate notations to the same effect in its own records.
<PAGE>
11.3 Refusal to Transfer. The Company will not be
required (i) to transfer on its books any Shares that have been sold or
otherwise transferred in violation of any of the provisions of this Exercise
Agreement or (ii) to treat as owner of such Shares, or to accord the right to
vote or pay dividends to any purchaser or other transferee to whom such Shares
have been so transferred.
12. Tax Consequences. PURCHASER UNDERSTANDS THAT PURCHASER
MAY SUFFER ADVERSE TAX CONSEQUENCES AS A RESULT OF PURCHASER'S PURCHASE OR
DISPOSITION OF THE SHARES. PURCHASER REPRESENTS THAT PURCHASER HAS CONSULTED
WITH ANY TAX ADVISER PURCHASER DEEMS ADVISABLE IN CONNECTION WITH THE PURCHASE
OR DISPOSITION OF THE SHARES AND THAT PURCHASER IS NOT RELYING ON THE COMPANY
FOR ANY TAX ADVICE. Set forth below is a brief summary as of the date the Plan
was adopted by the Board of some of the U.S. Federal and California tax
consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. PURCHASER SHOULD CONSULT A TAX ADVISER BEFORE EXECUTING THIS OPTION
OR DISPOSING OF THE SHARES.
12.1 Exercise of Incentive Stock Option. If the
Option qualifies as an ISO, there will be no regular U.S. Federal income tax
liability or California income tax liability upon the exercise of the Option,
although the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price will be treated as a tax preference item for
U.S. Federal alternative minimum tax purposes and may subject Purchaser to the
alternative minimum tax in the year of exercise.
12.2 Exercise of Nonqualified Stock Option. If the
Option does not qualify as an ISO, there may be a regular U.S. Federal income
tax liability and a California income tax liability upon the exercise of the
Option. Purchaser will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price. If
Purchaser is a current or former employee of the Company, the Company may be
required to withhold from Purchaser's compensation or collect from Purchaser and
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income at the time of exercise.
12.3 Disposition of Shares. The following tax
consequences may apply upon disposition of the Shares.
(a) Incentive Stock Options. If the Shares are
held for more than twelve (12) months after the date of the transfer of the
Shares pursuant to the exercise of an ISO and are disposed of more than two (2)
years after the Date of Grant, any gain realized on disposition of the Shares
will be treated as long term capital gain for federal and California income tax
purposes. If Shares purchased under an ISO are disposed of within the applicable
one (1) year or two (2) year period, any gain realized on such disposition will
be treated as compensation income (taxable at ordinary income rates) to the
extent of the excess, if any, of the Fair Market Value of the Shares on the date
of exercise over the Exercise Price.
<PAGE>
(b) Nonqualified Stock Options. If the Shares
are held for more than twelve (12) months after the date of the transfer of the
Shares pursuant to the exercise of an NQSO, any gain realized on disposition of
the Shares will be treated as long term capital gain.
(c) Withholding. The Company may be required
to withhold from the Purchaser's compensation or collect from the Purchaser and
pay to the applicable taxing authorities an amount equal to a percentage of this
compensation income.
13. Compliance with Laws and Regulations. The issuance and
transfer of the Shares will be subject to and conditioned upon compliance by the
Company and Purchaser with all applicable state and U.S. Federal laws and
regulations and with all applicable requirements of any stock exchange or
automated quotation system on which the Company's Common Stock may be listed or
quoted at the time of such issuance or transfer.
14. Successors and Assigns. The Company may assign any of
its rights under this Exercise Agreement, including its rights to repurchase
Shares under the Right of First Refusal. This Exercise Agreement shall be
binding upon and inure to the benefit of the successors and assigns of the
Company. Subject to the restrictions on transfer herein set forth, this Exercise
Agreement will be binding upon Purchaser and Purchaser's heirs, executors,
administrators, legal representatives, successors and assigns.
15. Governing Law; Severability. This Exercise Agreement
shall be governed by and construed in accordance with the internal laws of the
State of California as such laws are applied to agreements between California
residents entered into and to be performed entirely within California. If any
provision of this Exercise Agreement is determined by a court of law to be
illegal or unenforceable, then such provision will be enforced to the maximum
extent possible and the other provisions will remain fully effective and
enforceable.
16. Notices. Any notice required to be given or delivered
to the Company shall be in writing and addressed to the Corporate Secretary of
the Company at its principal corporate offices. Any notice required to be given
or delivered to Purchaser shall be in writing and addressed to Purchaser at the
address indicated above or to such other address as Purchaser may designate in
writing from time to time to the Company. All notices shall be deemed
effectively given upon personal delivery, three (3) days after deposit in the
United States mail by certified or registered mail (return receipt requested),
one (1) business day after its deposit with any return receipt express courier
(prepaid), or one (1) business day after transmission by rapifax or telecopier.
<PAGE>
17. Further Instruments. The parties agree to execute such
further instruments and to take such further action as may be reasonably
necessary to carry out the purposes and intent of this Exercise Agreement.
18. Headings. The captions and headings of this Exercise
Agreement are included for ease of reference only and will be disregarded in
interpreting or construing this Exercise Agreement. All references herein to
Sections will refer to Sections of this Exercise Agreement.
19. Entire Agreement. The Plan, the Stock Option Agreement
and this Exercise Agreement, together with all of its Exhibits, constitute the
entire agreement and understanding of the parties with respect to the subject
matter of this Exercise Agreement, and supersede all prior understandings and
agreements, whether oral or written, between the parties hereto with respect to
the specific subject matter hereof.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Exercise
Agreement to be executed in triplicate by its duly authorized representative and
Purchaser has executed this Exercise Agreement in triplicate as of the Effective
Date.
ABRIZIO INC. PURCHASER
By: __________________________ ____________________________
(Signature)
______________________________ ____________________________
(Please print name) (Please print name)
______________________________
(Please print title)
[Signature page to Abrizio Inc. Stock Option Exercise Agreement]
<PAGE>
LIST OF EXHIBITS
----------------
Exhibit 1: Stock Power and Assignment Separate from Stock Certificate
Exhibit 2: Spouse Consent
Exhibit 3: Copy of Purchaser's Check
<PAGE>
EXHIBIT 1
STOCK POWER AND ASSIGNMENT
SEPARATE FROM STOCK CERTIFICATE
<PAGE>
Stock Power and Assignment
--------------------------
Separate from Stock Certificate
-------------------------------
FOR VALUE RECEIVED and pursuant to that certain Stock Option
Exercise Agreement No. ___ dated as of _______________, 19___, (the "Exercise
Agreement"), the undersigned hereby sells, assigns and transfers unto
_______________________________, shares of the Common Stock of Abrizio Inc., a
California corporation (the "Company"), standing in the undersigned's name on
the books of the Company represented by Certificate No(s). ______ delivered
herewith, and does hereby irrevocably constitute and appoint the Secretary of
the Company as the undersigned's attorney-in-fact, with full power of
substitution, to transfer said stock on the books of the Company. THIS
ASSIGNMENT MAY ONLY BE USED AS AUTHORIZED BY THE EXERCISE AGREEMENT AND ANY
EXHIBITS THERETO.
Dated: _______________, 19____
PURCHASER
__________________________________
(Signature)
__________________________________
(Please Print Name)
__________________________________
(Spouse's Signature, if any)
__________________________________
(Please Print Spouse's Name)
Instructions: Please do not fill in any blanks other than the signature
line. The purpose of this Stock Power and Assignment is to enable the Company to
acquire the shares upon exercise of its "Right of First Refusal" set forth in
the Exercise Agreement without requiring additional signatures on the part of
the Purchaser or Purchaser's Spouse.
<PAGE>
EXHIBIT 2
SPOUSE CONSENT
<PAGE>
Spouse Consent
--------------
The undersigned spouse of Purchaser has read, understands, and
hereby approves the Stock Option Exercise Agreement between Purchaser and the
Company (the "Exercise Agreement"). In consideration of the Company's granting
my spouse the right to purchase the Shares as set forth in the Exercise
Agreement, the undersigned hereby agrees to be irrevocably bound by the Exercise
Agreement and further agrees that any community property interest I, the
undersigned spouse, may have in the Shares and any other property pursuant to
the Exercise Agreement shall similarly be bound by the Exercise Agreement. The
undersigned hereby appoints Purchaser as his or her attorney-in-fact with
respect to any amendment or exercise of any rights under the Exercise Agreement.
Date:___________________________ __________________________________
Name of Purchaser - Print
__________________________________
Signature of Purchaser's Spouse
Address: __________________________________
__________________________________
<PAGE>
EXHIBIT 3
COPY OF PURCHASER'S CHECK
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
TELEPHONE 650-493-9300 FACSIMILE 650-493-6811
September 13, 1999
PMC-Sierra, Inc.
105-8555 Baxter Place
Burnaby, British Columbia V5A 4V7
Canada
Re: Registration Statement on Form S-8
Ladies and Gentlemen:
We have examined the Registration Statement on Form S-8 to be filed by
PMC-Sierra, Inc. ("PMC") with the Securities and Exchange Commission on or about
September 13, 1999 (the "Registration Statement") in connection with the
registration under the Securities Act of 1933, as amended, of 948,829 shares
(the "Shares") of PMC common stock to be issued under PMC's assumed Abrizio Inc.
1997 Stock Option Plan ("Abrizio Plan"). As PMC's counsel in connection with
this transaction, we have examined the proceedings taken and are familiar with
the proceedings proposed to be taken by PMC in connection with the issuance and
sale of the Shares pursuant to the Abrizio Plan and the PMC-Sierra, Inc. 1999
Stock Option Plan ("PMC Plan").
It is our opinion that, when shares of PMC are issued and sold pursuant
to options granted in the manner described in the Abrizio Plan, the PMC Plan and
pursuant to the agreements which accompany each option grant, the Shares will be
legally and validly issued, fully paid and non-assessable.
We consent to the use of this opinion as an exhibit to the Registration
Statement, and further consent to the use of our name wherever appearing in the
Registration Statement and any amendments thereto.
Very truly yours,
WILSON SONSINI GOODRICH & ROSATI
Professional Corporation
/s/Wilson Sonsini Goodrich & Rosati
CONSENT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 21, 1999, with respect to the
consolidated financial statements and schedule of PMC-Sierra, Inc., included in
the Annual Report (Form 10-K) for the year ended December 27, 1998, filed with
the Securities and Exchange Commission.
/s/DELOITTE & TOUCHE LLP
DELOITTE & TOUCHE LLP
Vancouver, British Columbia, Canada
September 10, 1999
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated January 22, 1997, with respect to the
consolidated financial statements and schedule of PMC-Sierra, Inc., included in
the Annual Report (Form 10-K) for the year ended December 27, 1998, filed with
the Securities and Exchange Commission.
/s/ERNST & YOUNG LLP
ERNST & YOUNG LLP
San Jose, California
September 10, 1999
